3 Undeclared work
| Committee's assessment
| Legally and politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Draft Decision on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work
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| Legal base | Article 153(2)(a) TFEU; co-decision; QMV
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| Department | Business, Innovation and Skills
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Summary and Committee's conclusions
3.1 The draft Decision would establish an "EU Platform"
— a formal mechanism at EU level comprising the relevant
enforcement authorities designated by each Member State, the Commission
and various observers (including labour and industry representatives
and the International Labour Organisation) — to strengthen
cooperation in preventing and deterring undeclared work. The
EU Platform would promote the exchange of information and best
practice, develop expertise and analysis, and coordinate cross-border
operational action. The Commission considers that existing voluntary
cooperation between Member States is patchy and piecemeal. It
has therefore proposed that participation in the EU Platform should
be mandatory for all Member States.
3.2 In her letter dated 7 July, the Minister for Employment Relations
and Consumer Affairs (Jo Swinson) responds to questions raised
in our earlier Reports concerning the legal base for the draft
Decision, the application of the UK's Title V (justice and home
affairs — "JHA") opt-in, and the significance
of the cross-border dimension in tackling undeclared work and
in securing more effective enforcement action. She says that
the Government is minded to opt into the draft Decision, even
though it does not cite a Title V legal base, and that its opt-in
decision will be seen as "a political statement" of
the UK's support for the EU Platform.
3.3 We commend the Minister for responding so comprehensively
to the questions we raised in our earlier Reports. Regrettably,
there is little in her analysis that we are able to endorse.
The Government appears to have retreated on the three substantive
legal issues raised in her initial Explanatory Memorandum and
subsequent correspondence — the justification for EU action,
the legal base for EU action, and the need for a Title V (JHA)
legal base.
3.4 Taking each of these in turn, we do not accept the Minister's
assertion that "the main conflict with the principle of subsidiarity
has fallen away" because the UK would be under no obligation
to participate in any operational activities recommended by the
EU Platform. As the Minister herself acknowledges, the Commission
"has not provided any more evidence" to establish a
need for EU intervention or to demonstrate that EU action would
be effective and add value. The principle of mandatory participation
in the EU Platform — the core of the Government's initial
objection on subsidiarity grounds — remains.
3.5 We accept the Minister's analysis of the scope of Article
153(2)(a) — the legal base proposed by the Commission —
and agree that its use is appropriate in this case and that the
prospects of a successful legal challenge are "very low".
We note, in particular, her view that this Article cannot be
used to impose "any substantial obligations on Member States,
whether directly or indirectly".
3.6 Given these limitations, we find the Minister's assertion
that the draft Decision cannot impose "any substantive obligations"
difficult to reconcile with her belated assessment that the UK's
Title V opt-in applies. The Minister will be familiar with our
position that the UK's Title V opt-in does not apply in
the absence of a Title V legal base. The Government's position,
however, is that the opt-in does apply if there is "JHA content".
According to its established policy, the Government will press
for the inclusion of a Title V legal base if an EU measure imposes
a JHA obligation, but not if its content contains "political
commitments or declaratory statements which imposes no JHA obligations".[4]
As it would be for the UK to designate which of its enforcement
authorities should participate in the EU Platform, and as participation
in any activities recommended by the Platform would be on a voluntary
basis, it is not self-evident that the draft Decision imposes
any JHA obligations on the UK or, if it does, that they are anything
more than ancillary.
3.7 Under the Government's revised opt-in policy,
set out in a letter of 3 June 2014 to the Chair of our Committee,
the Government accepts that the UK is bound by a measure, once
adopted, which contains JHA content but does not cite a Title
V legal base except in cases where the UK has decided not
to opt in and the JHA content is ancillary and does not
call into question the validity of the entire measure.
3.8 The Minister tells us that the draft Decision
constitutes a "partial JHA measure"[5]
— in other words, its content is not wholly JHA in nature,
but nor is the JHA content purely ancillary. As a consequence,
if (as seems likely) the draft Decision is adopted without the
inclusion of a Title V legal base, the UK will consider itself
bound by it "whether we formally opt in or not", subject
to the UK's right to challenge its validity in the Court of Justice
if it chooses not to opt in. There is little indication that
the Government does intend to initiate a legal challenge. Even
if it were to do so, we think it likely, in light of recent Court
rulings, that the JHA content in the draft Decision would be considered
as ancillary and insufficient to justify the addition of a Title
V legal base.
3.9 The Government appears to have decided to
cut its losses and opt in. As the Minister so presciently observes,
the UK's opt-in decision "will be seen as a political statement
of our support for, or opposition to, this measure". Even
accepting the Government's approach, the assertion of the UK's
opt-in in this case has no legal effect whatsoever and operates
purely as a "political statement".
3.10 Our original concern that the evolution of
the Government's opt-in policy risked creating legal uncertainty
is now compounded by its use, in this case, as a symbolic gesture
with no legal effects. The Minister has provided no further compelling
evidence to support the adoption of the draft Decision, let alone
to exercise an opt-in which is recognised by no other Member State
and has no impact on the legal effect of the measure. In the
circumstances, we are unwilling to clear the draft Decision from
scrutiny. We invite the Minister to report back to us at the
earliest opportunity on the position taken by the UK within the
Council as and when an agreement is sought on a general approach.
Full details of
the document: Draft Decision on establishing
a European Platform to enhance cooperation in the prevention and
deterrence of undeclared work: (35967), 9008/14 + ADDs 1-2, COM(14)
221.
Background and previous scrutiny
3.11 The EU Platform proposed in the draft Decision
would have three objectives:
· improving
cooperation between Member States' different enforcement authorities
at EU level to prevent and deter undeclared work more effectively
and efficiently;
· strengthening
the technical capacity of Member States' enforcement authorities
to tackle cross-border aspects of undeclared work; and
· increasing
public awareness of the need for action and encouraging Member
States to intensify their efforts to tackle undeclared work.
3.12 Our Forty-ninth Report, agreed on 7 May 2014,
includes a detailed overview of the draft Decision and a draft
Reasoned Opinion, which was debated and agreed to in the House
on 9 June, explaining why we consider that the Commission has
failed to demonstrate either that action at EU level is necessary
or would be effective to achieve the objective of tackling undeclared
work, or that mandatory participation in an EU Platform is justified.
3.13 In addition to our subsidiarity concerns, we
also asked the Government to provide:
· a more
detailed analysis of the scope of the legal base proposed by the
Commission — Article 153(2)(a) of the Treaty on the Functioning
of the European Union (TFEU) — and the extent to which it
may be used to require, rather than merely to encourage or promote,
certain forms of cooperation; and
· a more
up-to-date assessment of the size of the UK's shadow economy,
as well as the Government's view on the accuracy of the Commission's
data concerning the scale of undeclared work across the EU and
the significance of any cross-border aspects.
3.14 Our Third Report, agreed on 18 June 2014, sets
out the response provided by the Minister for Employment Relations
and Consumer Affairs (Jenny Willott), and her progress report
on negotiations. Whilst the Commission had given no ground on
the principle of mandatory participation in the EU Platform, it
had accepted that participation in the activities of the Platform,
including any cross-border inspections, would be on a voluntary
basis, thereby lessening the Government's concerns relating to
subsidiarity. The Minister added that, on further reflection,
the Government had concluded that the draft Decision was subject
to the UK's Title V (justice and home affairs) opt-in on the grounds
that it included a reference (in recital 13) to the police as
one of a number of national enforcement authorities which may
have some responsibility for tackling undeclared work.
3.15 We reiterated our position that the UK's Title
V opt-in does not apply in the absence of a Title V legal base
and asked the Minister to:
· clarify
which provisions of the draft Decision create legally binding
obligations in the justice and home affairs field;
· confirm
that the Government is pressing for the inclusion of a Title V
legal base and clarify which Treaty Article/s it believes should
be cited; and
· explain,
in light of the policy set out in the letter of 3 June 2014 from
the Home Secretary (Mrs Theresa May) and the Lord Chancellor (Chris
Grayling), whether she considers the JHA provisions contained
in the draft Decision to be purely ancillary and, if so, whether
the UK would consider itself bound by them in the event that there
is no Title V legal basis and the UK does not opt in.[6]
3.16 We asked the Minister to inform Parliament of
the date on which the three month opt-in period would expire and
to set out the factors the Government would take into account
in reaching an opt-in decision. We also asked for her view on
the significance of the cross-border dimension in tackling undeclared
work and in securing more effective enforcement action, as well
as further analysis of the scope of the legal base proposed by
the Commission, including any advice given by the Council Legal
Service.
The Minister's letter of 7 July 2014
3.17 The Minister (Jo Swinson) anticipates that the
Italian Presidency will seek to reach an agreement on the draft
Decision as soon as possible, and invites the Committee to clear
it from scrutiny on the basis that the Government secures an outcome
ensuring that participation in all enforcement activities pursued
through the EU Platform remains voluntary.
3.18 The Minister says that the Commission has not
produced any further evidence to persuade the Government that
there is a need for EU-level intervention or that action at EU
level will be effective, but adds:
"negotiations have secured textual amendments
to both the Recitals and the Articles which clarify that participation
in any activities arising from the Platform's discussions would
be voluntary. This is a significant improvement to the proposal.
Although we accept that membership of the Platform would be mandatory,
this clarification means that the UK would not be required to
take part in activities arising from the Platform, although we
might choose to. The only remaining obligations are to nominate
an enforcement authority to attend and participate in the meetings
of the Platform, and these requirements are not onerous.
"With that in mind I do not believe we should
oppose the requirement for the UK to participate in the Platform.
We will need to continue to guard against the possibility that
the Commission might try to direct national policy in their pursuit
of common principles and guidelines further downstream. Participation
will help us to do this. As a result, and because the Government
considers that there is JHA content in this proposal, the Government
is therefore minded to opt-in."
3.19 The Minister notes that the three month opt-in
deadline expires on 15 July and sets out the Government's reasons
for considering that opting into the draft Decision would be in
the UK's national interest:
"The opt-in decision will be seen as a political
statement of our support for, or opposition to, this measure.
Some Member States who share our concerns about fraud and abuse
of EU free movement rights consider undeclared work to be a damaging
example of such abuse and therefore this measure is very important
to them as part of that broader agenda. Whilst the Government
considers that the primary responsibility for action on undeclared
work lies with Member States, we believe that opting into this
proposal would be useful in relation to delivering our wider position
on the abuse of free movement rights.
"Moreover, given the general support for this
proposal amongst a number of Member States, there is a risk that
the initiatives and the remit of the Platform (including the role
of the Commission) develop and increase over time. By engaging
positively with the Platform and participating in the meetings
of the Platform, the UK can help steer the direction of travel
and hopefully limit the level of ambition held by other Member
States."
3.20 The Minister provides further information on
the Government's reasons for considering that the draft Decision
creates legally binding obligations which engage the UK's Title
V opt-in. Although the reference to the police as one of a number
of national enforcement authorities only appears in a recital
to the draft Decision, not in the operative Articles, she notes
that the recitals play an important role in the interpretation
of the Articles, and adds:
"The Government considers that the activity
against which the co-operation is directed (failure to declare
work) is treated as a criminal matter in many Member States.
Furthermore, the co-operation set out in the proposal includes
cross-border co-operation — for example, initiatives that
facilitate joint operations of inspections and exchange of staff.
Recital 13 of the proposal sets out the enforcement bodies that
may be engaged, and includes the police, customs authorities,
and public prosecutors. On this basis, we consider that the proposal
requires law enforcement authorities to collaborate with the Platform,
that the proposal therefore engages Article 87 TFEU (police co-operation),
and the JHA opt-in is triggered."
3.21 During the course of negotiations, the Government
has pressed for the inclusion of Article 87 of the Treaty on the
Functioning of the European Union (TFEU) to be cited as an additional
legal base.[7] The Minister
continues:
"The Government has not been successful during
these negotiations (although we have been successful in clarifying
the language of the Proposal and ensuring that participation in
cross-border activities arising from discussions would be voluntary).
However, as you are aware, the Government's policy is that the
decision to assert the opt-in is taken on the basis of content,
not legal base. As we consider that there is JHA content in this
proposal, the Government believes that the opt-in is triggered.
"Given the importance that is placed on cooperation
on enforcement matters in the proposal, the Government considers
the JHA provisions to be a significant part of the Platform's
constitution and therefore more than ancillary content. We therefore
consider this to be a 'partial JHA measure' as set out in the
Home Secretary and Justice Secretary's letter to the committee
of 3 June. As a result, and as set out in that letter, in the
event that a Title V basis is not added, and the UK does not opt-in,
we will still be subject to the requirement to participate in
the Platform. In other words, we will be obliged to do so whether
we formally opt-in or not."
3.22 Turning to the substantive legal base for the
draft Decision proposed by the Commission, the Minister notes
that the purpose of the EU Platform is to enhance cooperation
between Member States on undeclared work. She continues:
"This falls within the scope of Article 153(2)(a),
which states that the Council and Parliament may adopt 'measures
designed to encourage cooperation between Member States through
initiatives aimed at improving knowledge, developing exchanges
of information and best practices, promoting innovative approaches
and evaluating experiences'. We consider therefore that the
chances of being able to successfully challenge the legal basis
of the measure before the CJEU after adoption are very low.
"As to the extent to which the legal base can
be used to require rather than encourage forms of cooperation
between Member States, the Government accepts the analysis of
the Council Legal Service that requiring representatives to attend
meetings or to appoint points of contact in a Member State who
shall participate in the Platform meetings is likely to be seen
as means of 'encouraging cooperation' in line with what Article
153(2)(a) allows.
"However, Article 153(2)(a) cannot be used as
the legal basis for measures creating any substantial obligations
on Member States, whether directly or indirectly.
"Therefore, we do not believe that Member States
can be obliged to participate in the initiatives that the Platform
may pursue under Article 4. However, Article 153(2)(a) does allow
more limited measures of a practical nature, the effect of which
is to set up the Platform and encourage cooperation. These limited
measures allow the Platform to be set up and to function, but
they do not impose any substantive obligations as to the terms
of that cooperation. In our view, the proposal, as currently
foreseen, falls well short of the harmonisation which is expressly
excluded by the Article."
3.23 The Minister notes our concern that mandatory
participation in the Platform would still be unsatisfactory, even
if the UK were not bound to take part in all of its activities,
as the UK would "shoulder all the expense and inconvenience
of attending meetings of the EU Platform without reaping any of
the benefits that may be derived from collective action".[8]
She disagrees, adding:
"The Government is not against all hypothetical
activity arising from the Platform and may take part in activities
which suit the national interest. The important point is that
the UK is involved in the discussions of the Platform which lead
to potential activities in order to negotiate and influence what
these activities are. It will then be up to us, following the
negotiations, as to whether we wish to be involved in the activities."
3.24 The Minister makes clear that the Government
does see some merit and added value in the EU Platform, even if
it is not convinced that all of the activities proposed by the
Commission are necessary or worthwhile. She highlights, in particular,
the potential to learn from other Member States' experiences and
initiatives and adds:
"A cross-border Platform of this nature is more
likely to be successfully set up at EU level rather than left
to Member States. Furthermore, we feel that sharing the UK's
own experience in this field would benefit other Member States,
thus supporting efforts across the EU as a whole."
3.25 Given that the UK will be able to decide on
"an issue-by-issue basis" whether or not to participate
in activities proposed by the EU Platform, the Minister considers
that "the main conflict with the principle of subsidiarity
has fallen away".
3.26 Finally, the Minister notes the lack of information
in the Commission's Impact Assessment on the scale of undeclared
work within the EU and the extent to which the cross-border dimension
presents a problem, particularly for the UK. She accepts that
obtaining reliable estimates is difficult, but cites a Eurobarometer
survey in 2013 which indicated that a low percentage of respondents
in the UK had carried out undeclared paid activities (3%) or purchased
goods and services involving undeclared work (8%) in the previous
12 months. Only 2% stated that all or part of their salary was
paid in cash and was not declared to tax or social security authorities.
The Minister continues:
"The UK Government is vigilant about tackling
undeclared work and has put in place a range of measures to tackle
it and its effects. The UK is already participating in a number
of voluntary undeclared work-related initiatives which are already
in place between Member States."
3.27 Whilst accepting that the EU Platform remains
"rather ill-defined", the Minister considers that the
Government has "changed it for the better" during the
course of negotiations and that it would be in the UK's interests
to participate. She invites us to clear the draft Decision from
scrutiny.
Previous Committee Reports
Third Report HC 219-iii (2014-15), chapter 3 (18
June 2014); Forty-ninth Report HC 83-xliv (2013-14), chapter 1
(7 May 2014).
4 See letter of 3 November 2011 from the Home Secretary
to the Chair of the European Scrutiny Committee. Back
5
The letter of 3 June 2014 refers to a "partial non-ancillary
JHA measure". Back
6
Letter of 3 June 2014 to the Chair of the European Scrutiny Committee.
Back
7
Article 87 TFEU provides for the adoption of EU measures on police
cooperation involving all the Member States' competent authorities,
including police, customs and other specialised law enforcement
services in relation to the prevention, detection and investigation
of criminal offences. Back
8
See our Third Report of Session 2014-15 (18 June 2014). Back
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