General reactions to the proposal

26. Witnesses generally supported the proposal. The Government described it as "a sensible rearrangement of the respective jurisdictions of the ECJ and the CFI" (p 24). The CCBE welcomed it, calling it "an important step in favour of a more coherent allocation of jurisdiction between the two Courts". Practitioners pointed to the benefits of the "two tier jurisdiction" of the Community Courts (QQ 65-67, p 12). They acknowledged, however, the time factors involved if a case has to go to the CFI and then on appeal to the ECJ to determine a question of law. But a considerable time could be taken up under the present regime in sorting out which Court should act in parallel actions, and even then all the issues might not necessarily be resolved. This was time wasted, in contrast to that taken by an appeal (QQ 72-75, 79, 80).

27. The proposal would require Member States to forgo the "privilege" of being able to go direct to the ECJ for decisions. One Member State had suggested that Member States should not as a question of principle be required to bring actions in the CFI. The United Kingdom did not share that view (Q 100). The CCBE considered that Member States should see a positive benefit from having factually complex cases heard first by the CFI. If unhappy with any point of law that emerged, they would have the right to have it reviewed by the ECJ. In practice about 25 per cent of decisions of the CFI are appealed. Appeals could sometimes be dealt with briefly, without an oral hearing (QQ 63, 76, 77). The Government acknowledged that there might be advantage in cases becoming subject to appeal on points of law. It accepted that the effect of Member States having to start proceedings in the CFI might lead to further delays in the determination of the cases they bring (p 24). Mr Paul Lasok QC said that obtaining a definitive ruling at the earliest opportunity might be more beneficial than having a right of appeal, particularly where the outcome is important for future conduct (such as the grant of aid by a Member State) (Q 18). The Government thought that overall the advantages to be had from the proposal outweighed any additional delay (Q 102).

28. Mr Nicholas Forwood QC, for the CCBE, said that there should be no difficulty with the proposal from the point of view of principle because the decision had been taken in 1992 in the amendments made by the Maastricht Treaty to remove the limitation which would have prevented cases brought by Member States being heard by the CFI. Rather, the CCBE objected to the principle that in respect of a challenge to the same act the identity of the Court having jurisdiction should be determined by the identity of the applicant. The CCBE considered that the proposal should, in the interests of consistency and simplicity, be enlarged to cover all actions of Member States against Community acts. They believed that in the longer term it might be necessary also to transfer to the CFI direct actions brought by the Community institutions (Q 63, p 13).

Parallel actions

29. Witnesses were agreed on the desirability of limiting, in the interests of the efficient administration of justice, the scope for parallel actions. The Government considered that there would be advantages in reducing the number of parallel actions before both Courts. In this regard the proposal would be likely to have its greatest impact in relation to state aid cases (Q 105, p 24). The CCBE said that the proposal would duly preserve the rights of private litigants (p 12).

30. Witnesses pointed out that parallel actions would remain possible. This is a result of the limited nature of the proposal. It does not, for example, cover all areas of Community law or acts of general application. Mr Brouwer, for the CCBE, gave as an example the current litigation challenging the Tobacco Advertising Directive (Q 75). There have also been cases where a direct action has been brought before the CFI at the same time as litigation in a national court in which a reference for a preliminary ruling is made to the ECJ. An example can be seen in the BSE litigation[18].

Direct actions

31. The proposal concentrates on one type of direct action, the application for annulment. The CCBE did not accept the arguments advanced for excluding actions for failure to act[19]. The action for annulment and the action for failure to act are closely related and parties often filed both types of action. Maître Waelbroeck, for the CCBE, said that the two were in essence the same action and both should logically be brought in the same Court. The CCBE contended that the proposal should also cover actions for failure to act where the act requested is one which, if taken, would be subject to challenge in the CFI (Q 81, p 12). The Government had not had time to consider the CCBE's suggestion. Mr Collins, Treasury Solicitor's Department, drew attention to the grounds on which the ECJ had excluded from its proposal actions for failure to act (they were infrequent and had not given rise to parallel actions) (Q 122).

The nature of the acts being challenged

32. The Explanatory Note to the proposal seeks to make a distinction between actions against "normative acts of general application"[20] (which would continue to be commenced before the ECJ) and actions concerning "the application of Community law to specific situations" (to be commenced before the CFI). The proposal itself refers to "decisions" and "acts" adopted by Community institutions. Mr Lasok noted that the proposal only involved a partial transfer to the CFI of jurisdiction over actions brought by Member States. In his view the proposal drew no proper distinction between jurisdiction over matters that are general or legislative in nature and jurisdiction over individual decisions (Q 10). The Government, however, considered that the distinction was workable and logical and that for the most part the drafting was clear as to what decisions were covered (QQ 109, 125).

33. The CCBE was critical of the approach taken in the proposal. The distinction was not clear-cut in practice. An increasing number of normative acts (eg anti-dumping regulations) also specifically referred to or affected individuals. The ECJ had become more receptive to challenges brought by private parties. The exclusion from the proposal of actions against normative acts would not achieve the stated desire to avoid the transfer of cases raising institutional questions. In the view of the CCBE excluding normative acts from the proposal was not justified or in the interests of the Member States. Removing the limitation would not lead to a major increase in the number of cases transferred. The total number of direct actions by Member States in the six years 1993-98 was 147. Of these, 76 would have been transferred under the Court's proposed criteria (QQ 69-70, pp 12, 21). But in the Government's mind there was a distinction between challenging an individual decision, for example, on a state aids proposal and a major directive such as the Working Time Directive or the Tobacco Advertising Directive. Mr Hendry, Foreign and Commonwealth Office (FCO), said that the latter involved "big political issues", ie constitutional issues, which the Government considered right for the ECJ to continue to deal with. He thought that the ECJ also increasingly saw itself as a constitutional court rather than a court reviewing individual administrative decisions (QQ 124,127).

The fields of Community law concerned

34. The Government considered that most of the types of action covered by the proposal would be likely to require factual findings and assessments or give rise to parallel actions. The CFI was well suited to deal with cases involving complex facts. The Government saw no disadvantage in cases brought by Member States in the areas covered by the proposal starting in the CFI. With the exception of the category relating to international trade protection, it was content that the categories had been adequately defined. (QQ 107, 117, p 24). The CCBE questioned the restriction of the proposal to certain fields of law only. There did not seem to be any reason to exclude other areas, such as pharmaceuticals, medicines and veterinary law. The risk of parallel actions existed there also, though it had not materialised significantly. The CCBE did not believe that extending the scope of the proposal in this way would add substantially to the CFI's workload (Q 83, p 12). The Government respected the ECJ's judgement in this matter. Mr Hendry (FCO) thought the CCBE proposal would introduce a risk of overloading the CFI (Q 123).

Arbitration clauses

35. There was general agreement that the jurisdiction of the CFI over actions based on arbitration clauses should be extended to include actions brought by Community institutions (QQ 24, 95). Mr Lasok thought that the real point was whether such cases, typically contractual disputes, needed a collegiate decision. One judge, experienced in the applicable (national) law, should suffice (Q 24).

Resources -implications for the CFI's workload

36. According to the CCBE, both the ECJ and CFI were in a critical position. While the present proposal would to a limited extent partly relieve the pressure on the ECJ it would do so at the price of increasing still further the pressures on the CFI (p 11). Mr Lasok said: "Cases are being transferred from one Court that is not particularly best placed to deal with complex matters of fact to another Court that is equally badly placed" (Q 22). The Court supplied a table setting out the numbers of cases that the change would have affected in the last six years (1993-98). The total number is 92, of which there were 18 in 1998. The CFI estimates that about 25 per cent of cases subject to the change would be appealed to the ECJ. The Government said that the CFI had been involved in the formulation of the proposal and was content to take on the additional work (p 23). The CFI's contentedness appears, however, to be conditional upon existing budgetary requests being met (p 37).

The Courts' other initiatives

37. The CCBE said that the present proposal had to be seen as part of a wider package of measures that needed to be adopted immediately. It referred to the Courts' recent proposal to deal with Community trade mark cases. In the view of the CCBE, the proposed transfer of jurisdiction should be made only together with the increase in the number of judges in the CFI and the other measures contained in that further proposal (p 11). Mr Hendry (FCO) thought it significant that the two proposals had been brought forward separately. The trade mark proposal was likely to be more controversial because it essentially concerned resources. Its negotiation was consequently likely to take longer (Q 128).

38. When she met the Select Committee on 15 June the Rt Hon Joyce Quin, Minister of State, Foreign and Commonwealth Office, acknowledged the need for the Community Courts to be able to work effectively: "It is in our interests to have a strong European Court of Justice and a strong Court of First Instance". As regards the changes being proposed by the Courts, the first question was to see how progress could be made without the need for Treaty amendment. (Mr Hendry (FCO) said that the number of changes requiring Treaty amendment was quite limited (Q 99)). But the Minister believed that Member States' Governments would be prepared to consider Treaty changes in the context of the forthcoming Inter-Governmental Conference if the Courts felt them necessary. She acknowledged that the implications of enlargement had to be kept in mind. [21]

PART 4: OPINION

39. It is only a year since the Committee last looked in detail at the role and work of the CFI. On that occasion we examined the proposal that certain types of case, principally those not raising complex legal issues, should be able to be heard by a single judge. That matter proved to be somewhat controversial and it is only recently[22], following two years negotiation, that the proposal has been adopted. The current proposal would appear to be less controversial, though it would require Member States for the first time to commence proceedings in the CFI rather than the ECJ.

The issue of principle

40. Member States should not, as a matter of principle, have any objection to the proposal. It was agreed in the context of the Maastricht Treaty that the CFI should have the capability of hearing all types of action which can be brought before the Community Courts with one exception, namely the preliminary reference from a national court under Article 234 (ex 177) EC. The CFI is experienced and well regarded. Practitioners told us that Member States had nothing to fear, but much to gain, from having their cases dealt with by that Court. It is true that in some cases the effect of the proposal will be that it will take longer to obtain a definitive ruling from the ECJ, because it will be necessary to go through the procedures of the CFI and then an appeal to the ECJ. But we do not believe that this will be a major problem. We have no hesitation in supporting the proposal.

The scope of the proposal

41. The proposal is a limited one and though its introduction has, in the ECJ's own words, been "prompted solely by a concern to ensure the proper administration of justice" the precise definition of its extent and terms seems to be based more on pragmatism than on principle. In this regard the CCBE's approach, which is aimed at bringing coherence and simplicity to the proposal, is more attractive if not, as we shall explain, totally compelling. The CCBE advocates that the proposal should be widened to include all direct actions brought by Member States. Whether this is politically acceptable at the present time is, we believe, extremely doubtful.

42. Turning to the detail of the ECJ's proposal, the CCBE argues that the proposal should not be limited to challenges against specific acts, such as decisions addressed to a particular Member State (relating, for example, to a State aid or the clearance of an account under the EAGGF) or a firm (as in competition cases). Actions brought by Member States challenging measures having general application, such as regulations and directives, should, in the CCBE's view, also begin in the CFI. But we can readily appreciate why the ECJ has not suggested that such cases should be dealt with by the CFI. Such challenges tend, as the Government's witnesses indicated, to be "political" or constitutional in nature.

43. There is no dispute as to the appropriateness of the six fields of Community law chosen by the ECJ, though certain clarification is necessary as to the precise scope of the reference to acts taken under international trade regulations. Overall the anticipated effect is to transfer about 18 cases a year to the CFI. The CCBE proposes that there should be no limitation by reference to particular fields of Community law. This would inevitably increase the number of cases involved. On the basis of the figures supplied by the CCBE, the number of direct actions transferred might double. Although the total number would still be relatively small in terms of the numbers of cases coming before the two Courts, there is, we believe, a real risk that the debate on the proposal would then turn into one about resources which, by limiting its proposal, the ECJ may incidentally have sought to avoid.

44. At present the proposal is limited to one type of direct action, the action for annulment. The CCBE believes it should also cover the action for failure to act. The ECJ's grounds for excluding such actions are that they are infrequent and have not given rise to parallel action problems. But the two actions are, as is often said, two sides of the same coin. It seems to us that extending the scope of the proposal to include actions for failure to act would remove an unnecessary and potentially artificial distinction. There is much force in the CCBE's arguments. We believe that the issue merits further consideration.

45. Finally, as regards actions based on arbitration clauses, the Committee agrees that the CFI's jurisdiction should be extended so that it can hear all such actions including those brought by a Community institution. The question of which Court, the ECJ or the CFI, hears the case should no longer depend on the status of the applicant.

 The workload of the Community Courts

46. Both Community Courts have heavy workloads. The number of cases continues to rise. In 1998, 485 cases (of which 264 were references for preliminary rulings) were brought before the ECJ and 238 before the CFI. The effect of recent developments, including the commencement of the third stage of European Monetary Union (EMU) and the entry into force of the Amsterdam Treaty, has been to increase the jurisdiction of both Courts. This will add further to the number of cases coming before them.

47. In our 1998 Report we noted that the backlog of undecided cases had reached alarming proportions. We said that the CFI needed more Judges, possibly six, of whom some should have experience in intellectual property. The figures supplied to the Committee during the course of its enquiry and the descriptions and predictions given in the Courts' recent proposal on intellectual property cases and its discussion paper do not give us any comfort. It is significant that the Courts speak of "the existence of a dangerous trend towards a structural imbalance between the volume of incoming cases and the capacity of the institution to dispose of them". Would the current proposal tip the balance? As mentioned above the number of additional cases that would in future have to be begun in the CFI would not be great, though it should be recalled that they could be factually complex and difficult ones. But the view of witnesses and of the CFI itself was that the caseload should be manageable. Nevertheless it is, we believe, necessary to draw attention once again to the position of the two Courts and the need, in our view, for urgent remedial action.

48. The two Courts have put forward a proposal for six more judges (and supporting resources) to deal with the expected influx of Community trade mark cases. But that proposal (which is restricted to the CFI) will not address the problems of the existing backlog, the impact of the Amsterdam Treaty and, looking not far into the future, the increased demand on the Courts which enlargement of the Union will inevitably bring.

49. We therefore welcome the Courts' discussion paper, which contains a number of practical proposals and also presents some quite radical ideas on the future role of the ECJ, particularly as regards references from national courts for preliminary rulings on points of Community law.[23] We note that following the debate on the paper at the recent Justice and Home Affairs Council the Presidency indicated that "a more in-depth examination and reflection would be carried out by the Council, and that some of these proposed reforms might be considered by the next Inter-Governmental Conference"[24]. We are pleased to note that our own Government does not exclude the possibility of reform of the Community's Courts being placed on the agenda of the next IGC. This Committee urges the Government to take a positive role in seeking to find solutions to the present problems and in preparing the Community judicial structure for an enlarged Union.

Recommendation

50. The Committee considers that the proposal to enlarge the jurisdiction of the CFI raises important questions to which the attention of the House should be drawn, and makes this Report to the House for information.

19   Under Article 232 (ex 175) EC an application can be made for the Court to rule on the legality of a failure to act on the part of the European Parliament, the Council or the Commission. Back

20   Normative acts have a rule-making or standard-setting effect. The classic examples, in Community law, are regulations and directives. A measure has general application where its scope is not limited by reference to a particular person or persons. Back

21   Minutes of Evidence. 15 June 1999 QQ 11, 13. Back

22   The "single judge" proposal was adopted at the General Affairs Council on 26April 1999. Back

23   The discussion paper raises, for example, the possibility of the creation, in each Member State, of decentralised judicial bodies responsible for dealing with references for rulings from local courts. Back

24   Council Press Release 8654/99 (Presse 168 -G). Back