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The European Union Today And Tomorrow: A New Treaty At Amsterdam?

Alastair Sutton

Jersey’s status under European Community law [1] will not change as a result of the present inter-governmental conference (IGC). Nonetheless, the unforeseen evolution of the EC (and, more recently, the European Union) since 1973 has indirectly affected Jersey as it has all other parts of the European continent. Equally, there is no doubt that the political and institutional transformation of Europe - which was prompted by the collapse of Soviet hegemony in Eastern Europe in 1989, and which is being implemented within the EU by the 1996 IGC - will carry political and economic implications for Jersey, which are difficult at this stage to quantify and predict.

As this article is being written, the rapprochement with the EU being sought by the Blair administration in the UK strengthens the prospect of a successful outcome to the Amsterdam European Council in June, with a "Maastricht II" Treaty to add to the multiple layers of treaty law which already provide the legal framework for the European Union [2] . For Jersey however - and for other "off-shore" territories whose economies depend essentially on financial services - the prospect of monetary union with effect from 1st January 1999 is likely to have a more immediate and tangible effect on the Island’s political and economic status (not least as a result of the position adopted by the UK towards EMU) than any Treaty amendments adopted at Amsterdam.

Yet another inter-governmental conference?

Given the controversy provoked (and the uniformly negative political fall-out) by the last inter-governmental conference culminating at Maastricht on 7th February 1992, it is surprising that the political leaders of the European Union should have embarked on a similar venture so soon. Nonetheless, even before the battles to secure the ratification of the Maastricht "package" of treaty amendments, the negotiators of the Treaty on European Union had agreed that:

"A conference of representatives of the governments of the Member States shall be convened in 1996 to examine those provisions of the Treaty for which revision is provided, in accordance with the objectives set out in Articles A and B." [3]

Articles A and B of the Treaty on European Union set out the principles underlying the Union, on which the development of the EU in the present inter-governmental conference is based. The main task of the Union is to organise "in a manner demonstrating consistency and solidarity, relations between the Member States and their peoples", thereby creating "an ever closer union amongst the peoples of Europe, in which decisions are taken as closely as possible to the citizen." More specifically, the objectives of the Union are defined as follows:

• to promote economic and social progress; [4]

• to assert its identity on the international scene, in particular through the implementation of a common foreign and security policy and "the eventual framing of a common defence policy";

• to introduce citizenship of the Union in order to strengthen the protection of rights and interests of the nationals of its Member States;

• to develop close co-operation on justice and home affairs;

• to maintain in full the acquis communautaire [5] and build on it with a view to considering, through the procedure referred to in Article N(2), to what extent the policies and forms of co-operation introduced by the Treaty may need to be revised with the aim of ensuring the effectiveness of the mechanisms and the institutions of the Community."

Read together, the texts of Articles B and N(2) make it clear that a new inter-governmental conference was to be convened in 1996 for the two quite limited purposes of re-examining the Treaty articles for which revision is provided and making institutional changes to improve the effectiveness of the Community's "mechanisms and institutions". Participants in the Maastricht conference recognised that a number of "loose ends" had inevitably been left untied and that a further IGC could deal with these as well as with the broader institutional issues raised by enlargement to the East. In fact, the 1996 IGC - despite the political limitations imposed by widespread "Euroscepticism" - is engaged in nothing less than restructuring the Union to accommodate ten or more new member states. At the same time, in addition to this institutional and procedural exercise, the IGC has embarked on a far wider review of the substantive rules in the Treaties than that strictly provided for in Article N(2). Much of the work of the IGC also concerns reforms which do not necessarily involve Treaty amendments. Much can be achieved, for example as regards the working methods of the institutions or in the field of external relations, through changes in rules of procedure, codes of conduct, or inter-institutional arrangements, provided there is the political will to do so.

It is legitimate to ask whether the political capital which is necessary to make a success of the IGC would not have been better spent in reducing the Community’s long list of uncompleted tasks, thereby consolidating the political and economic foundations of the present Union. [6] In fact, the disintegration of the Soviet Union's hegemony in Central and Eastern Europe from 1989 onwards created an irresistible political need for the European Union to address the issue of enlargement to the East. The institutional and procedural system designed for six member states in the 1950s was already buckling under the strain of fifteen states. Reforms were unavoidable. At the same time, at least in Continental Europe, there was a strong desire to correct, improve and simplify the Treaty amendments adopted at Maastricht. The 1992 IGC was the culmination of almost 20 years of successive Treaty amendments, resulting in a collection of Treaties and related instruments which were incomprehensible to the general public and a poor reflection of the "constitution" which it was felt was necessary to give the Union a recognisable image or personality for its citizens and in the wider world. In a word therefore, the 1996 IGC is about the modernisation of the Treaties, which currently underpin the Community and the Union.

After a faltering start, the Conference has now reached the point - under the Netherlands' presidency - of serious negotiations. [7] Time is short if a revised Treaty is to be ready for adoption at the Amsterdam Summit in June. There is now however a mood of cautious optimism in Brussels that agreement can be reached at Amsterdam, although it is premature even to speculate on how significant the "package" may be.

The explicit support for a successful outcome for the IGC given by the new UK Minister of State for Europe - Doug Henderson - in Brussels on 5th May 1997, reinforces the palpable desire of the other member states not to allow a failure at Amsterdam to de-rail other key Union objectives such as enlargement and monetary union. Contingency plans have nonetheless been made for possible delay, in the shape of further European Councils under the Luxembourg Presidency in the last half of 1997.

The link between the 1996 IGC and enlargement

Even if this linkage was not explicitly spelt out in the Maastricht Treaties, the European Council at Copenhagen in June 1993 concluded that:

"The associated countries in Central and Eastern Europe that so desire shall become members of the Union. Accession will take place as soon as a country is able to assume the obligations of membership by satisfying the economic and political conditions."

This is the first time that the Union has ever given, in advance of accession negotiations, a guarantee of membership to applicant states. [8] The timing of future enlargement negotiations is directly linked to a successful outcome of the IGC. The European Council at Florence in June 1996 stressed "the need for the Commission's opinions [9] and reports on enlargement to be available as soon as possible after the completion of the Inter-Governmental Conference, so that the initial phase of negotiations can coincide with the beginning of negotiations with Cyprus.....six months after the end of the IGC, taking its results into account."

Whilst there is no doubting the political will, expressed at the highest political level in the Union, in favour of the Eastern enlargement of the EU, considerable concern is felt at the working level about the capacity of a supranational entity comprising 25 or more sovereign states to discharge the duties imposed on it effectively and efficiently. Perhaps for this reason, the guarantee of accession given to the 10 applicant States is not as unconditional as at first appears. Thus, quite apart from the words "taking its results into account" cited above, the Madrid European Council in December 1995 invited the Commission to:

• take its evaluation of the effects of enlargement on Community policies further in an "impact study" dealing particularly with agricultural and structural policies;

• embark upon the preparation of a composite paper which will complement the opinions and impact studies by providing an overall approach to questions of enlargement (in other words, a "horizontal" paper dealing with the effect on all the Union's policies and operations of the accession of 10 or more new members);

• submit a communication on the future financial framework of the Union, having regard to the prospect of enlargement

immediately after the conclusion of the IGC. The Commission has confirmed that work on these three papers, as well as on the 10 opinions required under Article O, is well-advanced and that all the documents can be tabled as soon as the IGC is completed. Apart from the specific case of Cyprus, where the Commission has already issued a favourable Opinion and where accession negotiations are scheduled to begin six months after the conclusion of the IGC, [10] no timetable has been laid down for the Central European and Turkish accession negotiations. It is up to the Council to decide when to open accession negotiations and which countries should be included in the first phase. Under Article O of the TEU, it is clear that each application has to be taken separately on its individual merits. Although the present situation is unique, the political, economic and legal differences between the 11 applicant states will require that each be considered and negotiated separately. At the same time however, if only for institutional reasons (and the need to keep the inevitable disruption caused by successive accessions to a minimum), it will be necessary throughout the process to have a global view.

The Commission itself has taken a cautious approach on both the timing and the "modalities" of enlargement. The probable duration of the accession process may well be closely related to the extent to which the applicant states request derogations from the acquis communautaire and to other events such as the outcome of the Central European states' applications for NATO membership and the impact of internal developments in the EU, such as economic and monetary union (EMU). The Commission has said that the earliest realistic date for the first accessions is likely to be no earlier than 2002 and that it is unlikely that all applicants will be in a position to accede to the Union at the same time. It is likely therefore that, assuming that the process of enlargement continues as planned, much of the first two decades of the next century will be dominated by the progressive absorption of new member states. [11] If this is so, the implications for the challenge of maintaining coherence and momentum in the Union's internal and external policies through this crucial period in world history scarcely need emphasis.

A potential new dimension to the enlargement process was added at the EU-Turkey Association Council in Brussels on 29 April, 1997 when, faced with the threat of an anti-fundamentalist military coup in Turkey, the EU reaffirmed Turkey’s "eligibility" for membership, as well as the fact that Turkish accession would follow the "Copenhagen" principles laid down for the Central European and Baltic applicant States.

Completing the IGC, preparing enlargement and dealing with "unfinished business"

It is something of a paradox that the apparent enthusiasm for European integration in Central Europe coincides with widespread "Euroscepticism" within the Union. The apparent reversal of this tendency in the UK election on 1st May does not affect the more pervasive problem posed by the unique obscurity, for the vast majority of the 350 million Union citizens, of the Union’s institutions, law, decision-making process and political finalité. In one sense, the very success of European integration through the "common market" (as opposed to the "free trade area") model since 1951, contains the seeds of its present difficulties. Particularly after the successful launch of the single market programme in 1985, the Community and the Union have become both a model and a magnet for other European states, virtually all of which have either applied for membership or sought preferential relationships. The popularity of the EC/EU model has led to its enlargement, to a point where its capacity to achieve the goals for which it was established has become threatened. The management of a Union of 15 (with political, monetary, security and defence aspirations) is very different to that of a small club of six states, each with a vivid recollection of the destruction caused by the (then) recent war between them.

My own recollection of early days as a Commission civil servant in 1973, when many of my hierarchical superiors were former adversaries in the second world war, is a vivid illustration of this phenomenon. Today, the threat of "civil war" in Western Europe seems so remote as to put in question the original raison d’être of European integration which was to prevent a recurrence of armed conflict. In this context, perhaps the most urgent need is indeed to define the political or security aims of European integration. Meanwhile, on the economic side, the need for European integration in an information society where national frontiers are increasingly irrelevant, and for an international "presence" for Europe in a world likely to be dominated by China, the United States, Russia and Japan, has never been greater or more difficult to achieve. The current discussions on the future rôles of the EU, WEU and NATO in European security - as well as the participation of the United States and Russia in these endeavours - provides a perfect illustration of the dimension of the problems involved.

Arguably, without the new challenge created by the collapse of the Warsaw Pact, integration within the EU could have continued with the implementation of EMU to underpin the single market. As it is, the accession of Austria, Finland and Sweden (after 10 years preparation through the Luxembourg Agreement and European Economic Area processes) has been accompanied by the ongoing process of completing the regulatory framework for the single market [12], preparation for EMU, negotiating and implementing more than 20 preferential agreements linking neighbouring countries with the EU, implementing the Uruguay Round Agreements, pursuing the reform of the Common Agricultural Policy (CAP) and preparing a new budget for the EU with effect from 1 January, 2000. For better or for worse, the Union now faces the formidable challenge of addressing these issues at the same time.

The impact of EMU

At the Dublin Summit in December 1996, it was confirmed, in accordance with Article 109j of the EC Treaty, that EMU would start on 1st January 1999. Consequently, the Council (meeting in the composition of the Heads of State or Government) will decide, by qualified majority and early in 1998, which Member States fulfil the necessary conditions for the adoption of a single currency. Much secondary legislation has already been agreed or adopted in order to provide a minimum of legal security for the business community, and more is in the pipeline. Of course, an element of political uncertainty will persist until the last minute, but the signs are increasingly that - driven by political as much as purely economic factors - EMU will go ahead as planned on 1st January 1999.

Preparation for, and speculation concerning, EMU have tended to over-shadow the IGC. Of course, monetary union (with the advent of an independent European Central Bank (ECB) and a single currency) will have an immediate effect on markets and on economic operators worldwide, whereas the institutional reform of the EU combined with enlargement will have effects which are primarily political and longer-term. There is however one respect in which EMU, the IGC and enlargement are linked. This has to do with the future institutional structure of the European Union and the issue of "flexibility".

"Flexibility" is a political rather than a legal concept. In the debates surrounding the 1996 IGC, concepts such as "variable geometry", multi-speed Europe and Europe à la carte have been used alongside flexibility. The essential thought underlying all these notions is that, in a Union of 20 or more States, it is probably impossible for all to subscribe to the same level of legal obligation. Some States may require derogations or exceptions of differing duration. Some States may even wish to "opt out" of particular obligations altogether. The crucial (and unresolved) issue is whether, as a matter of principle, all States of the Union should be required to accept the same level of legal commitment as a target, or whether - as in the case of the Agreement on social policy concluded between the Member States of the EC except the UK and Protocol 14 of the EC Treaty on social policy - one or more Member States should be allowed to opt out permanently from particular areas of Union policy. Although six weeks before the Amsterdam Summit, there remains a wide variety of views on the balance to be struck between the minimum degree of homogeneity to assure a viable "core" to the Union on the one hand, and sufficient "flexibility" to secure the widest possible membership on the other, there seems to be a consensus that "flexibility" should only operate prospectively, with regard to new or future Union policies, leaving intact the acquis communautaire.

The EC Treaty's rules on EMU contain their own "flexibility", notably in Article 109k. In early 1998 when the Council confirms which Member States fulfil the necessary conditions for the adoption of a single currency, the Member States which do not fulfil the conditions are to have a derogation exempting them from the application of a number of Treaty provisions on EMU [13] . The voting rights of Member States with a derogation will be suspended as far as the application of these Treaty provisions is concerned and the expression "qualified majority" interpreted accordingly. Similarly, these States will not be involved in the appointment of the officers of the ECB.

It is difficult to evaluate in advance the effect of EMU (and in particular its institutional arrangements) on the modus operandi of the Union as a whole. Perhaps one of the most visible areas of activity will be in external monetary policy. Under Article 109 (a provision which does not apply to member states with a derogation), it is clearly envisaged that the ECB will have an important role in external affairs. Article 109 is an exception to Article 228 (which lays down the normal institutional arrangements for international negotiations by the EC) and gives the ECB tasks in relation with third countries in, for example, exchange-rate negotiations or adjustments. Given the comprehensive transfer of competence for monetary policy to the ECB, it is clear that this will be reflected externally (for example in the IMF) by the adoption of a common position by EMU Member States. It is even possible that, in 1999 and thereafter, the EC will be in the strange position of having a more clearly defined legal competence in external monetary policy than in external trade under Article 113. In any event, both internally and externally, EMU will have the effect - more clearly than ever before - of dividing Member States into two groups, with unpredictable consequences.

In a Commission communication to the Council on the external aspects of EMU in April 1997, the Commission stressed that the introduction of the euro will have significant effects on member states outside the euro area, as well as on countries outside the EU. Similarly, the impact of the euro area (with an economic weight equivalent to that of the United States) on activities within the OECD, IMF and World Bank group are not under-estimated by any of these bodies. The main characteristics of the euro area will be its comparable economic weight to the US and Japan [14], greater openness to international trade and less sensitivity to exchange-rate fluctuations. The arrival of the euro will create the largest bond-market in the world. The euro should rapidly develop as an international and reserve currency, particularly in those countries with close ties with the EU. This in turn is likely to be reflected in a substantial international presence for the European Central Bank (ECB). In terms of economic stability during the initial transitional period, the monetary policy stance of the ECB will be crucial. Hence, the Commission’s view is that there is no reason why the ECB should not be heir to the credibility of those central banks (especially the Bundesbank) to which it succeeds.

The euro area will - principally through the Council and the ECB - pursue a single exchange-rate and monetary policy in relation to third countries. This policy will be formulated through consultations between the Council, the ECB, and the Commission under Article 109 of the EC Treaty. As the Commission says (with commendable understatement) "the completion of EMU has the potential to lead to an important evolution in the international monetary system. The single currency is being introduced at a time when the international monetary system is already transforming from a hegemonic system to a more multi-pole system. A multi-pole system is not inherently more unstable than a uni-polar world, but by definition the arrangements for co-operation between the poles are an important element of the whole system and its flexibility."

More concretely, the advent of EMU and the ECB poses a number of operational and institutional questions, notably in the context of the IMF. How will the "EC/EMU" define its balance-of-payments need, in order to define its right to draw on fund resources? How will the "EC/EMU" be represented on the IMF Board of Governors or the Executive Board? Last - but certainly not least - as Commissioner de Silguy indicated immediately before the UK election, there is the question of how the "EU/EMU" will be represented in the G7 and whether, after 1998, a "G3" will suffice for setting global economic and monetary policy.

Leaving EMU to one side, it is not difficult to see the legal and institutional complexities which might emerge after the enlargement of the EU to 25 or more Member States. Assuming that the level of economic development of the acceding States leads to wide-ranging derogations from the acquis communautaire, there is obviously a risk of serious damage to the homogeneity of the Community or Union legal order. The 1996 IGC, though undoubtedly aware of the danger to the integration process which this sort of development might pose, has carefully avoided putting into question the provisions on EMU which were included in the EC Treaty at Maastricht. On the other hand, the question of "flexibility" in areas other than EMU has been a key feature of the IGC discussions (see below).

The main themes of the IGC two months from Amsterdam

The Irish and Dutch Presidencies have tabled more than 150 pages of texts outlining proposals for revision of the Treaties. These cover issues as diverse as fundamental rights and non-discrimination, foreign policy, institutional matters, "flexibility", transparency and subsidiarity, simplification of the Treaties, the legal personality of the Union and some specific (and topical) areas of Community law and policy such as employment, social law, environment, consumer policy and public health (notably against the background of the BSE and genetic engineering crises). Three of the most controversial subjects are justice and internal affairs, external relations and institutional reform. The latter issue is of course crucial if the decision-making processes of the Community and the Union are to be adapted for enlargement. But the breadth of other, substantive, issues under negotiation shows that member states are equally concerned with tying up the loose ends left at Maastricht and providing a better legal basis for the tasks facing the Community/Union in the twenty-first century.

• Justice and internal affairs

Those who were associated with the work to remove internal frontiers in accordance with Article 7a [15] were aware that this would highlight the need for reinforced co-operation between national law-enforcement authorities, particularly police and customs. In the preambular paragraphs of the TEU, the need to secure the free movement of persons, whilst respecting their safety and security, was given as the main reason for including provisions on justice and home affairs in the Treaty. The lack of concrete progress in the implementation of these provisions (together with those on foreign and security policy) has been particularly criticised since 1993. The entrenched opposition of states such as the United Kingdom to giving "teeth" to the Maastricht provisions on the free movement of persons has been a particular (but not the only) obstacle.

Meanwhile, quite independently of action taken by the European Union, problems such as international crime, the conditions of access and free movement for third country nationals, asylum and visa policy, and the increasing inter-action between legal systems giving rise to the need for more effective rules on the enforcement of civil and criminal judgements, combine to highlight the need for an efficient infrastructure for co-operation. Although often portrayed as such in the media, this is not a question of "Brussels versus the member states". It is about finding new working methods to cope with the international dimensions of what the different law-enforcement authorities have to do on a daily basis.

There now appears to be a large measure of agreement in the IGC that the most effective way forward is to transfer some subjects to the traditional Community framework - from the "third pillar" to the "first pillar". The aim is to provide more appropriate legal procedures and clearer decision-making. It would also provide a firmer democratic (through the European Parliament) and judicial (through the European Court) control of what Ministers decide in this area, particularly where individual rights are concerned.

One key issue is whether the Schengen Agreement, which provides the legal grounds for the complete abolition of frontier controls and the free movement of persons between contracting states, will be integrated into the Treaties, possibly with a derogation preserving the common travel zone between the UK and Ireland and allowing the UK to retain frontier controls with other member states for the time being. The Dutch Presidency text on the "third pillar" describes a two-fold objective; first, to create a new title in the EC Treaty ("first pillar") containing provisions on the free movement of persons, asylum and immigration; secondly, to strengthen the provisions on police and judicial co-operation in criminal matters in Title VI of the TEU. The new linkage between the two "pillars" (with their contrasting institutional arrangements) is made in a re-drafted Article B of the TEU, stressing the link between the free movement of persons and flanking measures to ensure the safety of individuals.

More specifically, the Dutch Presidency proposes:

• the incorporation of all the Schengen acquis (to be identified and attached, possibly as a Protocol, to the new Treaty) into Community/Union law;

• special provisions for the non-Schengen countries (such as the UK) to participate in the Schengen acquis on terms to be agreed with the Schengen countries, with appropriate provisional measures;

• specific or case-by-case "opt-out" provisions for non-Schengen states as regards new legislation adopted on the basis of the new Treaty provisions.

Significantly, the Presidency considers that the full integration of "Schengen" into the Union would have the positive effects of providing a single political and institutional framework for acting on the free movement of persons and would make it possible for non-Schengen states to participate actively in reinforcing the internal security of the Union as a whole. The Council Secretariat would take over the work currently done by the Schengen Secretariat. A new draft Article laying down provisions on the free movement of persons, asylum and immigration, envisages that qualified majority voting in the Council would be adopted on all matters in the new Title within 3 years.

Given the political sensitivity of issues affecting the free movement of persons, the substantial progress which appears to have been made in transferring much of the "third pillar" into the EC framework, is remarkable. It reflects the level of acceptance by the Schengen states that increased international co-operation between police and customs authorities, elsewhere than at frontiers, is a necessary and worthwhile price to be paid for the removal of national frontiers. It probably also shows the extent to which most European states now accept that many serious crimes - particularly the economic variety - frequently have an international dimension, which can only be dealt with by international co-operation.

• External affairs and the legal personality of the Union

Article 210 is possibly the shortest article of the Treaty and provides that "the Community shall have legal personality." Externally, the legal personality of the EC - in particular its treaty-making power - is based on Articles 11O - 115 on the common commercial policy and 228 on the conclusion of international agreements. These provisions have been interpreted by the ECJ in a series of judgements of which two need to be mentioned here. First, in the ERTA case [16], the Court held, in a strongly functional interpretation of Community law, that - in addition to the competence in external affairs conferred by the Treaty itself - the Community also enjoys external competence in areas of internal policy where, by legislation, the Community has "occupied the field" thereby transferring responsibility in those fields from the Member States to the Community.

Secondly, in a more conservative vein, in an advisory opinion obtained by the Commission under Article 228(6) on the capacity of the Community to ratify certain Uruguay Round Agreements (especially those on trade in services, and trade-related intellectual property measures), the Court interpreted Article 113 in such a way as to restrict the exclusive competence of the Community to matters which are wholly or at least substantially linked to trade in goods. The Court held that, in the absence of exclusive competence in the Community's internal policies in these fields, the Community had only "mixed" or shared competence with the member states at international level.

The issue of who is to represent the Community (and the Union) at international level has always been sensitive, even when "classical" trade policy issues in the GATT, such as tariff or non-tariff barrier negotiations, are concerned. Apart from the legal issues involved, the role of the Commission as negotiator and representative of the Community in international relations depends essentially on the trust placed in the Commission by the member states. As the Community has grown and the international issues have diversified away from mere trade in goods, so the member states have resisted the further transfer of power to the Community as such. Whilst understandable, this creates difficulties for the Community's negotiating partners, particularly in knowing whether to deal with the member states, the Commission or the Council Presidency on a particular issue.

Although in many ways the absence of a clearly defined personality or legal competence in trade and economic policy is the most glaring problem facing the Community in external relations (if only because the Community's partners expect the problem to have been solved after nearly 40 years’ experience), the main focus in the IGC has been with the external aspects of the common foreign and security policy. In this field even more than in justice and home affairs, the dearth of concrete results since Maastricht has diminished the standing of the Union in international councils.

Part of the problem - and perhaps a reflection of the Member States' preoccupation with internal affairs at Maastricht - was the failure to endow the European Union with legal personality. It is incongruous and confusing, first to allow the terms "Union" and "Community" to exist side-by-side in the Treaty and secondly to endow one, but not the other, with legal personality. Some would argue that it is precisely this sort of carelessness with terms of art which diminishes respect for the European institutions amongst citizens and third countries alike. In this respect, a number of proposals recently tabled by the Dutch Presidency are to be welcomed. One amendment envisages an obligation for the Council and the Commission to co-operate in order to ensure the consistency of the Union’s external activities as a whole, in the context of its external relations, security, economic and development policies. The proposal would confer explicit legal personality on the European Union and would merge the existing legal personalities of the three Communities [17] and that of the Union into a single legal entity. This would be done without altering the respective features of the Community and the common foreign and security policy and would leave the pillar structure unchanged. The draft text of a new Article A for the TEU provides that:

"1. By this Treaty, the High Contracting Parties establish among themselves a European Union, hereinafter called "the Union."... The Union shall replace and succeeds to the European Community, the European Coal and Steel Community and the European Atomic Energy Community...

2. The Union shall have legal personality.

3. In each of the Member States, the Union shall enjoy the most extensive legal capacity accorded to legal persons under their laws; it may, in particular, acquire or dispose of movable and immovable property and may be party to legal proceedings. To this end, the Union shall be represented by the Commission.

4. In international relations, the Union shall enjoy legal capacity to the extent necessary for the exercise of its functions and the fulfilment of its purposes. Agreements between the Union and one or more States or international organisations in areas falling under.......[the EC Treaty] shall be governed by the provisions of Article 228.....Agreements between the Union and one or more States or international organisations in areas falling under the [CFSP or JHA] provisions shall be governed by the provisions of [an article yet to be decided]."

The adoption of a text along these lines would be a significant step towards clarifying the external "image" of the EU, although the confusing and institutionally flawed "pillar" structure of the Union would remain in place. In this respect, Article E of the TEU would continue to specify that the institutions of the Union will continue to exercise their powers under the conditions, for the purposes and in accordance with the procedures laid down in the relevant parts (i.e. pillars) of the Treaty.

Still, for the Union to become more effective in international relations, changes in practice as well as in legal theory are indispensable. Given the almost comprehensive scope of issues now covered by the Union, it is urgent that the Union improves its internal co-ordination procedures and representation in multilateral bodies such as the OECD, the specialised agencies of the United Nations and the UN itself. In this context, the deletion of Article 116 of the EC Treaty, which provided that when the Community has to act in international organisations outside the common commercial policy, there should be prior co-ordination in an attempt to present a common position and to speak with a single voice, is difficult to understand. Representation of the Union, as such, in the Security Council, should have a high priority (especially to the extent that the second pillar is strengthened at Amsterdam and that the defence capability of the EU is reinforced in accordance with the spirit of Article J4 of the TEU) but is linked to the question of how the security and defence of the European continent is to be organised between the EU, WEU and NATO. In bilateral relations likewise improvements are urgently needed. The desire for greater consistency internally, which is demonstrated in the attempts to strengthen the drafting of the common foreign and security provisions of the TEU, will fail unless there is also sufficient political will for the Union to exert its presence in world affairs.

Articles J5 and J6 of the TEU already provide a basis for the Union to act in a concerted manner in international relations. The Presidency is to represent the Union in common foreign and security policy matters (CFSP), to be responsible for implementing common measures and to speak for the Union in international organisations and conferences. The diplomatic missions of the member states and the Commission in third countries, as well as international conferences and organisations, are to work together to ensure that common positions and measures are complied with and implemented. The crucial problem as far as the CFSP is concerned is not so much, therefore, the lack of Treaty provisions or institutional procedures, but rather the absence of the necessary political will to make the system work. The comparatively ineffectual measures taken by the Union to end the Bosnian crisis are a case in point.

Against the background of a disappointing performance since the creation of the CFSP in 1992, the Irish and Dutch Presidency texts aim above all to improve the operational efficiency of the CFSP. The most radical innovation is to reinforce the distinction (already present in Article J3) between fundamental foreign policy decisions, which would continue to be taken at the highest political level, and the decisions for making operational these policy decisions within a unanimously agreed political framework. The European Council will therefore continue to have a pre-eminent role. It would define general guidelines and common strategies in the areas in which the member states have important interests in common. Common strategies would be implemented through joint actions and common positions. The latest Dutch Presidency proposal is that all decisions made within the framework of an agreed common strategy, except those with military or defence implications, would be taken by qualified majority vote. In addition, the Dutch Presidency proposes the gradual integration of the WEU into the Union, the progressive framing of a common defence policy (supported by a common armaments policy) and greater powers in the Union’s foreign and security policy for the Secretary-General of the Council. [18] Although the Commission (together with the Parliament and ECJ) would continue to play only a marginal role in a CFSP run essentially through inter-governmental co-operation, the Presidency does propose that, in order to ensure consistency in the external activities of the Union, the Commission is to be "fully associated" with matters coming within the CFSP and the implementation of common measures. [19]

• Streamlining the institutions and procedures

It is a commonplace in Brussels today that the daily working of all the institutions has become more difficult. In the Commission, the need to accommodate nine new nationalities in an integrated team over the last 23 years - with greatly expanded responsibilities but scant extra resources - has put the institutions under considerable strain. Sustained public criticism after Maastricht combined with unprecedented financial responsibilities (PHARE, TACIS, [20] structural and agricultural funds are examples) have exacerbated the situation and had an adverse impact on morale.

Likewise in the Council, the fact that the number of member states has increased from 6 to 15 has had an unavoidable effect on its working procedures. If, for example, all delegations (including the Commission) were to insist on speaking merely for five minutes on a particular agenda item, then "discussion" of a single agenda item could occupy virtually the whole of a morning session. Clearly, with the prospect of 20-30 member states, some fairly radical (in terms of conventional views of national sovereignty) measures need to be adopted if the Union's decision-making structure is to function at all in future. This is not so much a matter of Treaty modification, although this will be required on issues such as qualified majority voting and national representation in, for example, the Commission. It is more a question of modifying the Council's rules of procedure.

The need for reform seems to be shared unanimously. As has been described extensively above, the creation of a "3 pillar" structure for the Union, and the juxtaposition of the Union and the Community, has created confusion internally and externally. Despite talk of the need for a single institutional framework for the EU [21], it is clear that the time is not yet ripe for a fusion of the supra-national and inter-governmental structures which currently characterise the TEU. In these circumstances, the IGC - recognising the deficiencies of the present system, but politically unwilling to embark on the "constitutional conference" that alone could resolve the situation - can only make limited adjustments to improve the efficiency and legitimacy of the Union’s institutions. As far as legitimacy is concerned, whatever the failings of the European Parliament, there are strong views in favour of making the Council and the Parliament equal partners in the adoption of legislation. As regards voting (a matter which affects efficiency rather than legitimacy), the Commission's view is that qualified majority voting should be the rule and subject only tojustified exceptions. This issue is now at the heart of bargaining in the IGC.

More generally, there is the issue of the weighting of votes between the larger and smaller member states. The current system [22] provides procedures and institutions in which smaller member states are particularly well-represented. According to the Commission, the current approach has proved its worth and has ensured a balance between efficiency and legitimacy. The problem which is anticipated is that enlargement may disturb the traditional balance. The tension engendered by these anxieties emerges in various ways.

One concerns the weighting of voting in the Council. Some consideration may well be given to change to ensure that the overall balance remains as it is now (rather than being tilted even further in the interests of smaller states), even if it is not strictly necessary from a logical or arithmetic point of view. Another group of issues concerns the composition, organisation and operation of the Commission itself.

Despite an unfair, out-dated and inaccurate attempt in some quarters to equate the failings of the Community or (even more absurdly) the Union with the Commission, there appears to be a strong consensus amongst member states to preserve, in very broad measures, the four "classical" areas of Commission competence - a virtual monopoly of the right to initiate Community legislation, the duty to enforce Community law as "guardian of the Treaties", the right to negotiate on behalf of the Community internationally (particularly in policy areas where national sovereignty has been entirely transferred to the Community) and its role as the "civil service" or administration of the Community. As a recent Commission communication put it:

"The Commission is the guardian of the common interest, taking the broad view that looks beyond national concerns, sometimes exercising an arbitration function... It has been the general impetus and has come to be the driving force behind European integration."

The communication emphasises however the changing role of the Commission in the 21st century, with the management and consolidation of economic integration taking priority over innovation. The role of the Commission in a Union of more than 20 sovereign states is of course typical of many issues facing the IGC which can largely be addressed by changes in practice rather than Treaty amendments. As the Commission itself says, "the composition, organisation and operation of the Commission are interlinked, even if they are not all matters for Treaty provisions." One important issue in an enlarged Union will be whether each member state should continue to nominate one commissioner and whether the larger states should have two commissioners, as at present. The key is to balance legitimacy and efficiency and the Commission proposed to confine commissioners to one per member state up to a maximum of 20; above that number, a revision of Article 157 should be envisaged.

In terms of institutional relations, the Commission proposes that it continues to follow the general political impetus and guidelines of the European Council, but remain collectively accountable to Parliament. The Commission recommends that its President be nominated by the European Council, formally approved by the Parliament and should have greater powers to designate his colleagues in conjunction with member states. As far as its internal operations are concerned, the Commission proposed changes in its rules of procedure (not the Treaties) to reduce to around 10-12 the number of portfolios (whilst increasing the number of commissioners!) and stream-lining operations so that a more limited number of commissioners take primary responsibility for wider areas of policy (such as external relations), with other commissioners having support functions or more specific tasks. Clearly, some form of rotation would have to be envisaged so that all countries, in due course, have the right to nominate a "senior" commissioner. These changes might be combined with raising the profile of areas such as external affairs, economic and monetary affairs, integration policies and citizens’ interests, by increasing the number of Commission Vice Presidents from the one or two currently allowed under Article 161 to a larger number.

Finally - and perhaps most important of all - the Commission will have to review and modernise the organisation and operation of all its departments, especially in the area of external relations. This process does not of course require Treaty amendment, is already under way and is more the responsibility of the Commission alone, than of the other institutions, except of course where increases to the EC budget are concerned.

Other areas of ambiguity

Discussion of the need for "flexibility" has pervaded the IGC (and academic discussion concerning the IGC [23] )since its inception. The debate on "flexibility" derives from two sources. The first - from the past - is a certain feeling that Maastricht I dealt with the rights of the minority (principally the United Kingdom and Denmark) to opt out and that Maastricht II should deal with the rights of the majority to proceed further and faster than the rest if they wish to do so. The second concerns the future and reflects a feeling that a larger Union will require mechanisms to allow temporary (or even permanent) ad hoc derogations for states (or groups of states) which are unable or unwilling to subscribe to the acquis communautaire in a particular area.

In the IGC it seems that there is agreement that, if the need for flexibility is conceded, it will have to be circumscribed by safeguards to prevent abuse. In particular, it will be crucial to avoid creating new (and parallel) institutional structures. On the other hand, the situation described above as regards EMU in which the member states with derogations will in effect be excluded from the decision-making of the ECB, seems to be one step towards separate structures. Perhaps partly as a result of the (correct) political decision to exclude any discussion of EMU from the present IGC, there seems to have been little consideration of the impact on the EC’s internal and external competence of:

• the split between the Community’s exclusive and mixed competence in external economic affairs, excluding EMU;

• the different institutional arrangements affecting member states with and without derogations from Articles 102-109 on EMU;

• external relations under the second and third pillars.

Although a number of Treaty articles have been drafted to provide the legal basis for securing a minimum of cohesion in all aspects of the Union’s external affairs, there is already scope for the "disintegration" or "segmentation" of the Union acquis, quite apart from any new provisions on flexibility.

In any event, many would argue that a considerable degree of flexibility already exists, not only in the ad hoc provisions made for many member states in the Treaties themselves (for example the transitional measures which are made to facilitate accession), but especially - almost as a matter of course - in secondary legislation, where one or more member states are allowed a period of time to conform to Community law. In this sense, there is no doubt that the combination of qualified majority voting in the Council and a liberal policy allowing member states with particular difficulties time to "come into line" has proved to be a means of accelerating integration (for example in the field of internal market legislation) than the reverse. On the other hand, if - especially in a wider Union of 25 or more states - "flexibility" resulted in legal confusion and, in effect, a Union of "concentric circles", this would not advance the political and economic goals of European integration and would diminish the very cohesion needed to make the European Union effective on the world stage.

The Dutch Presidency gives a prominent place in its draft text, based on the latest discussions by national representatives, to flexibility or "closer co-operation". The Presidency accepts that the conference outcome on this subject will be significant for the future development of the Union. In essence, the draft Treaty changes put forward by the Presidency include a general clause applicable to the three pillars, setting out the general conditions and institutional arrangements for closer co-operation. This is designed to establish a clear framework for using such co-operation, whilst preserving the basic principles of the Treaties and safeguarding the interest of any member states which might not participate in such closer co-operation from the outset.

Secondly, the Presidency has drafted specific clauses applicable to the three pillars individually, (EC, CFSP and CJHA), setting out the conditions for closer co-operation in each area, with a particular role being conferred on the Commission to control the compatibility of any request for closer co-operation in the context of the first (EC) pillar.

The Presidency suggests creating a new Title in the common provisions of the TEU laying down the fundamental conditions of closer co-operation. Draft Article 1(1) contains an important list of nine conditions to be met by member states intending to establish closer co-operation. Thus, the co-operation must:

• be aimed at enhancing European integration and the interests of the Union;

• respect the principles and objectives of the Treaties;

• be used as a last resort, where the objectives could not be attained by using other Treaty procedures;

• concern a majority of member states;

• safeguard the institutional framework of the Union;

• respect the acquis communautaire;

• not prejudice the interests of non-participating member states;

• allow other member states to become parties to the closer co-operation at any time, provided they comply with decisions taken within the framework of closer co-operation;

• comply with the additional specific criteria set out in the EC Treaty (Article 5a) and Articles J12 and K7 of the EU Treaty.

Institutionally, whilst all member states would be permitted to take part in the deliberations on issues covered by closer co-operation, qualified majority voting rules would only apply to participants, who would also alone be liable for expenditure.

Within the EC, the new draft Article 5a referred to above provides that any closer co-operation which may be authorised by the Council acting on a proposal from the Commission, must not prejudice the free movement of goods, services, persons and capital, the common commercial, agricultural, transport, competition or economic and social cohesion policies, nor constitute a discrimination, restriction or distortion of trade between member states.

Significantly, respect for the conditions in the context of the EC Treaty is subject to review by the ECJ, whereas - at least at first sight - the criteria to be established under the TEU are subject to no judicial review.

Finally, considerable ambiguity persists concerning the concept of "citizenship of the Union." At the heart of the current malaise in the European Union is the absence of a clear political vocation, either internally or towards the wider world. The absence of legally defined "personality" is one aspect of this problem. The fact that the Union has only (at best) an imperfect "constitution" is another, more serious, defect. It is now clear that the creation of a genuine Constitution of the Union in time for the Amsterdam Summit is simply not on the agenda. Yet if the Heads of State and Government at Amsterdam fail to address the need for a simplification of the Treaties, there may once again be difficulties in ensuring that the results are ratified by 15 national parliaments.

The state of the Union after Amsterdam ?

The limited progress so far made in the current IGC and likely to be achieved at Amsterdam is a salutary reminder of the political difficulty involved (in the absence of a commonly perceived external threat) in developing European integration for its own sake. In the absence of a more clearly defined political goal, it is doubtful whether much further progress can be made. In the current fragile political situation, serious slippage in any of the present goals (particularly the IGC or EMU) could result in the postponement of enlargement, with unpredictable political consequences.

There has been some discussion of a further IGC in 2001 when, in any event, the ECSC Treaty will expire. There have already been three IGCs in the last 10 years. Although the Single European Act undoubtedly facilitated the completion of the single market by widening the scope of qualified majority voting, inter-governmental (or "constitutional") conferences have generally had a debilitating and diversionary effect on the internal development of the Union. The next step, assuming there is no slippage, will be to complete the next enlargement of the Union and only then to look again at the possibility of a genuine constitution for the Union. At the moment, despite the crisis of public confidence which has affected the Union since Maastricht, the European Union has dominated the history of post-war Europe. It has become a model and a magnet for virtually all the nation states in and around the European continent. And yet, if the Union fails to become genuinely democratic (possibly by a more effective link between the European, national and regional parliaments or between national parliaments and the Council), if it fails to define its own defence policy and if it embraces a form of flexibility which leads to the unravelling of the collective enterprise, there is a risk that the Union will lose this leading role.

In short, the Union - to remain relevant to the economic and political future of Europe - must be seen to be indispensable to the challenges facing our societies on the eve of the 21st century. These include the emergence of a genuinely global economy, the information revolution, global environmental problems, international crime, the growing irrelevance of national frontiers, the proliferation of localised (but potentially contagious) conflicts in the Euro-Mediterranean region and a new geo-political challenge with the emerging economic dominance of China and the Asia-Pacific region in the immediate future. Even if the results of the Amsterdam Summit exceed the most optimistic predictions, the challenges facing the Union thereafter are of an entirely different order.

The impact of the IGC on Jersey

The outcome of the general election on 1st May 1997, if it leads to a strengthening of the United Kingdom’s position in the European Union may well be more important, for Jersey’s relationship with the European Union, at least in the short-term, than Treaty reforms agreed at Amsterdam. Nonetheless, the general restructuring of European integration, which is now under way and of which the 1996 IGC is but a part, is clearly a matter of concern to an Island for which stability and predictability (especially in economic matters) are of crucial importance. Progress towards EMU, which is proceeding quite independently from the IGC, clearly requires (and is receiving) careful assessment by the financial services industry. A possible tightening of European co-operation on fiscal policy, encouraged by EMU disciplines, also needs to be monitored. Jersey, like other off-shore financial centres, will also wish to note developments in the "grey zone" between the first and third pillars in the EU, in particular in areas such as police and judicial co-operation, the fight against fraud and money-laundering.

In one perspective, some might see dangers for an off-shore Island such as Jersey becoming increasingly isolated as the European Union widens its scope, both geographically and in terms of issues covered. On the other hand, a more realistic view is probably that, in a Europe where regional diversities are increasingly respected and where "flexibility" allows a wide measure of divergence in the level of legal obligations accepted by member states and regions within the Union, there is no reason why the special status enjoyed by Jersey under Community law since 1973 should not fulfil the Island’s expectations in the era of changes upon which the European Union is now embarked.

Alastair Sutton is a barrister and a partner of Forrester Norall and Sutton, Place Madou, Box 34, 1210 Brussels. He is an adviser to the States of Jersey on European matters.

Footnotes - (Top)

[1] - The status of Jersey, Guernsey and the Isle of Man is set out in Protocol 3 to the UK Treaty of Accession to the European Communities, OJ special edition, 27.3.72 at page 164.

[2] - The empirical collection of treaties which now underpin th color="#000000">e European C ommunity and Union comprise, inter alia, the Treaties of Paris (1951) and Rome (1957), the Single European Act (1986), the Treaty on European Union (1992) and the Treaty establishing the European Community (1992).

[3] - Article N (2) of the Treaty on European Union.

[4] - The text of Article B refers to achieving economic and social progress which is balanced and sustainable, in particular through the creation of an area without internal frontiers, through the strengthening of economic and social cohesion and through the establishment of an economic and monetary union, including a single currency.

[5] - In essence, the body of relevant Community law and practice. It is now often simply referred to as the acquis.

[6] - In this paper, the terms European Community and European Union are not used inter-changeably. The Union is a three pillar structure established by the Treaty on European Union (TEU), comprising not only the European Community (EC) - with a separate Treaty establishing the European Community - but also "pillars" dealing with a common foreign and security policy and co-operation in justice and home affairs. Only the EC operates on a supranational basis. The EU is based on inter-governmental co-operation, with the typically supranational EC institutions such as the Commission, Parliament and Court of Justice playing a much reduced role.

[7] - The 1996 IGC was prepared by a Reflection Group, comprising the Member States, the Commission and the European Parliament, which submitted a suggested annotated agenda to the European Council in Madrid in 1995. The IGC was formally inaugurated at the Turin European Council on 29 March 1996. The Irish Presidency then submitted a "general outline for a draft revision of the Treaties" to the Dublin Summit in December 1996. The Irish Presidency gave particular impetus to the IGC with meetings at Foreign Minister level on a monthly basis and meetings of a group of "personal representatives" on an almost weekly basis. The momentum has been maintained by the Dutch Presidency, which produced an "addendum" to the Dublin II document on 20 March 1997, representing a further refinement in the light of discussions by representatives of the texts contained in the Dublin II drafts.

[8] - The Central European states which have addressed applications to the Council are (in chronological order) Hungary, Poland, Romania, Slovakia, Latvia, Estonia, Lithuania, Bulgaria, the Czech Republic and Slovenia. Cyprus is also an "active" candidate. The case of Turkey is politically controversial, although on 30th April 1997 the Union confirmed Turkey’s eligibility for membership and its right to be considered in parallel to the Central European and Baltic countries.. Applications from Norway, Switzerland and Malta are, in practice, unlikely to be followed up in the foreseeable future.

[9] - Article O of the TEU lays down the procedure to be followed for the accession of new members. Thus, "any European State may apply to become a member of the Union. It shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members. The conditions of admission and the adjustments to the Treaties on which the Union is founded which such admission entails shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting states in accordance with their respective constitutional requirements."

[10] - Despite the precise indication on timing given at the Florence Summit in June 1996, it is clear that negotiations with Cyprus will be complicated by the divided status of the island, by the persistent frictions in the EU's relations with Turkey and the need for Greek support in order for any overall solution to be accepted by the Union as a whole. Delay in negotiations with Cyprus ought not, therefore, to retard negotiations with the Central European applicants, for which a different (and equally compelling) political imperative exists.

[11] - Such a scenario is particularly worrying (even if is politically inevitable) against the background of over 25 years of "stop - go" progress in European integration, involving the accessions of the United Kingdom, Denmark and Ireland in 1973, Greece in 1981, Spain and Portugal in 1986 and Austria, Finland and Sweden in 1995, together with the upheavals caused by the negotiation and ratification of the Single European Act in 1986 and the TEU in 1992.

[12] - Since the end of the "Delors decade" in 1995, the volume of new regulatory measures has dropped sharply. Attention has shifted to monitoring the application and enforcement of internal market measures by the 15 member states. Still, the fact that technological advance outstrips the regulators' ability to produce an appropriate regulatory framework (e.g. European rules on the information society, including technical standards and intellectual property rules) means that there is, for the foreseeable future, a backlog in the enactment of new European law.

[13] - These include Articles 104c(9) and (11), 105(1),(2),(3) and (5), 105a, 108a, 109 and 109a(2)(b).

[14] - In 1996, the EU’s share of GDP in the OECD was 38.3%, compared with 32.5% for the US and 20.5% for Japan.

[15] - Article 7a provides that "the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty".

[16] - Commission v Council [1971] ECR 263

[17] - The EC, the ECSC and the EURATOM.

[18] - A new draft Article J14 of the TEU substantially increases the powers of the Council Secretary-General by providing that he shall assist the Council in matters coming within the scope of the CFSP. He should also "contribute to the formulation, preparation and implementation of policy decisions" and may even act on behalf of the Council at the request of the Presidency by conducting political dialogue with third parties.

[19] - At first sight, this appears to add little to the present text of Article J9.

[20] - These acronyms refer to the technical assistance programmes financed by the EC for the countries of Central and Eastern Europe, including the Baltic States.

[21] - Article C of the TEU currently provides - somewhat misleadingly - that "the Union shall be served by a single institutional framework...".

[22] - Article 148(2) currently provides that, where the Council is required to act by qualified majority, Germany, France, Italy and the United Kingdom have 10 votes, Spain has 8, Belgium, Greece, the Netherlands and Portugal have 5, Austria and Sweden have 4, Denmark, Ireland and Finland have 3 and Luxembourg has 2.

[23] - See, in particular, Maastricht and Beyond, Federal Trust, London, 1994; Reviewing Maastricht: Issues for the 1996 IGC, Alan Dashwood (ed.), 1996 and Reforming the Union, Andrew Duff, Federal Trust, 1997.