For a Decentralised Enforcement of Single Market Rules

For many years, the incorrect application of the Single Market rules has been a concern for the EU. In that respect, the European Commission has expressed its ambition, in compliance and enforcement matters, to be “bigger and more ambitious on big things, and smaller and more modest on small things”. Given its limited resources, it makes sense for the Commission to focus on the “big things”. But then someone else has to take care of the “small things” because, added together, they constitute a serious impediment to the functioning of the Single Market.

How, and by whom, these small things shall be taken care of is the topic of our newly published discussion paper “Reforming compliance management in the Single Market”. In this paper, the National Board of Trade Sweden discusses, after looking at possible alternatives, a decentralisation reform that would consist in setting up national enforcement bodies in each Member State. Their mandate would be to investigate local infringements of EU law and, eventually, to bring actions before the national courts.

We explain why a decentralisation reform is necessary in order to significantly reduce the compliance deficit in the EU. It would also be a natural step in the development of the European integration project. Finally, it would be a means for the Member States to reassert their ownership of and responsibility for the Single Market.

A necessary reform

Whereas the Commission’s infringement proceedings focus on major enforcement issues, such as the timely transposition of directives, numerous cases of misapplication of Union law go under the EU’s radar. Those compliance issues may take the form of discriminatory decisions on the labelling of goods, municipal planning rules that restrict market access in a disproportionate manner or undue delays for the recognition of professional qualifications.

Taken separately, each of these problems may be very painful in the everyday lives of the EU citizens and businesses concerned. Added together, they may “prevent the Single Market from fully delivering projected benefits” as shown in the report “In Quest of Compliance” which we published in 2016.

The size of the compliance deficit is difficult to measure. A few studies have attempted to assess the cost of non-compliance within specific areas, for instance within taxation, services, public procurement and mutual recognition or for EU environmental legislation. For each of these areas, they indicate losses of tens of billions of euros every year due to an incorrect application of Union law.

There are already mechanisms in place to address compliance issues. Over the years, the European Commission has launched new tools ranging from scoreboards and peer-review mechanisms to interpretative guidelines or the setting up of the informal problem-solving network SOLVIT. It is also possible for citizens and businesses whose EU rights have been breached to bring a complaint before the national courts.

However, in our paper we explain why those mechanisms are, in our view, not sufficient to significantly reduce the compliance deficit in the EU. We argue further that compliance problems affecting the Single Market are inherent to the nature of EU law, a body of rules that transcend distinct legal orders – the European and the national ones –, each with their own (and not always compatible) logic, concepts, interests and traditions.

Bridging the gap between these legal orders requires more than the communication channels in place. In order to foster continuous awareness of, and understanding for EU law on the side of the national administrations, we find a need to move the enforcement mechanisms closer to where the infringements take place, that is within the Member States.

Devising a decentralised enforcement regime

More specifically, we discuss the possibility to introduce, in each Member State, a new player, a “National Enforcement Agency” or NEA, that would monitor the correct application of EU law in those states. In order to safeguard an efficient enforcement, we find it also necessary to endow each NEA with the power to bring cases before the national courts. Hence, the role of the NEAs in the Member States would mirror the Commission’s supervisory work at the EU level.

Aside from these two core features – a national authority embedded in the Member States’ administrations and the recourse to the judiciary – we discuss various aspects that may be relevant in devising a decentralisation regime. One of them relates to the scope of supervision of the NEAs, that is monitoring the application of the whole acquis or of specific pieces of EU legislation. Another concerns the risk of overlap with other national authorities which are entrusted by the EU to apply Union rules within specific sectors or areas, for instance in financial services, telecom or chemicals.

We also insist on the need to involve the Commission in such decentralised regime in order to safeguard a uniform application of the Single Market rules. Experiences from collaboration between national authorities and the Commission within competition law (with the European Competition Network), telecom (BEREC) or consumer protection (the CPC network) may serve as useful guidance here.

Impact of a decentralisation reform

We believe that a decentralised regime for the enforcement of EU law would have a significantly positive impact on the functioning of the Single Market. Reducing the compliance deficit would also contribute to raising the legitimacy of the European integration project.

Another positive effect of such a regime would be to reassert the Member States’ ownership of the Single Market. Both the European Commission and the Member States have an obligation, indeed a strong interest, in making the Single Market work. Solving local problems at the local level is not only an efficient way of enforcing Union law but also, and in line with the principle of subsidiarity, a way to involve the Member States in improving the EU’s engine for growth.

Even if a decentralisation reform would tick many boxes in terms of efficiency, economic integration and subsidiarity, we are conscious of the objections that may be formulated against such an idea. These include the costs associated with such a reform, the possible threat on the uniform interpretation of EU law, the challenge in safeguarding the independence of the NEAs or the difficulties in getting the Member States to agree on scrutinizing their own administrations. Without minimising the validity of these objections, we attempt in our paper to show that those are not necessarily insurmountable.

What next?

The appointment of a new European Commission this year provides a window of opportunity for taking a fresh look at the future of the Single Market. In that context, we are witnessing calls from the business community, Member States and the Commission to focus on the correct application and enforcement of EU law.

A decentralisation reform may not be the most realistic outcome in the short term but we hope that our paper can trigger a reflection on the needs and means for strengthening compliance in the Union. In particular, we hope that a presentation of an ambitious, yet concrete idea may elevate the debate and contribute in going beyond too abstract or too modest wishes for the Single Market.

Olivier Linden

Olivier Linden is a senior legal adviser at the National Board of Trade, the independent authority in charge of the Single Market in Sweden. Olivier has authored the Board’s own-initiative paper “Reforming compliance management in the Single Market”. The views expressed in this paper do not necessarily reflect the position of the Swedish government.

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Author: Olivier Linden

Olivier Linden is a senior legal adviser at the National Board of Trade, the independent authority in charge of the Single Market in Sweden. Olivier has authored the Board’s own-initiative paper “Reforming compliance management in the Single Market”. The views expressed in this paper do not necessarily reflect the position of the Swedish government.

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