14 MACRO-FINANCIAL ASSISTANCE FOR BOSNIA
AND HERZEGOVINA AND SERBIA-MONTENEGRO
(a)
(25989)
12885/04
COM(04) 604
(b)
(25991)
12886/04
COM(04) 605
|
Draft Decision amending Council Decision 2002/882/EC providing further
macro-financial assistance to Bosnia and Herzegovina
Draft Decision amending Decision 2002/883/EC providing further macro
financial assistance to Serbia-Montenegr
|
| Legal base | Article 308 EC; consultation; unanimity
|
| Department | HM Treasury
|
| Basis of consideration |
Minister's letter of 12 January 2005 |
| Previous Committee Report |
HC 38-i (2004-05), para 25 (1 December 2004) |
| To be discussed in Council
| Not known |
| Committee's assessment | Legally important
|
| Committee's decision | Cleared (decision reported on 1 December 2004)
|
Background
14.1 Macro-financial assistance (MFA) is a form of exceptional
balance of payments support the Community provides to countries
in the "near neighbourhood". In October 2004, we considered
these two draft Decisions to continue such assistance for Bosnia
and Herzegovina and for Serbia and Montenegro. We said then that
the substance of this proposal was straightforward and that normally
we would not draw it specifically to the attention of the House.
However, we were concerned about the justification given by the
Government for the use of Article 308 EC as the legal base for
the draft Decisions. It seemed to us that Article 181a EC was
sufficient for this purpose. We had commented before that Article
308 EC was sometimes used without proper justification and we
asked for an explanation as to why use of Article 181a was not
more appropriate in this case. We drew attention to a
similar case we were still considering in relation to European
Investment Bank (EIB) activity.[41]
In December 2004, in the light of an explanation given to us by
the Government about a declaration annexed to the Nice Treaty
to the effect that balance-of-payments aid to third countries
falls outside the scope of Article 181a, we cleared the document.
But we asked the Government to:
- enlarge on the reasoning behind the adoption of Declaration
No. 10 annexed to the Nice Treaty;
- say which Community objective is to be attained
by the proposals; and
- explain how the proposals relate to the operation
of the common market.[42]
The Minister's letter
14.2 The Financial Secretary to the Treasury (Mr
Stephen Timms) now responds to our request for further information.
In relation to the declaration annexed to the Nice Treaty he says:
"Prior to the Nice Treaty, third country
cooperation agreements were always adopted under the residual
power in what is now Article 308 TEC, which requires unanimity.
However, due to the frequency with which this article was being
used as a basis for grant-based assistance (for example to the
accession candidates and to MEDA countries)[43]
a case was made during the negotiations for the Nice Treaty to
establish a discrete legal base, operating by QMV, to cover this
particular type of agreement.
"The UK amongst other Member States considered
that the move to QMV was inappropriate for balance of payments
aid, which is different in nature from grant-based expenditure
and where the need for new legislation is less frequent; and this
view prevailed. Declaration 10 therefore sets out the Conference's
intention that Article 181a should not be used as a base for balance-of-payments
aid to third countries. It may be noted that Article 181a also
retains unanimity for association agreements and for economic,
financial and technical agreements with candidate states."
14.3 In relation to Community objective to be attained
by the proposals the Minister says:
"The recitals to the two instruments under
scrutiny make it clear that the beneficiary countries are committed
to the reform path and that this inter alia justifies extension
of the arrangements in Decisions 2002/882 and 883 which they will
amend. As stated in the recitals to Decision 2002/883:
'(3) Within the Stabilisation and Association
process, which is the framework for the European Union's (EU)
relations with the region, it is desirable to support efforts
to sustain political and economic stabilisation in Bosnia and
Herzegovina, with a view to evolving towards the development of
a full cooperation relationship with the Community.
'(4) Financial assistance from the Community
should be instrumental in bringing Bosnia and Herzegovina closer
to the Community.'
"Decision 2002/882 uses the same wording.
"The Treaty establishing the European Community
as amended at Nice entered into force on 1 February 2003, i.e.
after the adoption of Decisions 2002/882 and 883. However the
preambles to the Nice version and to the prior, Amsterdam, version
contain the same aspirational resolution:
'Resolved by thus pooling their resources to
preserve and strengthen peace and liberty, and calling upon other
peoples of Europe who share their ideal to join in their efforts.'
"Prior to Nice the Treaty already provided
for development cooperation as an activity of the Community (Article
3(1)(r) and Article 181). Article 181, which is the same in both
versions of the Treaty, made it clear that the Community's cooperation
policies are not confined to cooperation with developing countries.
It is only with the Nice amendments that the substance of Article
181 in the Development Cooperation Title is re-enacted and repeated
in the new Title on economic, financial and technical cooperation
with third countries, along with the rule of law and human rights
and fundamental freedoms provision in Article 177(2).
"The aims of the instruments under scrutiny
fall within the objectives of Article 181a. While the effect of
Protocol No 10 is to remove balance of payments aid from the scope
of the QMV decision-making power in Article 181a, this is not
to say that the objectives in this Article cannot apply to a decision
under Article 308. By definition Article 308 is to be used to
meet Community objectives where an express power is not provided
elsewhere."
14.4 Finally, in relation to how the proposals relate
to the operation of the common market, the Minister says:
"As the European Court held in the AETR
Case (Case 22/70) the Community's competence to conclude international
agreements arises not only from an express conferral by the Treaty
but may equally flow from other provisions of the Treaty and from
measures adopted, within the framework of those provisions, by
the Community institutions. The linkage with the operation of
the common market, i.e. the internal market is not a prerequisite."
Conclusion
14.5 We note the Minister's responses. However,
we remind the Government again of the importance of monitoring
carefully proposals to use Article 308 as a base for legislation
and, as a matter of principle and in the interests of good governance
and the rule of law, of acquiescing in its use only when properly
justified. Although we have cleared the proposals, we are still
doubtful whether Article 308 is a satisfactory legal basis for
them. We understand the reasoning the Minister gives us for the
adoption of Declaration No 10 annexed to the Nice Treaty. (But
we observe, particularly in the light of the specific preservation
of unanimity for association agreements and for economic, financial
and technical agreements under Article 181a, that it would have
been better if balance-of-payments aid had also been mentioned
on the face of the article.)
14.6 We also understand the reasoning that balance-of-payments
aid can be made in fulfilment of the objectives of Title XXI and
Article 181a and that these can be said to form one of the objectives
of the Community for the purposes of Article 308. However we do
not accept that it is not a prerequisite for the use of Article
308 that the Community action proposed must be "in the course
of the operation of the common market". Not only does this
requirement appear plainly on the face of the article, but we
are unable to see anything in the AETR judgement[44]
which supports the proposition that Article 308 does not require
a "linkage" with the operation of the common market.
14.7 We should be grateful for the Minister's
further comment on this last point, particularly as to why he
thinks the AETR case is relevant to the argument he seeks to make
on the use of Article 308.
41 See (25989) 12885/04 (25991) 12886/04: HC 42-xxxiv
(2003-04), para 14 (27 October 2004) and, for the related case,
(25705) 9886/04: HC 38-iii (2004-05), para 33 (12 January 2005).
Back
42
See headnote. Back
43
The MEDA programme is the principal financial instrument for implementing
the Euro-Mediterranean Partnership. Back
44
Case 22/70 Commission v Council [1971] ECR 263. Back
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