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dissertation entitled

WHO'S MINDING THE STORE?": DETERMINING THE
LOCUS OF CONTROL OF TELECOMMUNICATIONS
POLICY MAKING IN THE EUROPEAN COMMUNITY

presented by

Philip C. Fare

has been accepted towards fulfillment
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WHO'S MINDING THE STORE?:
DETERMINING THE LOCUS OF CONTROL IN TELECOMMUNICATIONS
POLICY MAKING IN THE EUROPEAN COMMUNITY

BY
Philip C. Fare

A DISSERTATION

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY
Ph.D. Program in the Mass Media
College of Communication Arts and Sciences

1992

ABSTRACT
WHO’S MINDING THE STORE?:

DETERMINING THE LOCUS OF CONTROL IN TELECOMMUNICATIONS
POLICY MAKING IN THE EUROPEAN COMMUNITY

BY
Philip C. Fare

This study explores the locus of control in
telecommunications policy making in the European Community
(Community). The Community is evolving in terms of economic
and international integration from a customs union toward
becoming a common market and, eventually, an economic union.
The political theories that pertain to international
integration--federalism, confederalism, functionalism, neo-
functionalism and international regimes--reveal that the
Community is currently most like a confederation. The
Member States determine policy at the collective level, but
retain a large measure of control in implementing that
policy at the national level.

That control becomes more apparent when the Community's
legal order and policy making structure are examined. The
Community has its own legal order and policy making
processes which involve multiple actors, including the
Community institutions, Member State governments and special
interest groups. These actors interact in various ways in

policy making, depending on the Community agenda and the

subject matter involved.

The Community has chosen telecommunications as a key
industry to lead the Community to economic improvement,
recognizing the direct importance of telecommunications in
the economy and the derived demand for telecommunications in
various industries. However, the telecommunications sector
in the Community was operating in a fragmented,
heterogeneous market.

A series of policy proposals has helped establish the
framework for developing a Community-wide telecommunications
market in equipment and services. An analysis of the policy
making processes that led to those proposals and the
Community legal instruments that were later enacted reveals
that the national governments retain a large measure of
control in determining and implementing Community

telecommunications policy.

Copyright by
PHILIP CLAYTON FARE
1992

To my best teachers and
my connection to Europe,

my Mother, Gladys,
and her parents,
Peter and Sarah Banoff

ACKNOWLEDGMENTS

My greatest thanks go to To. Muth, who eagerly recruited
me for the program before either one of us knew what we were
getting into, advised and encouraged me along the way and made
sure that I finished, all the while allaying my fears,
concerns and outright disbelief regarding the vagaries of
academia. Without his friendship, respect and guidance I
would never have gotten this far.

The other members of my committee also share in my
thanks: 8d Cohen for advice in broadcasting and statistics,
and for staying on the committee long after leaving East
Lansing; Todd Simon for sharing legal expertise; and Joe
straubhanr for adding to my knowledge of international
telecommunications.

My first and best teacher, my mother, Gladys rare, also
deserves much thanks and love for her spiritual, emotional and
financial support during the last three years. She has taught
me every important thing I know and instilled in me the faith,
hope and work ethic that make accomplishments like this
possible.

Many friends deserve my thanks for lending a hand,

providing encouragement, exchanging ideas or sharing their

vi

kindness along the way. Jason Butki and Mike voter provided
research assistance--as well as Joe Nolan, who helped with the
French materials--and showed me how to have fun before, during
and after Spartan basketball games. Veronica Gonzales
provided sage advice and a shoulder to cry on when I needed
it. Rick Bueeelle was always there to do a favor and provide
good conversation and laughs. Jeff Kaamiercaak, my cultural
mentor, understood best what many others never knew. Cliff
Flood was always himself: trustworthy, kind, wise and able to
laugh at all my jokes. :Mark.Gieeken.did.more than he knows to
help me finish this program by being a good friend. Tony
Polley was always witty and provided respite--as well as beats
from Collectors 12”, graciously keeping his complaints about
the "pop drivel" to a minimum. Stephen Moore kept in touch
and kept me in touch with his wealth of knowledge and great
ears. Sabrina Sterne-an, poet, goddess and tattoo companion,
always shared her insights, laughter and great stories. Brian
Kalahan kept me honest and mindful. Chris Cichoeki, though
late on the scene, made sure he made his mark, indelibly.
Thanks also to MSU football and basketball (for
employment and good times), Shawn, Elton, Roddy Frame, Neil
Tennant, Chris Lowe, Kirsty MacColl, Mark Wahlberg, Dinah
Washington, Mike Scott, and DJ Wayne Miller. Thanks for
keeping an eye on me Gareth, like you always do. iAnother life

begins today.

vii

List of Tables

List of Figures

TABLE OF CONTENTS

CHAPTER I INTRODUCTION

CHAPTER II THEORETICAL FRAMEWORK

A. The Theory of Economic Integration

B. Theories of International Integration
Federalism

Confederalism

Functionalism

Neo-functionalism

International Regimes

Conclusion

1.
2.
3.
4.
5.
6.

CHAPTER III THE LEGAL ORDER OF THE EUROPEAN COMMUNITY

A. Content of Community Law

B. Sources of Community Law
Treaties
Acts of Community Institutions

1.
2.

a.
b.
c.
d.
e.

f.

Regulations

Directives

Decisions

Recommendation and Opinions

General Requirements for Acts of
Community Institutions
Institutional and Substantive Rules

C. Community Institutions and Community Law

D. The Effect of Community Law on National Law

E. The Administration of Community Law

F. Conclusion

viii

xi

xii

12
13

16
19
25
27
30
33
36

43
44
45
45
47
49
51
52
52

53
55

55
56
60

61

CHAPTER IV INSTITUTIONS AND ACTORS AND THE EUROPEAN

A.

B.

E.

COMMUNITY POLICY MAKING PROCESSES
Historical Development

The Community Institutions
1. Council of Ministers
2. Commission of the European Communities
3. European Parliament
4. European Court of Justice and Court of
First Instance
5. European Council
6. Economic and Social Committee

Other Actors in the Policy Making Processes
1. Standards Organizations
2. Private Sector Participants

Policy Making Processes
1. The Consultation Procedure
2. The Cooperation Procedure
3. Community Legislation After Adoption

Conclusion

CHAPTER V TELECOMMUNICATIONS AND THE EUROPEAN

A.

B.

C.

COMMUNITY ECONOMY
European Telecommunications in the 1970s
The Dual Role of Telecommunications in
the Economy

1. The Direct Role

2. The Indirect Role

Conclusion

CHAPTER VI DEVELOPING TELECOMMUNICATION POLICY IN THE

A.

B.

C.

EUROPEAN COMMUNITY

Council Actions November 1984-June 1987
1. Telecommunications Standards
2. Research and Development Programs
3. Procurement Contracts

The Green Paper on Telecommunications

Implementing the Green Paper

1. Competition in Terminal Equipment
2. Competition in Services

3. Open Network Provision

4. Radio Paging

62

63

64
64
69
75

81
84
85

87
87
89

91
92
98
100

102

108

109

111
112
117

1209

124

125
125
130
132

132

137
137
140
143
145

5. Mutual Recognition of Terminal Equipment
6. Digital European Cordless Telephone

D. Conclusion
CHAPTER VII CONCLUSION

BIBLIOGRAPHY

146
149

150

153

156

LIST OF TABLES

Page

1. Telephone Mainlines in the Community--1978-1989 113
2. Telecommunications Investment, 1978-1989 115
116

3. Telecommunications Revenues 1989

xi

1.
2.

3.
4.

6.

LIST OF FIGURES

Theories of International Integration
Directorates General and Special Units of the
Commission

Standing Committees of the European Parliament
Main Stages of the Policy Making Processes
Council Actions Taken November 1984-June 1987
Proposed Positions of the Green Paper

xii

40

72
79
93
126
136

CHAPTER I

INTRODUCTION

On March 25, 1957, ministers of six European nations
met in Rome and signed a treaty (EEC Treatyfi"that created
the European Economic Community (EEC), which--together with
the European Atomic Energy Community (Euratom)2 and the
previously established European Coal and Steel Community

(ECSC)3--came to be known as the Common Market or the

 

lTreaty Establishing the European Economic Community,
Mar. 25, 1957, 1 Treaties Establishing the European
Communities 207 (1987) [hereinafter EEC Treaty]. Belgium,
France, Germany, Italy, Luxembourg and the Netherlands were
the founding Member States. Three of the countries--Belgium,
the Netherlands and Luxembourg--had previously formed a
customs union on January 1, 1948, known as the Benelux
Economic Union, which served as the basis for future
discussions regarding establishing the European Economic
Community.

2Intended as a means of promoting the peaceful use of
atomic energy in Europe, the treaty creating Euratom was also
signed by the Community of Six on March 25, 1957. Treaty
Establishing the European Atomic Energy Community, Mar. 25,
1957, 1 Treaties Establishing the European Communities 611
(1987) [hereinafter Euratom Treaty].

3Previously, on April 18, 1951, the Community of Six had
signed a treaty establishing the European Coal and Steel
Community as a means of promoting economic integration through
the common control of the coal and steel industries. Treaty
Establishing the European Coal and Steel Community, Apr. 18,
1951, 1 Treaties Establishing the European Communities 17
(1987) [hereinafter ECSC Treaty].

1

2

European Community (Community) .‘ Motivated by a desire to
pool their resources to preserve and strengthen peace and
liberty in postwar Europe,’ the signatories established the
Common Market to promote "a harmonious development of
economic activities, a continuous and balanced expansion, an
increase in stability, an accelerated raising of the
standard of living and closer relations between the States
belonging to it."6

The concept of unifying Europe on economic grounds,
however, was not a new one. Following World War I a
European federation based on interdependent economies was
considered by some as a means to avoid further political
anarchy and warn7 Further devastated by World War II,
Europeans had begun to question the international political
order, in particular the basic unit of that order: the
nation-state. European union therefore became not only a

means to rebuild Europe's fragmented economy but a way to

 

‘Although the three Communities retain distinct legal
personalities, they were officially merged in 1965, and the
designation "European. Community" has since Ibeen. used in
official documents, other than legislation, whenever possible
and appropriate. Resolution of February 16, 1978 on a Single
Designation for the Community (OJ 63, 13.3.1978, p. 36.)

5EEC Treaty, supra note 1, Preamble.
6EEC Treaty, supra note 1, art. 2.

7See Harold J. Laski, The Economic Foundations of Peace,
in The Intelligent Man's Way to Prevent War 502 (Leonard Woolf
ed., 1933) 502; Lionel Robbins, The Economic Causes of War
104-09 (1939) . The customs frontier between Belgium and
Luxembourg had been abolished on May 1, 1922.

control political antagonism. However, despite the shift of
economic policy making to the Community level, questions
regarding the role of the nation-state in Community affairs
remained.

The distinctiveness of the Community as an
international organization has attracted the attention of
various scholars of world politics and political science.
Chief among the theoretical schools are federalism,
confederalism, functionalism, neo-functionalist and
international regimes, all of which differ in their analysis
of the role of the nation state in the integrative process.8
As a result several problems arise in reconciling the
theories and finding one that adequately describes the
Community. Although the theories are each internally
cohesive, they differ dramatically from one another, each
focusing on different basic concepts. In addition, the
theories often tend toward abstraction, focusing on what is
presumed will, or ought to, happen within the Community.
Finally, at the expense of concentrating on the central
institutions that might develop during the integration
process, the theories often ignore the status of the nation-
state after integration.

Over the years the Community has not developed into the

 

3For a discussion of the various theories of
international integration, see Charles Pentland, International
Theory and European Integration (1973) ; Stephan Haggard & Beth
A. Simmons, Theories of International. Regimes, 41 Int'l
Organization 491 (1987).

4
"United States of Europe" envisioned by those theorists who
initially studied the organization. Indeed, the Community
has developed its own political system and legal order, and
its institutions serve as the core of the organization.
However, for a number of reasons, those institutions have
not developed into the type of supranational entities that
people predicted would emerge.

Understanding the Community as an international
organization requires further understanding of the role of
the nation-state in the Community. Throughout the
development of the Community its Member States have been at
the heart of the integration and policy making processes.
At various times for various reasons some Member States have
resisted integration on certain levels. The growing
membership in the Community,9 which has added to its
cultural, economic and geographic diversity, has had an
impact on the interrelationship among the Community
institutions and the policy making processes. The strict
structure of the Treaty of Rome has also been criticized as
a hindrance to the development of the competencies of

Community institutions beyond a certain point.10 Thus, the

 

9Since its inception the EC has gradually grown from six
to its current twelve Member States. Denmark, Ireland and the
United Kingdom became Member States on January 1, 1973. On
January 1, 1981, Greece became a Member State. Portugal and
Spain became Member States on January 1, 1986.

10See Luciano Bardi & Gianfranco Pasquino, The
Institutionalization Process Under the Draft Treaty, in An
Ever Closer Union 141 (Roland Bieber et al. eds., 1985).

5
way in which the Member States interact with each other and
the Community institutions is important in developing and
implementing policy for a unified Europe.

Establishing a single market through common policies is
a task that begins as the exclusive preserve of the
Community and its institutions. The main Community
institutions--the Commission, Council of Ministers, European
Parliament and European Court of Justice-~each play a
different role in the policy making processes. Over the
years other institutions and actors--the European Council,
the Committee of Permanent Representatives (Coreper) and
various standards organizations--have also taken part. As
the Community has grown in membership, the competencies of
its institutions have changed, bringing about new
relationships among themselves and between the organization
as a whole and its Member States. In the end, however, it
is the Member States that must implement the policies at the
national level. Therefore, the locus of control in
Community policy making may not be in the Community
institutions, for the Member States play an important role
through the final stages of the policy making processes.

The purpose behind economic integration among the
Member States has changed over the years. The economic
unity that was once seen as a means to maintain peace and
stability is now seen as a means to challenge the economic

might of Japan and the United States. This has been true

6

especially since the early 19803, when the Community renewed
its focus on developing a single internal market
guaranteeing the free movement of persons, goods, services
and capital. In 1985, a White Paper identified 300 barriers
to establishing a single market and proposed ways to
overcome them.11 The next year the Member States signed the
Single European Act,12 which took effect on July 1, 1987,
and revised the EEC Treaty, implementing the White Paper
proposals and changing the decision making processes of the
Community institutions. Of particular interest in the
Single European Act was a provision that set December 31,
1992 as the deadline for establishing the internal market.‘3

The concentrated effort on economic unity stimulated by
the enactment of the Single European Act came none too late.
By the mid-19803 the widespread use of new advanced
technologies, particularly in the areas of micro-electronics
and information technology, had signaled what has been
considered the beginning of another long wave of economic

development.“ The Community Member States, however, were

 

“Completing the Internal Market: White Paper from the
Commission to the European Council, COM(85)310 final.

”Single European Act, 1987 O.J. (L 169).

13Id. art. 13. Although this deadline will not be met in
all areas of Community policy, it has served to fecus the
Community institutions, the Member States and their citizens
on the task of integration.

“See, e.g., Chris Freeman, Long Waves of Economic
Development, in The Information Technology Revolution 602 (Tom
Forester ed., 1985). The Russian economist and statistician

7
suffering from a technology gap and loss of competitiveness
in these areas and in telecommunications in general. Behind
the technological decline was the fragmented European
market, resulting from chauvinistic industrial policies and
protective regulatory regimes.

Around the same time the Commission acknowledged the
two-fold importance of the telecommunications sector in the
development of the single market.” First, it recognized
the substantial direct role telecommunications plays in the
economy through its large contribution to the Community GDP
and the large amount of investment it requires.16 Second,
the Commission recognized the indirect impact of
telecommunications investment, noting the ability of
industries such as manufacturing, banking and tourism to
increase productivity and decentralize through investing in

telecommunications services and equipment.17 Because of the

 

Nikolai Kondrat’ev first measured and noted 50-year cycles of
economic development. See Nikolai Kondrat'ev, The Long Wave
Cycle (Guy Daniels trans. 1984). Later, Joseph Schumpeter
associated the cycles with major technological changes--the
introduction of railways, electricity and the development of
petroleum chemistry--that spurred further innovations, changes
in infrastructure and increased investment. See Joseph A.
Schumpeter, Business Cycles: A Theoretical, Historical and
Statistical Analysis of the Capitalist Process (1939).

15Communication from the Commission to the Council on
Telecommunications, Progress Report on the Thinking and Work
Done in the Field, and Initial Proposals for an Action
Programme, COM(84)277 final [hereinafter 1984 Community Action
Program].

16Id. at 3.

”Id. at 3.

8

widespread economic effect of the telecommunications sector
as an industry in its own right and as a factor of
production for other industries, concerted action by the
Member States was determined necessary to face the challenge
of the new industrial revolution. The Commission feared
that maintaining fragmented national markets and a divided
approach to telecommunications policy would only increase
the technology gap.18

In June 1987, the Commission issued a Green Paper on
telecommunications.l9 The purpose of the Green Paper was to
start a Community-wide debate on the future regulatory
regime for telecommunications in light of its recognized
role in establishing the single internal market. The Green
Paper sets out several proposed positions with an aim to
improve telecommunications infrastructure, to offer a
broader range of services on more favorable terms to users,
to ensure coordinated development among the Member States,
to create a competitive environment and to ensure a
transparent network.

Creating a Community-wide telecommunications market
necessitates transforming the current situation and changing

the regulatory regimes of the Member States. The task

 

"Id .

19Towards a Dynamic European Economy--Green Paper on the
development of the common ‘market for telecommunications
services and equipment, COM(87)290 final [hereinafter Green
Paper].

9
before the Community requires ensuring that a Community-wide
scale and dimension is introduced by the transformation,
that no new barriers are created and that existing barriers
are removed. To achieve these goals several important
directives20 have already been adopted.

Most of the directives are aimed at increasing
competition in various areas of the telecommunications
sector. Three directives have gradually increased
competition in the terminal equipment sector, leading to
full mutual recognition of terminal equipment.21
Competition in the market for value-added services was
opened up immediately in a services directive,22 which also
opens up competition in basic data services on January 1,
1993. Telecommunications procurement markets, which had
been highly protected by national industrial policies, were

opened to bidders from other Member States in a directive

 

”A directive is one of type of Community legislation.
See infra Chapter III.

2‘Council Directive of 24 July 1986 on the Initial Stage
of the Mutual Recognition of Type Approval for
Telecommunication Terminal Equipment, 1986 0.J. (L 217) 21;
Commission Directive of 16 May 1988 on Competition in the
Markets in Telecommunications Terminal Equipment, 1988 0.J. (L
131) 73 [hereinafter Terminal Equipment Directive]; Council
Directive of 29 April 1991 on.the.Approximation of Laws of the
Member States Concerning Telecommunications Terminal
Equipment, Including the Mutual Recognition of Their
Conformity, 1991 0.J. (L 128) 1 [hereinafter Full Mutual
Recognition Directive].

22Commission Directive of 28 June 1990 on Competition in
the Markets for Telecommunications Services, 1990 0.J. (L 192)
10 [hereinafter Services Directive].

10
dealing with public procurement procedures.23 An Open
Network Provision Directive24 concerns the open and
efficient access to public telecommunications networks
through harmonization of technical interfaces and service
features, supply and usage conditions and tariff principles.

This dissertation will focus on both the Community and
its developing policy in the telecommunication sector as a
means to examine several important questions:

1. In light of prevailing theories of international
integration, how is the European Community best
characterized as an international organization, given the
composition and competencies of its institutions?

2. To what extent are the national governments of the
Member States involved in the policy making processes?

3. Given the recognized importance of the
telecommunications sector in establishing a single internal
market, where is the locus of control in the
telecommunication policy making process?

Chapter II examines the various theories of
international integration in an effort to determine their

significance in understanding the Community as an

 

23Council Directive of 17 September 1991 on the
Procurement Procedures of Entities Operating in the Water,
Energy, Transport and Telecommunications Sectors, 1990 0.J. (L
297) 1.

2‘Council Directive of 28 June 1990 on the Establishment
of the Internal Market for Telecommunications Services Through
the Implementation of Open Network Provision, 1990 0.J. (L
192) 1 [hereinafter ONP Directive].

11

international organization. Chapters III and IV provide
background on the Community legal order and examine the role
of the Community institutions and other actors in the policy
making processes. These chapters are necessary to provide a
framework for understanding how the Community functions.

Chapters V and VI focus on telecommunications policy in
the Community. Chapter V discusses the role of
telecommunications in the Community in terms of its direct
effect on the economy and the derived demand for
telecommunications services in various businesses. Chapter
VI discusses the approach the Community is taking toward
policy making in the telecommunication sector and analyzes
the various policy documents issued by the Community,
particularly those that implement the objectives of the
Green Paper. Chapter VII concludes the dissertation,
summarizing the results of the analyses in previous chapters

and revisiting the questions proposed in this chapter.

CHAPTER II

THEORETICAL FRAMEWORK

In the varied literature pertaining to international
organizations, the Community has been called a strange
hybrid.” Its process of integration has been complex, and
no single theory has yet established itself in explaining
the organization. Indeed, some scholars have criticized the
theoretical literature as inadequate in explaining the
Community and the relationships that exist between this
organization and its member states.26 Some problems in the
literature result from theories developed in the early years
of the Community that were not later confirmed by the
activities of the organization. This chapter will review
two major areas of theory that mark the Community as an
international organization. First, the theory of economic
integration will be discussed in order to determine the
status of the Community in its own evolutionary process.
Then the various political theories regarding international
integration are reviewed to determine which best explains

the structure of the Community.

 

25ShirleyWilliams, Sovereignty and.Accountability in the
European Community, 61 Pol. Q. 299, 300 (1990).

26See, e.g., Bardi & Pasquino, supra note 10, at 143;
Webb, Carole, Theoretical Perspectives and Problems, in
Policy-making in the European Community 1 (Wallace, Helen et
al. eds., 2d ed. 1983).

12

13

I. The Theory of Economic Integration

The concept of integration involves notions of
cooperation and coordination, and integration can occur
across various aspects of social, political or economic
life.27 For example, a variety of social groups have been
brought together through the Community, some bounded by
geopolitical frontiers and others not. The Member States
have also attempted to further political integration as
well, as evidenced by the Treaty of Maastricht.28 The
primary impetus for integration, however, has been economic,
as evidenced by the objectives stated in the ECSC Treaty,
the EEC Treaty, the Single European Act and many of the
activities of the organization since its inception.

Economic integration, which can occur at various
levels, differs from mere coordination or cooperation in
that integration involves eliminating certain forms of

discrimination.” At the first level is the free trade

 

27See Gareth Locksley, European Integration and the
Information and Communications Technologies: The Double
Transformation, in The Single European Market and the
Information and Communication Technologies 4-9 (Gareth
Locksley ed., 1990).

28See Council of the European Communities & Commission of
the European Communities, Treaty on European Union (1992)
[hereinafter Treaty of Maastricht]. The Treaty of Maastricht
was signed on February 7, 1992 in Maastricht, the Netherlands.

29See Bela Balassa, The Theory of Economic Integration 1-3
(1962); Ali M. El-Agraa, General Introduction 1-2, in The
Economics of the European Community (Ali M. El-Agraa ed., 3d
ed. 1990).

14
area, an example of which is the European Free Trade Area
(EFTA). Within a free trade area the member states lower
trade barriers among themselves but remain independent from
one another in determining their external trade and economic
policies regarding non-members. In the next level, a
customs union, external trade policies are harmonized among
members.

Further advances in economic integration occur at the
next levels. When a common market is created, there is free
mobility of factors of production, i.e. capital, labor and
raw material, between members. The same occurs at the
fourth level of integration, the economic union. However,
what is added at that level is some degree of harmonization
of national economic policies. In a complete economic
union, monetary and fiscal policies are unified and subject
to a central controlling authority that makes decisions
binding on the member states.30

At least one writer argues that these levels each exist
separately and are not necessarily stages or parts of a
process.31 However, the prevailing view is that the levels
are successive.” Economic integration gives rise to an
increasing openness and economic interdependence among

participating member states, creating its own internal

 

30Balassa, supra note 29, at 2.
3‘See El-Agraa, supra note 29, at 2.

32.599 T. Hitiris, European Community Economics 1-2 (1988) .

15
dynamic. Independent courses of action become less possible
and policy conflicts more apparent as interdependence
progresses. Further economic integration becomes a means of
resolving such conflicts,33 and progress is made toward the
next level.

Each level of economic integration allows a variety of
possible gains to those nation-states involved. At the
level of a free trade area or customs union greater
economies of scale can be exploited through the increased
size of the market. The larger market can also lead to an
improved international bargaining position and improved
trade. Competition is also enhanced, forcing changes in
economic efficiency. At the level of a common market or
economic union additional possible gains include factor
mobility, the coordination of monetary and fiscal policies
and unified efforts at achieving economic growth.“

Because the Community is evolving, it does not fit
easily into one of the levels of economic integration. At
its foundation is a customs union.35 However, the
institutions within its legal order make decisions binding

on the Member States, which is one of the characteristics of

 

33A move backwards to a lesser level of integration is
also possible. However, such a move would seem appropriate
only where the need to harmonize policies is minimal and can
be achieved through channels other than the economic
association itself.

3‘El-Agraa, supra note 29, at 12-13.

”See EEC Treaty, supra note 1, art. 9.

16
an economic union, so an eventual rise to that level seems
an apparent secondary objective. At this point in time the
Community is a common market, the completion of which is one
of the objectives under the Single European Act.36 Various
barriers to free factor mobility still exist, such as
differing technical standards, which must be lowered to
achieve the full status of a common market. Reaching the
level of an economic union requires further integration and

remains a future goal.37

II. Theories of International Integration

Since the inception of the Community several theories--
federalism, confederalism, functionalism, neo-functionalism
and international regimes--have been applied to explain the
Community.38 Questions regarding the nature of the
Community as an international organization are, at their

root, theoretical, and the branch of political theory known

 

36See supra text accompanying notes 12-13.
37See Single European Act, supra note 12, art. 102a.

38Pentland has reviewed federalism, confederalism,
functionalism and neo-functionalism as they apply to the
European Community. See Pentland, supra note 8. Haggard and
Simone have reviewed the various works in the area of
internation regimes theory, much of which has been applied to
the Community. See Haggard & Simmons, supra note 8.

17
as integration” theory serves as the best means for
arriving at an answer. However, for several reasons the
literature in this field appears to lack pattern and
direction, providing few clear signposts along the way. For
the most part the problems arise from the nature of
political theory itself, which is often based on a rigid set
of assumptions. In addition, the focus of political theory
is often normative and predictive.

Like most theories, a political theory is a web of
interrelated concepts that purports to make sense of the
world. Based upon certain definitions, principles and
assumptions, a political theory describes, characterizes and
explains aspects of political reality through a process of
distinction and delimitation. When political theories are
based on different premises or use different definitions or
take a different perspective on the reality in question,
they often contradict one another. This opens them to
criticism, which is not uncommon in a field as complex and
multifaceted as international politics.

The political world is most often explained and
understood in theoretical terms rather than through
empirical testing. Thus, political theory differs from

scientific theory in that it is much harder to assess the

 

39Political integration has been defined as "the evolution
over time of collective decisionmaking among nations." See
Leon L. Lindberg, Political Integration as a Multidimensional
Phenomenon Requiring Multivariate Measurement, in Regional
Integration 45, 46 (Leon L. Lindberg et al. eds., 1971).

18

rigor of a political theory. Because political theories
tend to constitute the reality of the political world, there
is no independent reality against which they can be judged.
One political theory may be discounted on the basis of an
assumption of another. Thus, the adequacy of the theory is
determined by its ability to explain the political world.‘0

Another problem with political theory is that its focus
is often too normative in that in addition to setting forth
definitions and principles, it also often sets forth
standards and forms of conduct that are desirable. However,
any political reality involves certain facts. Theories
attempting to describe the Community have often been so
absorbed in the normative component that they have ignored
the evidence of facts, both present and historical. Their
focus has been on what ought to happen rather than on where
the Community stands in the logic of international

relations.

 

”See, e.g., Andrew Vincent, Theories of the State 40-42
(1987).

19

A. Federalism

Although federalist ideas may have an earlier origin,41
as a modern theory of government, federalism was born to
describe the formation of the United States. However, over
the years federalist theory has extended its reach and now
helps describe a variety of international situations. From
the classic theory of federalism new types of federalism
have developed that go beyond the model of a unitary system,
taking into account the dynamics of international
integration.

The classic theory of federalism was articulated by K.
C. Wheare.‘2 For Wheare, a federal government constitutes
”an association of states, which has been formed for certain
common purposes, but in which the member states retain a
large measure of their original independence.“3 Power in
the association is divided between a general government that
is independent of the governments of the associated states
and the state governments, which, in certain matters, are

independent of the general government. This division of

 

“Some scholars find sources of early federal institutions
in the Greek city-states. See, e.g., Adda Bozeman, Politics
and Culture in International History 102 (1960) . Other
scholars, however, disagree with such characterizations. See,
e.g., F. H. Hinsley, Power and the Pursuit of Peace 66-69
(1963).

42See K. C. Wheare, Federal Government (4th ed. 1964).

”Id. at 1.

20
powers is the federal principle, which Wheare defines as
”the method of dividing powers so that the general and
regional governments are each, within a sphere, coordinate
and independent.”“

Some formal division of powers between levels of
government is found in most classic descriptions of federal
governments. Macmahon, for example, describes the
characteristics of federalism as (1) a distribution of
powers between central and local governments,

(2) substantial rather than trivial local powers, (3)
contact between the central government and individual
citizens, (4) some amount of freedom for member states to
determine their internal organization and (5) legal equality
of the member states.“ Other writers have described
federalism as a "constitutional distribution of powers
between the central establishment and the members of the
system”“ or an ”apportioning jurisdictions among organized
collectivities."“

In general, federalists see integration as a political

 

“Id. at 10.

45Arthur W. Macmahon, The Problems of Federalism: A
Survey, in Federalism: Mature and Emergent 4-5 (Arthur W.
Macmahon ed. 1955).

“William Hartwell Bennett, American Theories of
Federalism 72 (1964), paraphrasing The Federalist, No. 9, 61
(Alexander Hamilton).

47Marcel Merle, Federalism.and France's Problems with its
Former Colonies, 1945-63, in Public Policy 403 (John D.
Montgomery and Arthur Smithies eds., 1965).

21

phenomenon involving national political elites. Integration
results in a particular kind of supranational entity that
deals with the problems of power and control by maintaining
order among its member states. Indeed, power is a theme
that runs through most federalist writing.“8 The basic
objective of federalism is the limitation of centralized
power as a safeguard against domination by a single group.
Therefore, in a federation a tension exists between
unification and pluralism as an attempt is made to balance
the advantages of size and uniformity with those of
smallness and diversity.‘9

Classic federalism, at a minimum, requires a rigid,
formal division of powers between two levels of government.
The system is essentially a static one. Political
institutions solve problems, often in a mechanistic fashion
and subject to various ”checks and balances” to assure a
separation of powers. Sometimes there are additional
requirements, such as constitutionally prescribed powers and
a bicameral legislature. In general, the central government
has jurisdiction over defense, finance and foreign relations
because these areas demand unitary control to treat problems
effectively.” The states retain control over internal

affairs.

 

“See Pentland, supra note 8, at 154-55.
”Pentland, supra note 8, at 149, 154.

”Wheare, supra note 42, at 237-39.

22

However, when federalism is applied as a model for
international integration, there are fewer requirements.51
Little more is required than two levels of government, each
of which is guaranteed autonomy in at least one area of
action. For some theorists even such minimal criteria seem
inflexible.

Trends in international relations since World War II
have produced a shift in federalist thinking from a static
perspective to one that is more dynamic. Carl J. Friedrich
is the principle proponent of a model of federalism in which
the concept is construed as a process. Friedrich defines a
federation as "a union of groups, united by one or more
common objectives, rooted in common values, interests, or
beliefs, but retaining their distinctive group character for
other purposes.“2 Friedrich's version of federalism is
"the process of federalizing a political community" and may
result from either integration or differentiation.” He
distinguishes federalism from other forms of social
organization by its focus on balancing a central

organization with its component parts in a process of

 

”At one time the concept of international federalism was
challenged as a misnomer or impossibility. The establishment
of the Community, however, has given the term political
meaning and significance. See Carl J. Friedrich, Trends of
Federalism in Theory and Practice 82-88 (1968).

”Id. at 177.

”Carl. J. Friedrich, Federal Constitutional Theory and
Emergent Proposals, in Macmahon, supra note 44, at 514.

23

reciprocal adaptation.“ This approach to federalism
focuses more on the process rather than the institutions.”

During the 19803 a new approach to federalism developed
known as cooperative federalism. This branch of federalist
theory is characterized by a shift from the classic
distribution of exclusive powers between two levels of
government to a model based on concurrent powers.“ This
implies a pooling or mixing of competencies between levels
of government, changing a dualistically conceived system
into a cooperative one. As noted by Levi, an increasing
number of policy objectives require the coordinated efforts
of both levels of government and a joint commitment to carry
them out.” Such joint tasks are characteristic of
technical policy areas, according to Bulmer and Paterson.58
Derived in part from the West German experience with

federalism,” cooperative federalism turns policy making

 

“Friedrich, supra note 51, at 177.

”According to Friedrich, a federal system can also be
found in non-governmental organizations such as unions,
interest groups and churches. Id..

“Lucio Levi, Recent Developments in Federalist Theory, in
.Altiero Spinelli and Federalism in Europe and in the World 29,
31 (Lucio Levi ed. 1990).

”Id .

”See Simon Bulmer & William Paterson, The Federal
Republic of Germany and the European Community 187 (1987).

”See Simon Bulmer & Wolfgang Wessels, The European
Council: Decision-making in European Politics (1987); Renate
Kunze, Kooperativer deeralismus in der Bundesrepublik (1968) .

24
into an exercise in which decisions important to both the
central and state governments are made jointly.60

Regardless whether the approach to federalism is static
or process-oriented, several prerequisites are necessary
before a federal system of government can be adopted.61
Most important is the requirement that the member states
desire to unite under a single independent government,62
without which there cannot be a federal government. At the
same time the member states must desire to retain or
establish independent local or regional governments for some
matters. Otherwise, there would be no division of powers
between levels of government. Thus, the member states must
desire to unite for some purposes and to remain independent
for others.

The mere desire to form a federal system, however, is
not enough; the member states must also be capable of
adopting it. First, there must be sufficient economic
resources to operate the central government. Similar
economic and political systems between member states are
other favorable conditions for adopting a federal

government. The degree of similarity necessary is related

 

60For example, in West Germany the federation and the
Lander jointly' determine jpolicy’ in. commonly' planned and
financed areas concerned with national importance that require
large investments by the L3nder and municipalities.

“See, e.g., Amitai Etzioni, Political Unification 14-64
(1965); K. C. Wheare, supra note 42, at 35-52.

62Wheare, supra note 42, at 35.

25

to the objectives behind adopting a federal system.
Although similarities in language, culture, religion and
race might seem essential for federal integration, history
has shown they are usually unnecessary.63 Too much
divergence between member states regarding these conditions,
however, might decrease the prospects for a federal system.

In a federal system the state is a political given,
something to be accommodated rather than abolished. During
integration the state plays an important role because
integration can only be brought about by the states
themselves. After integration is complete, the state has
its own sphere of jurisdiction, although limits are
established within the system to control the states’ powers.
Nonetheless, in distinction to some other theories of
international integration, in federalism the state is a
vital entity that continues as part of the integrated

system.

B. Confederalism

The nature of a confederation, or a confederacy, as a
political system is a subject few theorists have studied in
depth, although confederations are sometimes dealt with

briefly in works dealing with federalism. John C. Calhoun,

 

63Etzioni, supra note 61, at 22-23; Wheare, supra note 42,
at 38-39.

26
the nineteenth century political theorist, described a
confederation as

allied to an assembly of diplomats, convened to

deliberate and determine how a league or treaty

between their several sovereigns, for certain
defined purposes, shall be carried into execution;
leaving to the parties themselves to furnish their
quota of means, and to co-operate in carrying out
what may have been determined on.“
Beloff similarly defined a confederation as a system in
which institutions are set up through which "individual
governments, acting on behalf of their own countries, accept
certain procedures for arriving at joint decisions which
they are prepared to carry out afterwards through their own
instrumentalities."“ A treaty is the usual document that
establishes a confederation and outlines its procedures for
making and implementing decisions. Thus, at its heart a
confederation is an alliance for joint decision making that
does not infringe on the self-determination of its member
states.

A confederation is distinguishable from a federation,
although the former might be a step in the process toward
the latter. In a federation the central power is a genuine
government usually established by a constitution. Being a

government, it has the power to pass and execute laws.

Usually the central government in a federation exercises the

 

“John c. Calhoun, Works 162-63 (R. K. Cralle ed. 1968).

“Max Beloff, International Integration and the Modern
State, 2 J. of Common Mkt. Studies 52, 58 (1963).

27
power to tax and engages in foreign policy and defense. A
confederation does not have any of these powers, and what
powers it does have are derived from the governments of its
member states and a treaty or agreement ratified by those
governments. Furthermore, a federation is an unmediated
union created by the people of its member states in which a
central government and the governments of the member states
are coordinate in their own jurisdictions. A confederation,
on the other hand, is a union of member states created
through the organs of their respective governments and
remains subordinate to those governments.“

Thus, the state retains its identity and power in a
confederation. However, in the areas that are the subject
matter of the confederation, the state exercises that power
as a member of a collective. The confederation is "a
profound locking together of states themselves as regards
the exercise of fundamental powers"67 and represents
something "beyond the normal restricted circle of interstate

relations."“

 

“Id. at 165; see also William Wallace, Europe as a
Confederation: The Community and the Nation-State, 21 J. of
Common Mkt. Studies 57, 61 (1982); Wheare, supra note 42, at
32.

67Murray Forsyth, Unions of States 15 (1981).

“Id. at 4.

28

C. Functionalism

The functionalist school constitutes a group of
theorists who focus on international organizations and the
international world order. Best represented by David
Mitrany, the functionalists believe that social structures
exist to satisfy the needs of society.69 Because the
technological and economic needs of societies have become
increasingly international, cooperation on a more
international regional or global scale is necessary to solve
various problems. Thus, the technological and economic
character of societies is an imperative of political change
resulting in the founding of international organizations.

According to the functionalists, however, international
cooperation develops around specific needs. As Mitrany
noted, "The essential principle is that activities would be
selected specifically and organized separately--each
according to its nature, to the conditions under which it
has to operate, and to the needs of the moment."70 Thus,
there is a one-to-one correspondence between societal needs
and structures. An international organization does not
develop unless there is a specific need for it or a function

it must perform. The nature of that function determines

 

69See David Mitrany, A Working Peace System (1966);
Pentland supra note 8; Leonard S. Woolf, International
Government (1913).

70Mitrany, supra note 69, at 70.

29
jurisdiction of the organization and the range of its
activities.

The result envisioned by the functionalists rarely
develops beyond a system of intergovernmental cooperation.
That system, however, is elastic, as organizations develop
or disband depending on specific needs for them.71 Mitrany
sees the basis of the system as a complex, interwoven
network of organizations. Some method would develop,
perhaps through international planning agencies, to
coordinate the efforts of these functional organizations in
meeting various societal needs.72

There is little government involvement, however, in
this process of policy making through international
cooperation. For the functionalists "policy making is not
seen in terms of a political process through which conflicts
of interest and values are mediated. Instead, it is much
more a problem-solving exercise, through which common
interests are stressed and status is accorded to 'technical
experts’...."73 Thus, functionalists believe the role of
national governments or political authority is limited in

international organizations. Seeing the nation-state as a

 

”See James P. Sewell, Functionalism and World Politics 68
(1966).

”See Mitrany, supra note 69, at 72-75.
73Carole Webb, Introduction: Variations on a Theoretical

Theme, in Policy-Making in the European Community 9 (Wallace,
Helen et al. eds., lst ed. 1977).

30
cause of war and international unrest, the functionalists
propose to substitute its role with international

organizations and their technical experts."

D. Neofunctionalism

The neofunctionalist approach to political integration,
which developed out of the functionalist school, has been
closely associated with the growth and development of the
Community as an international organization. The
neofunctionalists agree with their predecessors that
integration is a process of change but believe that the
impetus for change comes not from the functional needs of
societies but from political forces such as interest groups,
political parties and governments pursuing their own
interests.

The foundations of neofunctionalist theory are found in
the writings of Ernst Haas, long an observer of European
integration. Haas defines integration as "the process
whereby political actors in several distinct national
settings are persuaded to shift their loyalties,
expectations and political activities toward a new centre,

whose institutions possess or demand jurisdiction over the

 

74See Mitrany, supra note 69.

31

pre-existing national states."” This shifting of loyalties
occurs through a process of conflict resolution; when
conflicts develop they are shifted from the level of
individual states to the collective level of the central
institutions for resolution, thus upgrading such issues to a
level of common interest.76

The role of central institutions is crucial in the
neofunctionalist process of integration. Integration is
advanced as coalitions form among political forces and their
tasks become more related to collective interests and
decision making. This process occurs as a result of
”spillover," which is a neofunctionalist term that refers to

the process whereby members of an integration

scheme--agreed on some collective goals for a

variety of motives but unequally satisfied with

their attainment of these goals--attempt to

resolve their dissatisfaction either by resorting

to collaboration in another, related sector

(expanding the gggpg of the mutual commitment) or

by intensifying their commitment to the original

sector (increasing the level of mutual commitment)

or both.77
As integration advances ”the initial task and grant of

powers to the central institutions creates a situation or

series of situations that can be dealt with only by further

 

”Ernst B. Haas, The Uniting of Europe: Political,
Economic and Social Forces, 1950-57 16 (1958).

76See Leon Lindberg, Integration as a Source of Stress on
the European Community System, 20 Int'l Organization 233
(1966).

"Peter Schmitters, Three Neofunctionalist.Hypotheses, 24
Int'l Organization 161, 162 (1964).

32
expanding the task and the grant of power."78 Through this
process the central institutions acquire the character of
supranationality.

The closest the neo-functionalists come to describing
the end-product of integration is to say that it results in
supranationality, a term that has been misinterpreted over
the years.79 For Haas, who introduced the concept,
supranationality does not refer to the relationship between
Community institutions and the governments of member states.
Instead, supranationality is a style of decision making.
Haas defines it as "a cumulative pattern of accommodation in
which the participants refrain from unconditionally vetoing
proposals and instead seek to attain agreement by means of
compromises upgrading interests."”

The neofunctionalists believe that certain conditions
contribute to the successful development of a system of
collective supranational decision making via spillover. An
established pattern of international interaction among
political and bureaucratic elites is essential for further
integration. In addition, a complex, interdependent socio-

economic system is necessary because such a system requires

 

78Leon Lindberg, The Political Dynamics of European
Integration 288 (1963).

79See Robert O. Keohane & Stanley Hoffman, Conclusions:
Community Politics and Institutional Change, 276, 280, in The
Dynamics of European Integration (WilliamflWallace ed., 1990).

soErnst B. Haas, Technocracy, Pluralism [and the lNew
Europe, in A New Europe? 64 (Stephen R. Graubard ed., 1964).

33

a high rate of transactions leading to cooperation on a
variety of tasks. Finally, some degree of procedural
consensus and some commitment by the member states to long-
term goals is necessary for a supranational authority to
emerge.81 Whether integration is successful depends on the
extent to which the developing central institutions
represent the interests of the member states.

The role of the nation-state in such a system changes
over time. Neofunctionalists view the nation-state as a
complex of interests and issue-areas which are identified
with the political elites rather than as a monolithic
structure. The nation-state performs a whole range of
functions, and through spillover any of them might be
transferred to the collective decision making process of the
central institutions. Thus, the spillover process implies
an erosion of the nation-state as its functions are

gradually taken over by the central institutions.

E. International Regimes

International regimes is a macro-analytical approach

that has been applied to the study of international

relations, mostly in critical reaction to functionalism and

 

81See Pentland, supra note 8, at 120-122.

34
neo-functionalism.82 International regimes theory seeks to
identify central concepts and processes that aggregate
discrete behaviors and explain the operation of an entire
system. Regime theorists believe that not all international
cooperation occurs in formal organizations, which they see
as rigid, formal frameworks. For these theorists, a regime
is an example of cooperation that exists in a broader
context.

The concept of what constitutes a regime comes in a
variety of forms. Keohane and Nye define it as a "network
of rules, norms and procedures that regularise behavior and
control its effects."83 Puchala and Hopkins argue that a
regime exists wherever there is a pattern of behavior
influenced by norms.“ However, the existence of a pattern

does not necessarily imply the existence of a regime.

 

82Another'macro-analytical approach that.has been applied
to the Community is systems analysis, in particular the branch
developed by Easton to explain political systems. See David
Easton, A Systems Analysis of Political Life (1965) . Lindberg
has applied Easton’s theories involving internal political
relationships and linkages to help explain the decision making
process in the Community. See Leon L. Lindberg, The European
Community as a Political System: Notes Toward the Construction
of a Model, 5 J. of Common Mkt. Studies 344 (1967); Lindberg,
supra note 39. However, because that work focuses on the
dynamics of the decision making process rather than on the
structure of the system it reveals little about the
characteristics of the Community' as an international or
intergovernmental organization.

83Robert Keohane & Joseph Nye, Power and Interdependence:
World Politics in Transition 19 (1977).

“Donald Puchala & Raymond Hopkins, International Regimes:
Lessons from Inductive Analysis, in International Regimes 61-
91 (Stephen Krasner ed., 1983).

35

Krasner, therefore, has defined a regime as "implicit or
explicit principles, norms, rules and decision-making
procedures around which actors' expectations converge in a
given area of international relations."” However, despite
the acceptance of this general definition, there is
disagreement regarding defining its components. Several
theorists have commented that the differences between
principles, norms and rules are difficult to distinguish.“

Most of the literature involving regimes provides only
vague descriptions, if any, regarding how regimes are
structured. Regimes are rather fluid, changing over time
and sometimes weakening or decaying. At best there seems to
be some minimal centralized system of dispute settlement but
little organizational structure. Thus, the strength of a
regime is measured by the degree to which its members comply
with its injunctions.87 Because the existence of a regime
is determined on the basis of patterns of behavior rather
than by institutional structures, nation-states that are
members of a regime have greater autonomy than they do in
more structural systems such as international organizations.

Regimes theorists believe that although international

 

”Stephen Krasner, Structural Causes and Regime
Consequences: Regimes as Intervening Variables, in Krasner,
supra note 84, at 21.

“See, e.g., Haggard & Simmons, supra note 8, at 493-94
(1987); Robert Keohane, After Hegemony: Cooperation and
Discord in the World Political Economy 58 (1984).

”See Haggard & Simmons, supra note 8, at 496-97.

36
institutions can help foster cooperation, nation-states

remain the central, unitary actors in world affairs.88

F. Conclusion

The problems with political theory in general89 are
evident in the literature of international integration,
making it difficult to choose a theory that best describes
the Community for several reasons. First, although the
theories are internally cohesive, they differ dramatically
from one another, each focusing on different basic concepts.
Lindberg vividly summed up this problem with the literature:

As a contributor to the European integration
literature I have more and more come to feel as if
I were excavating a small, isolated portion of a
large, dimly-perceived mass, the contours of which
I could not make out. I know that there are
others digging there too, for I can sometimes hear
them, but we seldom meet or see each other, and we
have seldom organized to combine our efforts.

What we see as we confront the ever-growing
literature on Western European integration is a
multitude of events comprising the total economic,
political, social, and intellectual life of six
countries and the product of their interactions,
and a profusion of theories from a variety of
disciplines seeking to order these events and make
assertions about presumed patterns of persistence
and transformation. But the theories hardly ever
confront or complement each other or even appear

 

88Emil Joseph Kirchner, Decision-Making in the European
Community: The Council Presidency and European Integration 26
(1992).

”See supra pp. 16-18.

37

in any clear relationship to each other.90
This state of affairs, however, is not surprising because
many of the theories were developed, or first applied in an
international context, while the Community was in its early
years. During that period there was an abundance of
formative theoretical work attempting to explain the
organization, some of which was not fully developed or was
contradictory. As the Community developed and changed, some
of the theories lost popularity that others gained or
regained as scholars moved on to find new explanations for
the organization. The result is a body of literature that
appears somewhat disjointed and difficult to reconcile.

Second, a problem with the literature is that most of
the theories tend toward abstraction, focusing on what is
presumed will, or ought to, happen within the Community.
Evidence the Community provides about itself through its
legal order and institutions is ignored. Although
explanation is not the sole purpose of political theory, the
tendency in the literature to emphasize normative aspects
often obscures what is actually happening within the
Community. Thus, some of the theories have been deemed
inadequate when compared to real world events.91

Another problem is that some of the theories focus on

 

90Lindberg, The European Community as a Political System,
supra note 82, at 345.

91See authorities cited supra note 26.

38
only one aspect of the integration process: the creation or
development of central institutions. This is understandable
since the existence of such entities is evidence of
integration. However, there is another equally important
part of integration that some of the theories ignore: the
status of the nation-state after integration. Even where
this is addressed, usually little is said.

Finally, as the object of theoretical investigation
the Community itself is distinctive among contemporary
international organizations, its institutions unique. It
has executive capacity and a legal dynamic of its own.
Community institutions negotiate trade policies among twelve
nation-states and on behalf of the group with the rest of
the world. Furthermore, and perhaps most important, the
Community is a developing organization, continuously
advancing to new stages of integration as barriers between
its Member States are lifted. However, although the
Community is highly structured, it remains an anomaly,
"stronger than a mere international organization, weaker
than a state...."92

Despite the problems within the literature, there is
some order to the theoretical work in the field. Although

as Hoffman has noted, ”a flea-market is not a discipline,"”

 

92Keohane & Hoffman, supra note 79, at 279.

93Stanley Hoffman, Contemporary Theory in International
Relations 7 (1960).

39

when the theories are organized around (1) the nature of the
central entity, (2) the power structure and (3) the status
of the nation-state, the apparent chaos among them lessens
(Figure 1). Their differences become easier to understand,
and their static and dynamic features become more apparent.

Federalism is the most static approach, with a
government as its central entity and a rigid division of
power between the central and nation-state governments in
which the nation-state government retains exclusive power in
certain matters. In cooperative federalism the organization
is somewhat less rigid, with the central and nation-state
governments cooperating with one another and sharing power
in certain areas. The power shifts, however, in
confederalism, where the central entity is no longer a
government but a collective alliance or union of states
subordinate to the governments of the nation-states. The
nation-state retains a good deal of power in a confederation
because it determines the means of executing and
implementing the policies determined by the collective.

Those theories that have been traditionally associated
with the Community--functionalism, neofunctionalism and
international regimes--are less structure-bound and more
dynamic than the other theories. In these approaches the
central entity is a network or system, sometimes involving
technical experts representing the nation-state as in

functionalism or a vague, supranational institution that

40

 

Central Power nation-state
Entity Structure status
Supranational Rigid State retains
PEDERALIBM central division exclusive
government between central power w/in
and nation-state its own
govts sphere
COOPERATIVE Supranational Cooperation State shares
FEDERALISM central between central power w/ in
government and nation-state certain
govts spheres
CONPBDERALIBM Union of states Union of states State retains
or collective or alliance power to
alliance subordinate execute
to nation-state policies
govts
FUNCTIONALISM Administrative System of State power
network cooperation is limited
responsive to between by network
community nation-state of technical
needs govts experts
NBO- Supranational Supranational State power
FUNCTIONALISM decision institutions is gradually
making with expanding usurped by
system powers supranational
institutions

FIGURE 1

Theories of International Integration

41
gradually usurps responsibilities of the nation-state. The
power structure in these approaches varies as well, often
determined by the subject matter and purpose of the
collective decision making at hand. The status of the
nation-state is rarely considered in these approaches, which
developed to some extent to explain certain limitations of
the nation-state in world affairs.

Given this comparison the theory that best explains the
Community at this time is confederalism. The various
theories of federalism are inappropriate because the
Community is not a federation--though it may become one--
because its central institutions lack certain federative
powers. Although the institutions have legislative powers,
they lack the ability to tax and engage in defense and
currently lack the authority to develop foreign policy for
the Community. Functionalism and neofunctionalism are also
inadequate because they underestimate the power of the
nation-state. The governments of the Member States remain
heavily involved in Community policy making and retain a
large measure of control. Finally, international regimes
theory ignores institutions and focuses on patterns of
activity and processes within systems. Thus, although
international regimes theory might inform the decision
making process of the organization, it fails to appreciate
the institutional structures inherent in the Community.

In this stage in its development the Community is

42
currently most like a confederation. Its work is largely an
intergovernmental exercise in establishing a common
framework of policy. Within the organization there is a
tolerance for national diversity in various standards and
practices. Thus, rather than abdicate control to the
Community, Member States exercise it more effectively as a
collective engaged in joint tasks. This becomes apparent in
the legal order of the Community and the organizational

structure and competencies of its institutions.

CHAPTER III

THE LEGAL ORDER OF THE EUROPEAN COMMUNITY

As an international organization the Community is
unique. It is based on the rule of law, and the acts of its
Member States and institutions are subject to judicial
review to determine whether they conform to the Treaties
that established the organization.“ Community law is a
type of international law because its basis consists of
treaties concluded between sovereign states. However, it
differs from traditional international law in its sources
and content.95 Community law has its own distinctive legal
order, an "organized and structured system of legal rules,
with its own sources, and its own institutions and
procedures for making, interpreting and enforcing those
rules,”” that contributes much to the nature and identity

of the Community as an international organization.” This

 

9‘See Case 294/83, Les Verts v. Parliament, E.C.R. 1357
(1970).

”See P. J. G. Kapteyn. & P. ‘VerLoren, van Themaat,
Introduction to the Law of the European Communities 36-38
(Laurence W. Gormely ed., 2d ed., 1989).

9‘G. Isaac, Droit Communautaire General 111 (1983).
97At least one writer has argued that the legal system of
the EC is intrinsically tied to the political philosophy and
evolution of the Community. See Joseph weiler, Community,
(continued...)

43

44

chapter describes the main features of that legal order.

A. Content of Community Law

Although Community law is a type of international law,
in terms of content Community law differs significantly from
most traditional international law. Community law forms a
body of internal law common to the Member States rather than
a law between the Member States. The substantive core of
Community law concerns rules for establishing a single
internal market to replace the separate national markets:
"The Treaty, by establishing a common market and
progressively approximating the economic policies of the
Member States, seeks to unite national markets into a single
market having the characteristics of a domestic market."98
Thus, in the new market the difference between legal
relations that have an international character and those
that are internal in nature becomes blurred.

Compounding the confusion are the numerous fundamental
legal rights, concepts and rules of construction that

Community law employs which are not commonly part of

 

”(...continued)
Member States and European Integration: Is the Law Relevant?,
21 Journal of Common Mkt. Studies 39 (1982).

98See, e.g., Case 270/80, Polydor Ltd. et al. v. Harlequin
Record Shops Ltd et al., E.C.R. 329, 348 (1982).

45
international law.99 Community law does not consist of
mutual rights and duties between the Member States as it
would if it were traditional international law. Instead,
”Community law regulates a conglomerate of mutual rights and
duties between the Community and its subjects, both Member
States and private persons, and between these subjects
amongst themselves."100 Furthermore, in addition to
employing certain concepts and methods of interpretation
used in national and international law, Community law also
employs its own principles, including solidarity and unity,

to further the goal of integration.101

B. Sources of Community Law

1. Treaties

Although the treaties establishing an international
organization are the usual source of much international law,
in the Community they comprise only one source, albeit an
important one. The driving force behind the integration of
the Community has been the Treaties that established the

organization, in particular the EEC Treaty. That Treaty

 

99See, e.g., EEC Treaty, supra note 1, art. 220; Jean-
Victor Louis, The Community Legal Order 95-96 (1990);
Schermers & Waelbrock, Judicial Protection in the European
Communities 25-83 (4th ed., 1987).

moKapteyn & van Themaat, supra note 95, at 37.

101See Louis, supra note 99, at 50-56.

46

determines that the organization should be based on a
customs unionm and lays out objectives and principles of
the organization103 but leaves it to the Community
institutions to formulate these objectives and principles
into concrete measures. The EEC Treaty also defines the
powers and procedures of the institutions,“” including
provisions regarding the judicial system and application of
Community law.105 The duration of the organization'”‘5 as
well as the territorial scope of Community law‘m are also
addressed in the Treaty.

For the most part the EEC Treaty--supplemented by the
ECSC Treaty,“ the Euratom Treaty,” modifications of the

Treaties,"° and the accession treaties“‘--provide the

 

1mEEC Treaty, supra note 1, art. 9.; see supra pp. 13-16.

‘mSee id. art. 9-122.

‘“See id. art. 137-198.

‘“See id. art. 164-188.

10“The EEC Treaty "is concluded for an unlimited period."
Id. art. 240. This indicates the irrevocability of the Member
States' commitment to the organization. See Louis, supra note
99, at 74.

‘mThe Treaty applies to the twelve Member States as well
as to some of their territories. EEC Treaty, supra note 1,
art. 227.

108See su t

pra no e 3.
109See supra note 2.

1“’See, e.g., Single European Act, supra note 12.

‘"See supra note 9.

47
framework for the organization. At least one writer has
referred to these Treaties as the constitution of the

1” although the Treaties merely provide a

Community
constitutional framework (traité-cadre or traité de
procedure) for the Community, comparable to national

1” The constitution of the Community,

enabling legislation.
as a source of Community law, generally refers to what is

known as the primary law of the Community. In addition to
the Treaties, the primary law includes certain binding acts

and rules of the Community institutions.

2. Acts of Community Institutions

Another source of Community law, known as the secondary
law of the Community, consists of acts adopted by the
Community institutions in order to implement the

114

Treaties. These acts include regulations, directives,

decisions, recommendations and opinions. The EEC Treaty

 

112See Weiler, supra note 97, at 41-42; Cf. Rudolf
Bernhardt, The Sources of Community Law: The "Constitution" of
the Community, in Thirty Years of Community Law 69 (1983).

“3Paul Renter, Organisations Européennes 188 (2d ed. ,
1970).

‘“Acts of Community institutions should be distinguished
from the acts of various representatives, such as the Coreper.
The rules in the Treaties regarding the procedure the
institutions must follow in making decisions and their legal
effect, implementation and judicial review do not apply to
acts of representatives. See Kapteyn 8 van Themaat, supra
note 95, at 204-08.

48
specifies the nature and legal effect of these acts and
contains rules regarding the publication, entry into force
and enforcement of them.” The general provisions,
however, contain only a legal definition of the various acts
which the Council and Commission can adopt in order to carry
out their task "in accordance with the provisions of this
Treaty. "“‘ Under the concept of attributed powers the
questions as to whether and in what form the Council and
Commission can adopt such acts depends on the specific
powers conferred upon them elsewhere in the EEC Treaty.m
Thus, each act must be attributed directly or indirectly to
one or more specific provisions of the Treaty.

The distinction between each of the permissible acts
is important for several reasons. Different acts have
different legal effect. In addition, the rules regarding
publication and entry into force vary according to the type
of act involved. Finally, the distinction involves
different legal protection. When it is difficult to

distinguish one act from another, substance rather than form

 

u’EEC Treaty, supra note 1, art. 189-192.

116Id. at art. 189, para. 1. The list of acts in this
article is not exhaustive. There is a residual category of
acts under the category sui generis that do not fall within
one of the listed categories and usually involve the internal
management of the Community.

n7See Kapteyn 8 van Themaat, supra note 95, at 112-13.
Several articles of the EEC'Treaty provide a basis for acts by
the Community institutionsw .See, e.g., art. 8a, 63, 90, 100a,
130g and 235.

49
determines the legal status and effect of an act.”8
Therefore, the various acts are distinguished by their

object and content.

a. Regulations

Regulations are the first act mentioned in the general
provisions. A regulation has three characteristic elements:
(1) its general application, (2) its binding character in
its entirety and (3) its direct applicability to the Member
States.119 These characteristics combine to make a
regulation "the most complete and effective instrument among
the battery of powers" available to the Community
institutions.120

A regulation is said to have general application
because "it is applicable...to objectively determined
situations and involves legal consequences for categories of
persons viewed in a general and abstract manner. "‘2‘ Thus,

a regulation is impersonal and non-individualized in
character. This characteristic helps distinguish a

regulation from a decision in terms of legal protection.

 

118See Kapteyn 8 van Themaat, supra note 95, at 190-91.
‘”EEC Treaty, supra note 1, art. 189, para. 2.
m'See Louis, supra note 102, at 82-83.

121Case 6/ 68, Zuckerfabrik Watenstadt GmbH v. Council,
E.C.R. 409, 415 (1968).

50

A regulation is also binding in its entirety. Because
it is binding, a Member State that has opposed a regulation
during the policy making process cannot fail to apply the
regulation when it is entered into force.122 Furthermore,
because a regulation is binding in its entirety, a Member
State cannot grant exemptions from policies introduced by
regulations or otherwise modify them or change their scope
unless such a change is provided for in a subsequent
regulation.123

Finally, a regulation is directly applicable in all
Member States. This means that a regulation has immediate
direct effectm when entered into force and becomes part of
the national law of all Member States. No national
legislation is necessary to transform the regulation into
national law. Furthermore, the Member States are prohibited
from transforming a regulation into national legislation
because to allow otherwise would create uncertainty about

the legal nature and effect of the provisions.”5

 

‘”See Case 39/72, Commission v. Italy, E.C.R. 101, 115
(1973) (Member States cannot apply a regulation in an
incomplete or selective manner) [hereinafter Commission v.
Italy].

123See, e.g., Case 18/72, Granaria, E.C.R. 1163 (1972)
(Member State cannot grant an exemption from an import levy
introduced by a regulation).

‘“See infra notes 146-50 and accompanying text.

‘”If the Member States were allowed to follow their own
implementing procedures regarding regulations, such measures
”would have the result of creating an obstacle to the direct

(continued...)

51

b. Directives

A directive is another source of Community law.
According to the general provisions of the EEC Treaty, "a
directive shall be binding, as to the result to be achieved,
upon each Member State to which it is addressed, but shall
leave to the national authorities the choice of form and
method."”6 A directive is an indirect form of law that
provides a framework for Member States to follow. Member
States, however, are obligated to achieve the specific
result of a directive. Although the EEC Treaty leaves a
certain amount of discretion to the Member States in
implementing a directive, "the freedom left to the member
states by Article 189 as to the Choice of forms and methods
of implementation of directives does not affect their
obligation to Choose the most appropriate forms and methods
to ensure the effectiveness of the directives."“" The
Commission is responsible for monitoring the Member States

to verify that a directive has been properly implemented.128

 

‘”(...continued)
effect of Community regulations and of jeopardizing their
simultaneous and uniform application in the whole of the
Community." .See Commission v. Italy, supra note 122, at 114.

126EEC Treaty, supra note 1, art. 189, para. 9.

‘”Case 48/75, Royer, E.C.R. 497, 519 (1976).

‘”EEC Treaty, supra note 1, art. 155.

52

C. Decisions

Another binding act of the Council and Commission is a
decision. According to the EEC Treaty, "a decision shall be
binding in its entirety upon those to whom it is
addressed.'”” Decisions can be addressed to Member States,
firms or individuals,‘” and are the means by which the
Community adopts individual administrative acts or applies
Community law in specific cases. In cases in which it is
difficult to distinguish a decision from a regulation, as a

general rule a decision must mention an addressee.

d. Recommendations and Opinions

The final acts mentioned in the general provisions of
the EEC Treaty, recommendations and opinions, are non-
binding.131 These acts are allowed in a variety of areas
under the Treaty. In general the Commission is granted the
broad authority to "formulate recommendations or deliver
opinions on matters dealt with in [the EEC] Treaty...if the
Commission considers it necessary."I32 Recommendations can

also be issued to prevent possible distortions of

 

‘”Id. art. 189, para. 4.
130’Id. art. 191, para. 2.
131Id. art. 189, para. 4.

‘nrd. art. 155, para. 3.

53
competition,133 and opinions can be delivered to promote
close cooperation between Member States in social fields.134
Although these acts are non-binding, they do have legal
consequences. If a Member State does not comply does with a
recommendation addressed to it regarding distortion, the
Commission cannot propose that the Council issue a directive
to oblige other Member States to eliminate the
distortion.w’ If a Member State fails to comply with a
reasoned opinion regarding a breach of obligations under the
EEC Treaty, the Commission can refer the matter to the Court

of Justice.136

e. General Requirements for Acts of
Community Institutions

Various general requirements must also be satisfied
before any acts by the Community institutions become
effective. Regulations, directives and decisions "shall
state the reasons on which they are based and shall refer to

any proposals or opinions which were required to be obtained

 

133Id. art. 102.
‘uld. art. 118.
‘”Id. art. 101-102.

136Id. art. 169.

54

pursuant to the Treaty."”7 This requirement makes it
possible to determine whether the decision making process
required by the Treaties has been properly followed. A
violation of this rule is grounds for annulling a contested
act.‘38

Certain rules limit the freedom of the Council and
Commission to fix the date upon which acts enter into force.
Regulations are the only act that must be published to
become effective. When finalized, a regulation is published
inthemmmgmwmitiesinthe
nine official languages of the Community. The regulation
takes effect on the date specified in its text or, if no
date is specified, twenty days after publication.“’9
Directives and decisions need not be published and take

effect when served upon their addressees.“°

 

mId. art. 190. Certain provisions of the EEC Treaty
require the Council or Commission to consult the Parliament
and the Economic and Social Committee before taking action.
See, e.g., id. art. 100.

138Id. art. 173.

'”Id. art. 191, para. 1.

‘wId. art. 191, para. 2. Although directives and
decisions are often published in the Official Journal of the

European Communities, their publication is for information
purposes only. See Louis, supra note 99, at 86.

55

f. Institutional and Substantive Rules

Both the primary and secondary law of the Community can
also be categorized into two groups of rules, institutional
and substantive. Institutional rules relate to the
institutional structure of the Community and its policy
making and administrative functions. Specifically, these
rules include provisions regarding the application and
revision of the Treaties, the legal personality of the
Community and its institutions and the composition and power
of the institutions. Substantive rules include rules
regulating national policy making by the Member States and
their own administrative bodies in various sectors. In
addition, substantive law includes rules involving the
conduct of legal persons governed by Community law, such as

the extensive rules in the area of competition law.

C. Community Institutions and Community Law

The Community institutions also differ from those of
traditional international law. In many international
organizations the instruments often do no more than provide
a forum for agreement among member states. The procedural
or organizational provisions in such organizations are often
limited, and international adjudication plays only a small

role, if any. The Community, however, is Characterized by

56
extensive organizational and procedural provisions and a
refined legal system. The institutions have legal

personality, legal capacity and real powersIM1

and engage

in autonomous legislative and administrative activities.
Furthermore, the Community policy making processes involve
more than just representatives of the Member States; persons

independent of the Member States and private persons

collaborate in the process.“2

D. The Effect of Community Law on National Law

In addition to the content and sources of Community
law, two related legal doctrines help shape the Community
legal order: direct effect“3 and supremacy.” These
doctrines, which have been called the "twin pillars of the
Community legal system,"“5 both involve the effect of
Community law on national law and are fundamental to the
legal order of the Community.

The doctrine of direct effect deals with the ability of

legal persons to rely on a particular provision of Community

 

“‘Case 6/64, Costa v. ENEL, E.C.R. 585, 593 (1964)
[hereinafter Costa v. ENEL].

‘”See Kapteyn 8 van Themaat, supra note 95, at 37-38.

”For a thorough discussion of the doctrine of direct
effect see Louis, supra note 102, at 107-35.

‘“Soe id. at 135-57.

“’Id. at 107 .

57
law before national courts. In referring to its
jurisdiction and the question of direct effect, the Court of
Justice has stated that
the task assigned to the Court of Justice under
Article 177, the object of which is to secure
uniform interpretation of the Treaty by national
courts and tribunals, confirms that the states
have acknowledged that the Community law has an
authority which can be invoked by their nationals
before those courts and tribunals.“‘
Direct effect, thus, differs from direct applicability,
which refers to whether national bodies must take action to
give national effect to a provision of Community law. There
are also two ways in which direct effect can be applied,
vertically and horizontally. When applied vertically, the
doctrine involves the right of legal persons to invoke a
provision of Community law against governments that have
allegedly failed to carry out obligations imposed by
Community law. When applied horizontally, both parties
involved are legal persons.“7
The doctrine of direct effect can be invoked in
situations involving Treaty provisions, regulations,
decisions and directives. Not all Treaty provisions,

however, give legal persons directly effective rights;

purely procedural obligations of Member States that involve

 

l“Case 26/62, NV Algemene Transport--en Expeditie
Onderneming Van Gend en Loos v. Nederlandse administratie der
belastingen, E.C.R. 1, 12 (1963) [hereinafter Van Gend 8
Loos].

‘”See Louis, supra note 99, at 113.

58
the exercise of discretion by Community institutions or

3 Regulations

Member States are not directly effective.“
are directly effective because of their nature, and function
as a directly applicable source of Community law.“9
Although directives and decisions have no direct
applicability by virtue of the EEC Treaty, the Court of
Justice has held that they have vertical direct effect.”0
The supremacy of Community law refers to the fact that
Community law is "an integral part of, and take[s]
precedence in, the legal order applicable in the territory
of each of the Member States."”‘ Adthough there is no
specific supremacy provision in the Treaties, the Court of
Justice has further confirmed this principle by reference to
the EEC Treaty provision designating regulations as binding
and directly applicable in all Member States: "[TJhis
provision, which is subject to no reservation, would be

quite meaningless if a State could unilaterally nullify its

effects by means of a legislative measure which could

 

‘“See Costa v. ENEL, supra note 141, at 595-96 (1964).

149See EEC Treaty, supra note 1, art. 189, para. 2; Case
43/71, Politi, E.C.R. 1039, 1048 (1971).

1”See, e.g., Case 9/70, Grad, E.C.R. 825, 837 (1970)
(involving the direct effect of a directive); Case 33/70,
SACE, E.C.R. 1213, 1223 (1970) (involving the direct effect
of a decision).

1“Case 106/77, Simenthal, E.C.R. 629, 643 (1978)
[hereinafter Simenthal].

59
prevail over Community law."‘52 Thus, supremacy is linked
to both direct applicability and direct effect.

The doctrine of supremacy is applied by the courts.
Unconditional and absolute, the doctrine applies to any
national law, even a constitutional principle.”3 To allow
otherwise would disrupt the Community and the process of
integration. Without common rules and procedure there
cannot be a Community, and there cannot be common rules if
Community law is subject to national laws and rules that
vary from one Member State to another.

The doctrines of direct effect and supremacy shed light
on the effect of Community law on national law and the
relationship between the Community and national legal
systems. Unlike in other legal systems with similar
concepts, the Community and national legal systems are not
in a dualistic relationship, but a cooperative one. This
relationship has been best summed up by the Court of
Justice: "Every national court must, in a case within its
jurisdiction, apply Community law in its entirety and
protect rights which the latter confers on individuals and

must accordingly set aside any provision of national law

 

152See Costa v. ENEL, supra note 141.

1”Where the application of the doctrine of supremacy is
not so»clear is in.cases involving conflicts between Community
law and later national legislation. 'The highest courts in.the
six original Member States have all recognized the supremacy
of Community law in such cases. The issue has not been
directly addressed in the other Member States. See Louis,
supra note 99, at 149-57.

60
which may conflict with it, whether prior or subsequent to

the Community rule."“4

E. The Administration of Community Law

The EEC Treaty requires that Member States take
appropriate measures to fulfill their obligations arising
under the Treaty and from actions taken by Community
institutions.” Although the Member States have some
discretion in carrying out this task, their autonomy is not
absolute. Member States are obligated to administer

‘“ ensuring uniformity, supremacy

Community law properly,
and the direct effect of Community law.

Implementing Community law on a national basis--except
in cases of directly applicable acts, which need no national
implementation--often involves amending existing legislation
or enacting new legislation. Various branches of national
governments have been involved in performing this task,
depending on the governmental organization of the Member
States and the nature of the legislation required. In any
case, however, the Commission is responsible for monitoring

how Member States comply with their obligation to implement

Community law.

 

l“See Simenthal, supra note 151.
1”EEC Treaty, supra note 1, art. 5.

1“‘Id. para. 2.

61

F. Conclusion

The Community legal order distinguishes the Community
from other international organizations. Through laws
developed in the Community system, a common, uniform set of
rules is promoted throughout the Community. The way those
rules are developed is an integral part of the Community
legal order and involves a variety of actors and policy

making processes.

CHAPTER IV

INSTITUTIONS AND ACTORS AND THE EUROPEAN COMMUNITY
POLICY MAKING PROCESSES

In the Community the task of establishing the single
market is a complex one that involves multiple actors.
Chief among them are the Community institutions, which
embody the character of the Community as an international
organization and represent it as a visible entity to its
members and the outside world. The primary institutions--
the Council of Ministers, Commission of the European
Communities, European Parliament and the Court of Justice--
provide the Member States forums for determining, expressing
and implementing policy.”’ However, those institutions do
not act alone. Various secondary institutions and actors
associated with European regional, national and public
interests are also involved in the policy making processes.
This chapter reviews the Community institutions and other
actors involved in policy making and the processes in which

they engage to determine policies for the single market.

 

ls"Roland Bieber, The Institutions and Decision-making
Procedure in the Draft Treaty Establishing the European Union,
in An Ever Closer Union 31 (Roland Bieber et al. eds., 1985).

62

 

63

A. The Historical Development

The roots of the Community institutional framework are
found in the ECSC, the first of the European Communities.
The ECSC Treaty created four central institutions--the High
Authority, Common Assembly, Council of Ministers and Court
of Justice--each with its own composition, functions and
Character.“ These institutions not only distinguished the
ECSC from other international organizations that existed at
the time, but provided a framework that the other
Communities, the EEC and Euratom, would later adopt. When
the EEC and Euratom were established in 1957, they too
created a similar framework of four central institutions,
although the EEC and Euratom Treaties substituted a
Commission for the High Authority of the ECSC.”9

Over the years several modifications have occurred in
the institutional organization of the Community. In 1965, a
treaty was signed that established a single Council of
Ministers for all three Communities and merged the High
Authority of the ECSC and the EEC and Euratom Commissions

into one Commission.‘°° The Communities themselves,

 

l5"See ECSC Treaty, supra note 3, art. 7-45.

‘”See EEC Treaty, supra note 1, art. 4; Euratom Treaty,
supra note 2, art. 3.

“o‘rreaty Establishing a Single Council and a Single
Commission of the European Communities, Apr. 8, 1965, Office
for Official Publications of the European Communities, 1
Treaties Establishing the European Communities 823 (1987
[hereinafter Merger Treaty].

64
however, still remained distinct entities. In addition, a
Committee of Permanent Representatives (Coreper) was
established as a subsidiary body of the Council.”1 Years
later the Single European Act altered certain aspects of the
decision-making system to help accelerate Community
integration.“52 Despite these changes, however, the same
basic institutional arrangement created in the 1950s still
exists in the Community today and remains at the center of

policy making.

B. The Community Institutions

1. Council of Ministers

The Council of Ministers (Council) is the main decision
making institution. According to the Merger Treaty, the
Council "shall consist of representatives of the Member
States. Each Government shall delegate to it one of its
members.“53 .Although this prescription makes it seem as
though there is only one Council, the exact representatives
vary according to the policy task at hand. Thus, there are
actually several Councils. The General Council deals with

general issues regarding policy coordination, with external

 

1“Although the Coreper has existed since 1958, it was
first legally recognized in the Merger Treaty. See id. art.
4.

162See infra.

163Merger Treaty, supra note 160, art. 2, para. 1.

65
relations and with politically sensitive issues. Sectoral
matters, such as energy, agriculture and the environment,
are handled by the Technical Councils. Choosing Council
representatives is in the discretion of the Member States,
and usually the foreign minister of their ministry of state
sits on the General Council. Other ministry representatives
often sit on the Technical Councils. At most Council
meetings--there are approximately ninety each year--
representatives are accompanied by small national
delegations and support teams.“‘

The Council is assisted by the Coreper, whose members
are ambassadors who head the Permanent Representations of
each Member State to the Community. Established under the
Merger Treaty, the Coreper prepares the work of the Council
and carries out any tasks assigned by the Council,“” The
Coreper, however, is a subsidiary body of the Council and
does not have independent decision making powers. As
ambassadors to the Community, the members of the Coreper
form important links between Member State governments and

the Community institutions and provide an important means

 

16‘See Kapteyn 8 van Themaat, supra note 95, at 103-08.

1“Merger Treaty, supra note 160, art. 4. The Coreper is
divided into the Coreper I, whiCh is comprised of deputies
from each permanent representation and handles technical
matters, and the Coreper II, which is comprised of the
Permanent Representatives themselves. Juliet Lodge, EC
Policymaking: Institutional Considerations, in The European
Community and the Challenge of the Future 26, 45-46 (Juliet
Lodge, ed. 1989).

66
for testing Member State reactions to Community policy
proposals.

Meetings of the Council are generally convened by the
Council President,“ an important position that rotates
every six months, Changing in January and July. The
rotation is based on strict alphabetical order according to
how the Member States spell the name of their country in
their own language. Because responsibilities vary between
the first and second half of the year, pairs of countries
will reverse their order after the current rotation is
completed at the end of 1992. Thus, Denmark will hold the
Presidency for the first half of 1993 and Belgium for the
second half.“7

Holding the Council Presidency provides both advantages
and disadvantages.16$ Although the position has several
tasks and enjoys certain privileges, there are no executive
powers associated with it, such as vetoes or sanction
possibilities. The Council President is responsible for
arranging and chairing all Council meetings, which gives the
President control over not only the agenda and but how often
the General and Technical Councils meet. In addition, the

President takes the lead in building a consensus for policy

 

166See Merger Treaty, supra note 160, art. 7.

167Id. art. 7; See also, Neill Nugent, The Government and
Politics of the European Community 125 (2d ed., 1991).

‘“For a detailed analysis of the Council Presidency, see
Kirchner, supra note 88.

67

initiatives and development and represents the Council
before other Community institutions. These responsibilities
allow the President some influence in the nature of debate
and the timing of the adoption of legislation. That
influence, however, is somewhat tempered by the coordination
and cooperation between the preceding, the incumbent and the
succeeding Presidencies.169

In addition to the influence a Council President can
exert, a certain amount of prestige and esteem attaches as a
result of the position, particularly when a Presidency has
been successful. Bad reviews, however, can follow a bad
Presidency. A distinct disadvantage of the position is the
heavy workload which poses an administrative burden for any
Member State, especially the smaller ones, who often find
the task difficult to handle.

In the EEC the primary duty of the Council is to ensure
the coordination of the general economic policies of the
Member States.”° Although the Council President organizes
an agenda, the Council generally acts only on proposals made

by the Commission. The Council can, however, initiate

 

169See Nugent, supra note 167, at 104-05.

‘mEEC Treaty, art. 145. In the ECSC the primary duty of
the Council is "to harmonize the action of the High Authority
and that of the Governments, which are responsible for the
general economic policies of their countries. See ECSC
Treaty, supra note 3, art. 26, para. 1. In Euratom the
primary duty of the Council is "to coordinate the actions of
the Member States of the Community.” See Euratom Treaty,
supra note 2, art. 115, para. 2.

68
policy by ”request[ing] the Commission to undertake any
studies the Council considers desirable for the attainment
of the common objectives, and to submit to it any
proposals."171 The Council has also been granted attributed
powers under the Treaties to make decisions that are legally
binding upon the Member States and subjects of the
Community.”2 After deciding the essential elements and
rules of an area to be regulated, the Council may "confer on
the Commission, in the acts which the Council adopts, powers
for the implementation of the rules which the Council lays
down. "‘73 However, the regulatory power of the Council may
not be delegated in its entirety to the Commission since
that would require the Commission to implement the rules of
the Treaty itself, rather than merely the rules laid down by
the Council.

The Council performs various organizational functions
in the Community besides its legislative function. For
example, the Council ultimately determines the rules
governing the committees provided for by the EEC Treaty.174
The Council also has the power to determine aspects of the

organization of the Court of Justice, including the number

 

‘"EEC Treaty, supra note 1, art. 152.
172See EEC Treaty, supra note 1, art. 145.
I73EEC Treaty, supra note 1, art. 145.

‘uId. art. 153. The Council determines those rules after
receiving an opinion from the Commission. Id..

69

of judges sitting on the Court.”5 In addition, the Council
also can alter the size of the Commission”5 and determine
the salaries the Commission members and judges.177

The Council is the one Community institution in which
the national governments of the Member States are
represented as such. This intergovernmental arrangementI78
brings a strong nationalistic character to the debates and
work of the Council, making it the forum where Member States
can exert their individual power as nation-states in the
policy making processes. However, because the ability to
compromise is necessary for successful policy making, the
Council also provides a forum for developing mutual

understanding between Member States.

2. Commission of the European Communities

The Commission of the European Communities (Commission)

bears its own political responsibility in the Community and

 

‘PId. art. 165.
17“Merger Treaty, supra note 160, art. 10(2).
‘Wrd. art. 6.

‘flAlthough the Council is intergovernmental in nature,
the work of the Council is unlike the work of other
intergovernmental organizations in that it does not result in
international agreements among the Member States. Instead,
the acts of the Council have legal effect under the Treaty and
are subject to review by the Court of Justice. See supra pp.
46-53.

70

differs in several ways from the Council. The Commission
itself consists of "seventeen members, who shall be chosen
on grounds of the general competence and whose independence
is beyond doubt."‘79 The larger countries in the Community-
-France, Germany, Italy, Spain and the UK--appoint two
members to the Commission, often attempting to reflect the
political interests at home.“° The remaining smaller
Member States each have one seat on the Commission. The
members of the Commission are appointed by the common accord
of the Member States to four-year terms."“ A President is
also appointed in the same manner.182 Supporting the
Commissioners is a staff of approximately 16,000 officials
and temporary agents.183

The hierarchical structure of the Commission is
complex, and lines of authority are sometimes blurred. The
various policy portfolios are distributed among the

Commissioners, who carry the main leadership responsibility

 

179Merger'Treaty, supra note 160, art. 10(1) as amended.by
Act of Accession ESP/PORT, art. 15.

180For example, the United Kingdom has thus far appointed
both a Conservative and a Labour Party representative to the
Commission. See Kapteyn 8 van Themaat, supra note 95, at 108,
n. 28.

mMerger Treaty, supra note 160, art. 11. Although
Commissioners are appointed, they are nominated by the Member
State governments.

'“Id. art. 14.

183Richard Hay, The European Commission and the
Administration of the Community 31 (1989).

 

71
in that particular area.134 The policy development work
itself is divided into separate areas that are handled by
twenty-three different Directorates General (DG) which vary
in size and internal organization‘” (Figure 2). The head
of each DG reports directly to the Commissioner in charge of
its policy portfolio.

One of the primary functions of the Commission is to
initiate the policy making processes in the Community.186
Under the EEC Treaty the Commission is required to
"formulate recommendations and deliver opinions on matters
dealt with in this Treaty, if it expressly so provides or if
the Commission considers it necessary."187 Other treaty
provisions make it clear that in most cases the
Council can act only after receiving a proposal from the
Commission.‘“ The Commission is aided in this process by

the various Directorates General and a network of advisory

 

“‘For a discussion of the portfolio system, see Peter
Ludlow, The European Commission, in The New European
Community: Decisionmaking and Institutional Change 85, 88-93
(Robert O. Keohane et al. eds., 1991).

185Each DG is generally referred to by its number, rather
than its area of expertise, such as DGXIII, which is in charge
of telecommunications, information technologies and
innovation.

186The Commission, however, does not have a monopoly on
initiating policy in the Community. See infra text
accompanying notes 250-252.

'"EEC Treaty, supra note 1, art. 155.

1“See, e.g., id. art. 28 (free movement of goods); art.
63 (free movement of services).

72

MW

DGI External Relations

DGII Economic 8 Financial Affairs

DGIII Internal Market 8 Industrial Affairs

DGIV Competition

DGV Employment, Industrial Relationships
8 Social Affairs

DGVI Agriculture

DGVII Transport

DGVIII Development

DGIX Personnel 8 Administration

DGX Information, Communication 8 Culture

DGXI Environment, Nuclear Safety 8 Civil
Protection

DGXII Science, Research 8 Development

DGXIII Telecommunications, Information Industries
8 Innovation

DGXIV Fisheries

DGXV Financial Institutions 8 Company Law

DGXVI Regional Policies

DGXVII Energy

DGXVIII Credit 8 Investments

DGXIX Budgets

DGXX Financial Control

DGXXI Customs Union 8 Indirect Taxation

DGXXII Coordination of Structural Policies

DGXXIII Enterprise Policy, Distributive Trades,

Tourism 8 Social Economy

MW

Secretariat General of the Commission

Legal Service

Spokesman's Service

Translation Service

Joint Interpretation 8 Conference Service

Statistical Office

Consumer Policy Service

Joint Research Center

Task Force "Human Resources, Education, Training 8 Youth"

Euratom Supply Agency

Security Office

Office for the Official Publications of the European
Communities

Figure 2

Directorates General and Special Units of the Commission

73
and consultative committees.

The Commission also performs several executive
functions that closely involve it in the implementation,
supervision and management of Community policies. Under the
Treaties the Council may confer powers upon the Commission
to implement rules laid down by the Council.189 These
delegated rule-making powers include not only the
application of rules, but also their elaboration.

The Council, however, does not delegate this regulatory
power completely to the Commission because the rules laid
down by the Council are usually drafted with great
detail.190 The Commission may also delegate some of its
rule-making duties to individual members and senior
officials who act in the name of the Commission and take
into account its principle of collective responsibility to
the Community.”‘

The supervisory function of the Commission includes
overseeing that Member States fulfill their obligations
under the Treaties and Community legislation.192 The front-

line implementation of Community policy is generally

 

‘”Id. art. 155.

‘wFor a discussion of the delegation of powers between
the Council and the Commission, see Kapteyn and van Themaat,
supra note 95, at 119-23.

191See Rules of Procedure of the Commission, art. 27, 1975
0.J. (L 199) 43.

192EEC Treaty, supra note 1, art. 155.

74

delegated to the appropriate national agencies in the Member
States. Then, as part of its obligation to prepare an
annual report regarding Community activities,‘93 the
Commission attempts to assure that Community duties are
properly performed at the national level. This task
presents several difficulties to the Commission. At times a
Member State may be unwilling or unable to implement
Community policy, and the limited resources of the
Commission can make infringements difficult to detect.194
When the Commission becomes aware of possible infringements,
it informs the Member States involved, conducts
investigations and delivers an opinion. Should the
infringement continue, the Commission can bring the matter
before the Court of Justice.”5

Finally, as part of its executive function the
Commission helps manage aspects of Community finances. The
duties of the Commission in this regard on the revenue side

include making sure that the correct rates are applied

 

193The Commission must present its annual report to the
European Parliament. See Merger Treaty, supra note 160, art.
18.

194The Commission obtains the necessary information to
perform this supervisory function primarily from the Member
States, which are often required to report back to the
Commission regarding the methods of implementing the results
desired in directives. In addition, Member States are obliged
under the Treaties to facilitate the achievement of the
Community's tasks. See EEC Treaty, supra note 1, art. 5,
para. 1. This obligation includes complying with requests for
information from the Commission.

1951d. art. 5, para. 2.

75

within categories of revenue and that proper payments are
made to the Community by the Member States.“5 On the
expenditure side the Commission oversees the general
operation of the Community to assure that it remains within
the approved annual budget.”7

The character of the Commission as a Community
institution differs greatly from that of the Council.
Unlike the Council, whose members represent the interests of
the individual Member States, the Commission represents
Community interests as a whole. The members of the
Commission are required to maintain their independence and
"neither seek nor take instructions from any Government or
from any other body. "1” Thus, the Commission complements
the nationalistic character of the Council and remains in a

close, interdependent relationship with it.

3. European Parliament

The European Parliament (Parliament), originally called

the Assembly,‘99 consists of "representatives of the peoples

 

196See id. art. 201.
mSee id. art. 205; Nugent, supra note 167, at 79-82.
‘”Merger Treaty, supra note 160, art. 10(2).

199In 1962, the Assembly adopted.the "European Parliament"
as its title. See 1962 J.O. (1045) 62.

76

of the States brought together in the Community...."200
Persons who are members of the Parliament represent the
peoples of the Community collectively. The use of the
phrase ”peoples of the States" rather than "peoples of the
Member States" in the Treaty reinforces the collective
nature of that representation. Thus, the members of
Parliament do more than represent the people of an
individual Member State; they represent all the peoples of
the Community.

Currently there are 518 members of Parliament.201 ‘The
number of members from each Member State varies on the basis
of population.202 Although members of Parliament can also
hold seats in a national parliament, holding other positions
in Member State governments or being a member or active
official in any other Community institution is
prohibited.203 Members of Parliament are currently elected

for five-year terms.

Although members of Parliament were at one time

 

2""EEC Treaty, supra note 1, art. 137.
201Id. art. 138(2) .

202Currently, the number of seats is distributed as
follows: Germany, France, Italy and the UK each have 81; Spain
has 60; the Netherlands has 25; Belgium, Greece and Portugal
each have 24; Denmark has 16; Ireland has 15 and Luxembourg
has 6. Id. art. 138(2).

203See Act Concerning the Election of Representatives of
the Assembly by Direct Universal Suffrage, art. 6(1), 1976
0.J. (L 278) 1 and 5 [hereinafter Act on Direct Elections].

77

appointed, direct elections have been held since 1979.””
However, no uniform electoral system is prescribed by the
Act on direct elections. Until a uniform procedure can be
agreed upon by the Member States, elections are governed by
national provisions.”” .At present each Member State, as
well as Northern Ireland, has its own election procedure.206
Despite the problems that arise given the different
proceduregmn the advantage of having direct elections is
that they allow voters to air views on Community policy.
However, for many voters the Parliament remains a distant
Community entity . 2°“

The Parliament is organized around partisan politics,
and political groups form around ideological identification
and political family traditions.209 Since the 1989

elections there have been ten political groups in

 

20‘Thetmethod of appointing members was intended.under the
Treaties as temporary. See, e.g., EEC Treaty, supra note 1,
art. 138(3).

20SSeeAct on Direct elections, supra note 203, art. 7(2).
2mSee Nugent, supra note 167, at 142-45.

20”To date there have been three elections--in 1979, 1984
and 1989. Each election has been contested on the basis of
different national election procedures. See id. at 142.

208Light voter turnout is often mentioned in regard to
Parliament elections. In 1979, only 62.5% of those persons
eligible to vote did so. In 1984, the turnout was 59%, and in
1989 57.2%. See Francis Jacobs 8 Richard Corbett, The
European Parliament 25 (1990).

209The requirements for forming a political group vary
depending on the number of Member States involved. See
Parliament's Rules of Procedure.

78
Parliament.‘no Each group receives funds for administrative
and research purposes, including non-attached members, who
are regarded as a group for this purpose. In addition, the
political groups are guaranteed representation on
Parliamentary committees and speaking rights in plenary
sessions.

Much of the work of the Parliament is carried out by
its standing committees, of which there are currently
eighteen (Figure 3).2n Ad hoc committees are established
to investigate special topics asrequired. The political
groups negotiate committee memberships so as to ensure fair
representation of the Member States and of political views.
Most members of Parliament are on at least one standing
committee.

The Parliament performs both advisory and supervisory
functions that are conferred upon it by the Treaties.212
Consultation of the Parliament is often required before the
Council can act. However, the Council often seeks the
opinion of the Parliament when not required to do so, and
the Parliament sometimes addresses opinions on its own

initiative to the Council. Although the Treaties require

 

210For a detailed discussion of the political groups,
their membership and their ideology, see Jacobs 8 corbett,
supra note 208, at 54-83; Nugent, supra note 167, at 146-53.

2“For a detailed discussion of the Parliamentary
committees, see Jacobs 8 Corbett, supra note 208, at 91-124.

212See EEC Treaty, supra note 1, art. 137.

79

Committee Title

# of members

 

1.
2.

3.
4.

5.
6.
7.

9.
10.
11.

12.

13.
14.
15.
16.

17.
18.

Political Affairs

Agricultural Fisheries 8 Rural
Development

Budgets

Economic 8 Monetary Affairs 8
Industrial Policy

Energy, Research 8 Technology

External Economic Relations

Legal Affairs 8 Citizens's Rights

Social Affairs, Employment 8 the
Working Environment

Regional Policy 8 Regional Planning

Transport 8 Tourism

Environment, Public Health 8
Consumer Protection

Youth, Culture, Education, Media
8 Sport

Development 8 Co-operation

Budgetary Control

Institutional Affairs

Rules of Procedure, the Verification of
Credentials 8 Immunities

Women's Rights

Petitions

Figure 3

56

47
32

52
34
29
34

41
38
30

51

31
43
28
38

27
33
25

Standing Committees of the European Parliament

80
only the Council to consult the Parliament on policy
proposals, the Commission also consults the Parliament on
occasion.

The primary supervisory power of the Parliament over
the activities of the Community is its power to dismiss the
Commission en bloc by adopting a motion of censure.213
In addition, however, the Parliament maintains a dialogue
with the Commission, reviewing Community affairs through a
variety of procedures. The Commission is required to
respond to questions put to it by the Parliament or its
individual members.“ The Parliament also holds public
deliberations regarding the annual report on Community
activities submitted to it by the Commission.”5 iFinally,
the Parliament has considerable power regarding the budget
of the Community through its requisite approval of the
overall budget and overseeing all non-compulsory
expenditure, certain Community development projects and its

own administrative budget.216

 

213EEC Treaty, supra note 1, art. 144. Although a motion
to censure has occasionally been tabled, none has ever been
approved. See Kapteyn 8 van Themaat, supra note 95, at 138.

2MEEC Treaty, supra note 1, art. 140, para. 3. The ECSC
Treaty require the High Authority to respond to questions from
the Parliament" See ECSC Treaty, supra note 3, art. 23, para.
3.

21‘See EEC Treaty, supra note 1, art 143.

216See id. art. 203.

81

In distinction to other Community institutions the
Parliament is characterized as the representative body of
the peoples of the Community. It maintains this role by
organizing itself around Community-level political groups
rather than national alliances. Although its role in
Community policy making is somewhat limited, its powers are
nonetheless important. Its supervisory powers over the
Commission provide a crucial check in protecting collective
Community interests, and its control over the Community
budget gives it influence over the general direction of

policy making efforts in the Community.

4. European Court of Justice and
Court of First Instance

The European Court of Justice (Court of Justice)

consists of thirteen judges,"7 who are assisted by six

218

advocates-general. Both positions last for a renewable

9 Every three years there is a partial

term of six years.”
replacement of the members of the Court of Justice, and

seven or six judges and three advocates-general are replaced

 

2"’Id. art. 164, as amended by Act of Accession ESP/PORT,
art. 17.

218Id. art. 166, para. 1, as amended by Act of Accession
ESP/PORT, art. 18.

2"Id. art. 167, para. 1, as amended by Act of Accession
ESP/PORT, art. 19.

 

 

82
alternatelyfi220 Although the judges and advocates-general
are supposed to be appointed by common accord of the
governments of the Member States,”1 this does not happen in
practice. Each Member State nominates one judge, leaving
the thirteenth judge to be appointed by common accord.222
The appointment of the advocates-general tends to be more
collective than that of the judges, although the larger
Member States are usually able to ensure that they each have
one of the positions.223 Behind the scenes a staff of
approximately 650 handles the administrative work and
provides language services.”‘

It is the duty of the Court of Justice to "ensure that
in the interpretation and application of the Treaty the law
is observed.”225 The Court of Justice performs this duty
through its judgments in direct actions usually involving

the failure of Member States, the Council or the Commission

 

220Id. art. 167, para. 2, as amended by Act of Accession
ESP/PORT, art. 19.

22‘l'd. para. 1, as amended by Act of Accession ESP/PORT,
art. 19.

222Office for the Publications of the European
Communities, The Court of Justice of the European Community 3
(1986).

223See Nugent, supra note 167, at 188.

22‘Id.

22‘Id. art. 164, as amended by Act of Accession ESP/PORT,
art. 17.

83
to fulfill their Community obligations226 or the legality of
acts of the Council or Commission.227 The Court of Justice
also has jurisdiction to issue preliminary rulings
concerning points of Community law to enable courts in the
Member States to give judgements in cases they are
hearing.228

Because of the increasing case load before the Court of
Justice, the Council was given the power to establish a
Court of First Instance.229 The Court of First Instance was
established in November 1989 and has twelve judges but no
advocates-general. It hears only disputes between the
Community and its staff, actions brought against the
Commission under the ECSC Treaty and certain cases involving
the Community competition rules. The Court of Justice hears
all other cases. Decisions of the Court of First Instance
can be appealed to the Court of Justice.

The Court of Justice and Court of First Instance play
an important role in establishing the legal order of the
Community. The courts are the source of uniform
interpretation of Community law throughout the Member

States. Without these independent institutions to give

 

226See id. art. 169-70, 175.
227See id. art. 173.
228See id. art. 177.

229See id. art. 168a, as amended by Single European Act,
supra note 14, art. 4.

84
rulings regarding legal obligations under the Treaties and
Community legislation, Community decision making would be
less effective and establishing common policies throughout

the twelve Member States would be more difficult.

5. European Council

The European Council is a body consisting of "the Heads
of State or Government of the Member States and the
President of the Commission...assisted by the Ministers for
Foreign Affairs and by a Member of the Commission."230 The
European Council meets twice each year“ on a relatively
informal basis. While it does not participate in the formal
policy making processes of the Community, its exchange of
ideas gives general direction to Community policy
development232 and assures progress and overall consistency
in Community activities. The general economic situation in
the Community and progress toward the completion of the
internal market are usually on the agenda at European
Council meetings. Other areas of activity include economic

and monetary integration, external trade issues, external

 

230Single European Act, supra note 12, art. 2.
2“my.

232For example, the European Council has played a
significant. role in introducing’ direct. elections in ‘the
Parliament and in Community expansion. See Kapteyn & van
Themaat, supra note 95, at 107.

85
international political issues and Community political
integration.233 However, because there are no Treaty
provisions setting out the responsibilities of the European
Council, it has relative freedom in the activities it
chooses to undertake.

The main effect of creating the European Council has
been to increase the influence of the Member States in the
Community policy making processes. The European Council has
become a forum for initiating policy and mediation, thus
undermining some of the power of the Commission in these
areas. In addition, because the European Council often
addresses major issues, sometimes its discussions precede
work later duplicated by the Council. However, the
decisions of the European Council remain political in nature
and thus have few, if any, implications for the Court,

unlike the legislation of the Council.

6. Economic and Social Committee

The Economic and Social Committee (ESC) was established
under the EEC and Euratom Treaties as a consultative body
comprised of representatives of various social and economic

interests.“ Currently, the ESC has 189 members” who are

 

233See Nugent, supra note 167, at 201-06.

23‘EEC Treaty supra note 1, art. 193.

86

nominated by Member State governments and formally appointed
by the Council.236 Each member serves a four-year renewable
term.237

The membership of the ESC is divided into three main
groups, each reflected in the national groups and
approximately equal in size.238 Group I--Employers includes
members from industry, public enterprises, commercial
ventures and financial institutions. The members of Group
II--Workers are mostly drawn from national trade unions.
Group III--Various Interests is associated with agriculture,
small and medium-sized business, the professions, public
agencies, local authorities and various public interest
groups. Although the ESC members are appointed in a
personal capacity rather than as representatives of an
organization, their close association with certain interests
inevitably results in a tendency to act as spokespersons for
a particular cause.239

The ESC performs an advisory function within the

 

235The distribution of members among the Member States is
as follows: Germany, France, Italy and the United Kingdom each
have 24; Spain has 21; Belgium, Greece, the Netherlands and
Portugal each have 12; Denmark and Ireland each have 9 and
Luxembourg has 6. Id. art. 194.

mm. art. 193.

237Id. art. 194.

238For a detailed discussion of the ESC groups and their
membership, see Emil Kirchner & Konrad Schwaiger, The Role of
Interest Groups in the European Community 60-84 (1981).

239See Nugent, supra note 167, at 211.

87
Community, issuing ESC Opinions and information reports on a
variety of matters. Under the EEC and Euratom Treaties, ESC
Opinions usually result from mandatory or optional
consultation by the Council or Commission. However, the ESC
also occasionally issues Opinions on its own initiative.
The Opinions are drafted by one of nine sections of the ESC,
which operate in this regard similarly to the committees of
Parliament.

The influence the ESC has on Community policy making is
limited because the Council and Commission are not required
to act on ESC Opinions. Mandatory consultation is
restricted and ESC Opinions are often issued after key
decision makers on the Council or Commission have already
made up their minds. However, the ESC does provide a useful
forum for the exchange of views from various social and

economic interests.

C. Other Actors in the Policy Making Processes

1. Standards Organizations

Several European standards organizations have come to
play significant roles in the telecommunication policy
making process in the Community. The European Conference of
Postal and Telecommunications Administrations (CEPT) was
founded in 1959 and is comprised of representatives from the

postal and telecommunications administrations in twenty-six

88
European countries, including the twelve Community Member
States. The work of the CEPT primarily involves questions
regarding service provision, technical standards and
tariffs. In 1984, a framework for cooperation between the
CEPT and the Community was established to help develop
European-wide standards in telecommunications.“0 The
Technical Recommendations Application Committee was created
with the power to adopt mandatory European standards, or
normes des Europeenes des telecommunications (NETs) in
certain cases.

In 1988, the CEPT created a new European
Telecommunications Standards Institute (ETSI) to serve as a
research facility, but ETSI was soon severed from the CEPT.
The members of ETSI come from twenty-one of the CEPT
countries and are predominantly manufacturers, although
national telecommunication administrations, public network
operators, users and service providers are also

represented.”‘

 

2“"See Council Recommendation of 12 November 1984
Concerning the Implementation of Harmonization in the Field of
Telecommunications, 1984 0.J. (L 298) 49; Green Paper, supra
note 19, at 108.

2“For a discussion of the CEPT and the creation and
organization of the ETSI, see Frede Ask, Standards and the
Role of ETSI, in European Communications 189 (David Shorrock
ed., 1989).

89

Standards organizations such as the CEPT and the
ETSI“2 are important actors in the telecommunications
policy making processes in the Community. Such
organizations have a large share of the responsibility for
the development of telecommunications standards in Europe.
Because their membership is comprised primarily of the
national telecommunications administrations of the Member
States and industry representatives, a great deal of the
authority in the area of standards setting is not in the

hands of the Community and its institutions.

2. Private Sector Participants

Various non-governmental interests also play a part in
the Community policy making processes. Among these are
private and public companies, national and European interest
groups and regional and local decision making bodies.“3
Because such interests are unable to directly approach the
Council, they gain access to the policy making processes
through the national governments of the Member States, the

Commission, the Parliament and the ESC, each for different

 

2“The work of the CEPT and ETSI is supplemented by that
of other organizations such as the European Committee on
Standardization (CEN) , the European Committee for Electro-
technical Standardization (CENELEC) and the International
Telecommunications Union (ITU).

243See Nugent, supra note 167, at 226-31.

 

90
reasons.“‘

National governments are a prime target for attempting
to influence Community policy. Specialized interest groups
are often called upon by the Member State governments as a
source of information for developing policy positions. Not
only can private interests attempt to influence national
positions on Community policy, they can also influence the
way such policies are implemented on the national level.
Thus, private interests consider it important to make their
views on Community policy known at the national level.“5

Targeting the Commission is also important to private
interests. The Commission makes itself accessible because
it needs specialized information from private interests to
perform its role as the main initiator of Community policy.
Support from private interests for proposals from the
Commission strengthens its position with the Council.
Therefore, the Commission keeps an official register of
several interest groups and the various DGs keep them
informed of policy developments. Sometimes members of the
groups become part of the various Member State delegations
sent to work at the DGs.“‘

The Parliament and the ESC also provide such groups

access to the policy making processes. Ministers of

 

2“See Kirchner & Schwaiger, supra note 239, at 37-59.
2“‘See Nugent supra note 167, at 232-33.

2"“See id. at 233-34.

91
Parliament and members of special advisory committees can be
directly lobbied. In addition, approaching members of the
ESC, whose main purpose is to serve as a forum for special
interest representation, might be used as a means of
influence. However, given the advisory position of the
Parliament and the ESC in the policy making processes, they

are not primary targets for lobbying.

E. Policy Making Processes

Policy making in the Community is complex, and involves
different processes in which the actors interact in various
ways. The main actors--the Community institutions, Member
State governments and special interest groups--each differ
in character and at times take on different roles, either
active or passive, depending on the subject matter involved
and the resources available. The subject matter can also
determine the policy making process that is used because
certain policy areas are more complex than others, occupy a
more important position on the Community agenda or involve
different balances of responsibility between the Community
and the Member States.

Since the ratification of the Single European Act in
1987, there have been two different policy making processes

in the Community: the consultation procedure and the

92
cooperation procedure"7(Figure 4). The consultation
procedure involves a single reading by the Council of a
Commission proposal. The cooperation procedure includes two
readings by the Council and, under certain circumstances
qualified majority voting. A variety of legislative matters
are decided by the cooperation procedure, including various
matters of social policy” and most measures "which have as
their object the establishment and functioning of the

internal market."249

1. The Consultation Procedure

The consultation procedure begins when one of the
actors initiates the development of a policy proposal.
Usually, this is done by the Commission.”0 However, other
actors can require or influence the Commission to act. The
Council can request the Commission to submit proposals

regarding matters relevant to attaining Community

 

24“’Although the consultation procedure was already in
place, the Single European Act introduced the cooperation
procedure to improve the efficiency of decision.making in the
Council and, presumably, to strengthen the role: of the
Parliament in policy making. See Single European Act, supra
note 12, art. 7.

248See, e.g., EEC Treaty, supra note 1, art. 7
(prohibitions of discrimination on the grounds of
nationality).

249Id. art. 100a.

2"""See supra text accompanying notes 186-87.

93

COIBULIAILOI COOBIRATIOI
PROCEDURE PROCEDURE
Commission
initiates a _
l proposal I
EP gives an EP gives an
Opinion Opinion
Council issues Commission
legislation takes a view

on EP Opinion

Council adopts a
common position by
qualified majority

Within three months
the SP:

. J A
I | l

Approves Council Amends Council Rejects Council
position or takes position by position by
no view absolute majority absolute majority
Council adopts Within one month Council may,
act Commission reviews within three months,
EP amendments and adopt by unanimity

may revise

Within three months
the Council:

I i l 1

 

Adopts Amends Adopts Fails
Commission Commission EP amendments to act
proposals by proposals by not accepted by

qualified unanimity Commission by
majority unanimity

Proposal lapses
but possible
one-month extension
if EP agrees

Figure 4

Main Stages of the Policy Making Processes

94
objectives.”1 In addition, the various private sector
participants might lobby the Commission to initiate
proposals or exert influence internally through
representation in one of the DGs.”2 The Parliament might
also influence the Commission through a Parliamentary
initiative report.

The decision to issue a Commission proposal is usually
made by the head of the relevant DG. Officials in the DG
prepare an initial draft which is eventually sent to the
staff of the Commissioner responsible for that particular
policy portfolio. The staff might amend the proposal before
submitting it to the Commissioner, who, upon approving the
proposal, submits it to the entire Commission. Depending on
how controversial the proposal is, the Commissioners might
adopt it or hold a debate after which they accept it, reject
it, amend it or refer it back to the DG for further
consideration. During this pre-proposal stage the
Commission might solicit various views from other Community
officials, interest groups or researchers, depending on the
nature of the proposal and the working habits of its
drafters.

A simple majority of votes is required to approve the

 

2”EEC Treaty, supra note 1, art. 152. The impetus for a
request from the Council for a proposal from the Commission
might come from the indirect influence of various private
sector participants on a member of the Council or its staff.

2”See supra text accompanying note 247.

95
proposal. The proposal is then published, and the formal
consultative procedure among other Community institutions
begins. The Council receives a copy of the proposal and
refers it to the Parliament and, if necessary, the ESC, for
their Opinions. The various Parliamentary committees or ESC
working groups then study the proposal.

In the Parliament the proposal might be studied by as
many as three committees, although one of them is designated
as responsible for preparing a report for the plenary
session. The final report usually includes amendments to
the Commission proposal, if any; a draft legislative
resolution; and explanatory statement; and annexes, if any,
which might include reports from other committees. Once
again the complexity and controversiality of the subject
matter determines how quickly a committee report is adopted
and recommended to the plenary session of the Parliament.

Sometimes it is necessary to consult the ESC regarding
a Commission proposal. ESC Opinions are drafted by one of
the nine sections of the Committee, which eventually submits
the Opinion at a plenary meeting. Once an ESC Opinion is
approved by a majority, minority viewpoints have an
cngportunity to be annexed to the ESC Opinion before it is
submitted to the Council. ESC Opinions, however, usually
have little influence over Community legislation because the
Council or Commission might move ahead in the policy making

process before the Opinion is issued. Although when an ESC

96
Opinion is issued, some note is taken of it.

The Council usually does not wait until the Parliament
and the ESC delivers its Opinions before beginning to
examine the proposal.”3 Initially, a working party
examines the proposal, discussing key points and determining
the positions of the Member States. The working party
eventually prepares a report noting points of agreement and
disagreement and any reservations of the Member States.

That report is then referred to the Coreper, which pays
particular attention to resolving the areas of disagreement
and reservation. When such issues cannot be resolved,
depending on their difficulty and the disparity among the
various positions, the Coreper refers the report back to the
working party for further work or on to the Council for
negotiation.

Only the Council itself can formally adopt a proposal.
A vote is not taken, however, as long as there is
substantial disagreement among Council members. Even when a
vote does occur, the number of votes required for adoption
varies depending on the type of proposal involved.

Unanimity is usually required to adopt policy in a new area

or to modify or further develop an established policy

 

2”Even in cases in which consultation of the Parliament
is required under the EEC Treaty, an Opinion of Parliament
does not bind the Council in any way. See EEC Treaty, supra
note 1, art. 235.

97
frameworkaz“ .A unanimous vote is also required for the
Council to amend a Commission proposal against the wishes of
the Commission. A simple majority is required for
procedural matters.

Proposals for measures to establish the internal
market’” require qualified majority voting.”6 A qualified
majority is also required at the first stage of the
cooperation procedure,”7 and, under special circumstances,
the second stage.”8 Under qualified majority voting, the
vote of each Member State is weighted, depending on its
size. France, Germany, Italy and the UK have 10 votes each;
Spain has 8; Belgium, Greece, the Netherlands and Portugal
have 5; Denmark and Ireland have 3 and Luxembourg has 2.259

Fifty-four votes--which is 70 per cent of the total 76--

 

2’"Because abstentions do not count as negative votes for
Council decisions requiring unanimity, they do not impede
adopting such decisions. See id. art. 148(3).

2”According to the EEC Treaty, " [t]he internal market
shall comprise an area without internal frontiers in which the
free movement of goods, persons, services and capital is
ensured....” EEC Treaty, supra note 1, art. 8a. Article 8a
was added to the EEC Treaty by the Single European Act, supra
note 12, art. 13.

2”EEC Treaty, supra note 1, art. 100a. Article 100a was
added to the EEC'Treaty by the Single European Act, supra note
12, art. 18.

2”See id. art. 149(2)(a).

2”Id. art. 149 (2)(e).

2”Id. art. 143(2).

98
constitute a qualified majorityu”” ‘Under this system, the
five largest Member States alone cannot outvote the other
seven, nor can two of the largest Member States block the

adoption of a proposal.

2. The Cooperation Procedure

The cooperation procedure is much more complicated than
the consultation procedure. The procedure begins with a
proposal making its way out of the Commission, being
submitted to the Council and then being passed on to the
Parliament or the ESC for an Opinion. When the Council
receives the Opinion, the Council adopts a common position
on the proposal,”51 rather than making a final decision as
it would under the consultation procedure. Usually
qualified majority voting is used to adopt a common
position ,2” unless the Council chooses to amend the
proposal against the wishes of the Commission, in which case
unanimity is required.263

The Parliament then conducts its second reading. The

common position, including the reasons which lead the

 

z“Id .

2“Id. art. 149(2)(a), as amended by the Single European
Act, supra note 12.

mm. art. 149(2) (a).

2631d. art. 149(1).

99
Council to adopt it, is then sent to the Parliamentmz” The
Parliament then has three months to take one of four courses
of action. The Parliament can decide to approve the common
position, in which case the Council adopts the proposal.“5
The Parliament can reject the common position by an absolute
majority and send the matter back to the Council, which can
adopt its common position by unanimity within three
months.”56 The Parliament can amend the common position by
an absolute majority and send the proposal back to the
Council and the Commission.267 The Commission then has one
month to review the Parliamentary amendments and decide
whether to incorporate them into the proposal before
referring it back to the Council.26$ If the Commission
incorporates the Parliamentary amendments, the Council can
approve them by a qualified majority.269 If the Commission
does not incorporate the amendments, the Council can only
approve them by a unanimous vote.”0 By voting unanimously

the Council can also approve any Parliamentary amendments

 

26“Id. art. 149(2)(b).
2“51d. art. 149(2)(b).
266Id..

”71d. art. 149(2)(c).
268Id. 149(2)(d).
2“91d. art. 149(e).

”01d .

100
not adopted by the Commissiondn‘ Should the Parliament
fail to act during the three-month period, the Council can
adopt the common position.272
Also, if the Council fails to act within three months after
receiving the re-examined proposal from the Commission, the

proposal lapses.273

3. Community Legislation After Adoption

Once the Council votes to adopt a proposal, the next
steps depend on the type of legislation that is issued.
Regulations and decisions are binding without any further
action.274 Directives, however, must be incorporated into
national law by the individual Member States, which are
usually required by the directives to inform the Commission
of the measures taken.“ The way in which Member States
incorporate directives into national law varies but usually
involves adopting or amending administrative measures or
legislation. Whether Community legislation is being
properly applied at the national level is usually monitored

by national authorities and agencies who communicate with

 

271Id. art. 149(d).

mm. art. 149(2)(b).
273Id. art. 149(f).

274See supra Chapter III.

2753ee id..

101

the Commission and the DGs.”°

Two types of legislation in particular require followup
provisions or measures: framework legislation and certain
legislation intended to harmonize national laws under
Article 100b of the EEC Treaty. Framework legislation lays
down general principles and rules in a policy area but
requires additional, more detailed legislation to cover
specific areas within the policy framework. Article 100b
legislation lays down essential requirements in an area of
policy important to establishing the single market,
particularly one in which standards are necessary, such as
telecommunications. Under such legislation Member States
are allowed to retain their national standards but agree to
mutually recognize the national standards of other Member
States. The national standards are eventually replaced with
Community standards determined by European standards
organizations such as the ETSI.277

Under special circumstances Member States are allowed

to adopt national safeguard measures rather than implement

 

”61d .

2"See EEC Treaty, supra note 1, art. 100b. Article 100b
‘was added by the Single European Act, supra note 12, art. 19.
What constitutes the new approach is the agreement for mutual
recognition of the standards of other Member States. Prior to
enacting the Single European Act the Council would not adopt
standards legislation until national specifications could be
harmonized by Community institutions through the consultation
procedure. Given the various problems associated with
harmonizing national standards, the old approach was usually
a lengthy process characterized by frequent delays and
stalemates.

102
Community harmonization legislation adopted by qualified
majority voting.27$ The special circumstances must fall
under the non-economic conditions outlined in Article 36 of
the EEC Treatym "or relat[e] to protection of the
environment or working environment. . . . "230 Member States
wanting to apply national safeguards must notify the
Commission, which then confirms the safeguards after having
verified that they are not a means of discrimination or

trade restriction.281

E. Conclusion

The policy making processes in the Community differ
from those in other international organizations in several
respects. Most obvious is that the character, composition
and functions of the primary institutions of the Community
are more governmental. In addition, many of the issues
dealt with in the Community are matters of direct concern to

the citizens and business entities of the Member States,

 

278See EEC Treaty, supra art. 100a(4).

279Such conditions include "grounds of public morality,
public policy or public security; the protection of health and
life of humans, animals or plants; the p[rotection of national
treasures possessing artistic, historic or archaeological
value; or the protection of industrial and commercial
property.” EEC Treaty, supra note 1, art. 36.

280Id. art. 100a(4).

281Id. para. 2.

103
unlike the international political issues dealt with by
traditional international organizations such as the United
Nations.282

As such Community policy making is not so different
from what occurs at the national level. For the Member
States policy making is a process of resolving issues and
problems in certain ways, either in national or Community
forums. At both levels policy making is a political process
of accommodation and compromise. Tensions and differences
between competing interests must be smoothed over--usually
through discussions, debates and deal making--in order to
achieve overall policy goals.

Difference do exist, however, between Community and
national policy making processes and have been a source for
criticism regarding the Community. Critics point out that
the Community institutions are less directly accountable
than their national counterparts to those who are affected
by their decisions. In the traditional system of
representative government, legislative authority is vested
in an assembly of representatives chosen in a free

election.283 The Community, however, is not wholly a

 

2“See John Fitzmaurice, European Community Decision-
Making: The National Dimension, in Institutions and Policies
of the European Community 1 (Juliet Lodge, ed. 1983).

283See John Pinder, The European Community, the Rule of
Law and Representative Government: The Significance of
Intergovernmental Conferences, 26 Gov't & Opposition 199, 204
(1991).

104
representative governmental system.

Critics who point out the lack of accountability in the
Community system often phrase their argument in terms of the
democratic deficitmfl” The "democratic deficit" has been
defined as the combination of the transfer of policy making
powers to Community institutions and the exercise of those

powers by institutions other than the Parliament, the only

 

institution whose members are directly elected.”’

According to this argument the Commission--a grOup of

 

non-elected civil servants--proposes policy to the Council--
a group of non-elected national ministers--which enacts
binding, enforceable Community legislation that must be
followed in the Member States despite any action by their
national parliaments. Such critics equate the democratic
deficit with a lack of accountability in Community policy
making.

The critics fail to clearly define "accountability,"
but seem to imply that a lack of accountability results from
there being no connection between the Community policy

making system and the people or national governments of the

 

2“"See J. H. H. Weiler, The Transformation of Europe, 100
Yale L.J. 2403, 2466-74 (1991); Williams, supra note 24, at
306-07.

2“See Vernon Bogdanor and Geoffrey Woodcock, The European
Community and Sovereignty, 44 Parliamentary Affairs 481, 482-
83 (1991).

105
Community Member States.236 Such connections, however,
clearly exist through the representation of national
governments in Community institutions,287 the appointment of
representatives to the Community and its institutions by
directly elected national officials, the staffing of
Community committees by the people themselves288 and the
direct election of the Parliament. Various public and
private interest groups and industry groups, many of which
reflect the interests of various collectivities of the
people, also have a say in Community policy making through
representation in the ESC and standards organizations such
as the ETSI and their lobbying efforts.239 Thus, to imply
that the Community lacks accountability because it is
disconnected from its members is incorrect.

The alleged lack of accountability is also related to a

 

286Bogdanor and Woodcock note that public opinion polls
and low voter turnout at Parliament elections might be signs
of public alienation and hostility towards the Community. Id.
at 481.

2”The members of the Council, the Coreper and the
European Council all represent the national governments of the
Member States. See supra pp. 63-65, 68, 84-85; Williams,
supra note 24, at 302.

288Through a system Iknown as comitology hundreds of
national civil servants sit on the various advisory
committees, and.DGs under the control of the Commission.and on
regulatory and management committees. See Williams, supra
note 24, at 302.

289See supra pp. 88-91.

 

 

PE}
it;

sy:

 

 

 

fou

fox|
pat
1a

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106
perceived lack of formal legitimacy290 of the Community and
its institutions. Formal legitimacy in institutions and
systems, at least in the West, rests on a democratic
foundation.“ The Community has established such a
foundation through its Treaties which were ratified by the
parliaments of the Member States. Therefore, it does not
lack formal legitimacy.

Questions regarding the accountability or legitimacy of
the Community are really about the locus of control in the
policy making processes. As evidenced in composition and
character of Community institutions and other actors, the
national governments of the Member States retain a large
measure of control in the policy making processes. Their
input is expected and received at every level, both behind
the scenes and at the fronts”” Furthermore, national
governments retain much control in implementing Community
policy at the Member State level, particularly in the

methods they choose to implement directives.

 

290Formal legitimacy implies that "all the requirements of
the law are observed in the creation of the institution or
system." Weiler, supra note 284, at 2468. Formal legitimacy
should be distinguished from social legitimacy, which implies
social acceptance of the system. Id..

2"‘See T. Franck, The Power and Legitimacy of Nations
(1991).

292For a discussion of the role of national policy makers
in the Community policy making processes, see Helen Wallace,
National Bulls in the Community China Shop: The Role of
National Governments in Community Policy-Making, in Policy-
Making in the European Community 33 (Wallace, Helen et al.
eds., 1st ed., 1977).

 

CHAPTER V

TELECOMMUNICATIONS AND THE EUROPEAN COMMUNITY ECONOMY

Following the oil crisis of 1973 Europe's traditional
industries--steel, textiles, shipbuilding and coal--were in
a state of decline, and the European heads of state
recognized the need for new sources of economic growth. In
the Dublin Report, which was submitted in 1979, the
Commission stated that a "considerable effort will have to
be made for the Community, its citizens, its cumbersome
social structures and its fragile political balances to
react in a positive way by adapting to the new economic and
political realities of the world today."293 .A key industry
chosen to lead the Community to economic improvement was
telecommunications, but for a variety of reasons that
industry was also troubled during the 1970s. Substantial
policy changes were therefore necessary before
telecommunications could help revitalize the Community
economy and further the goal of establishing a single
internal market that could compete on a global basis. This
chapter reviews the problems the industry faced during the

19708, the dual role telecommunications plays in the

 

293European Society Faced. with the Challenge of New
Information Technologies, COM(79)650 final at 1 [hereinafter
Dublin Report].

108

 

109
Community economy and the policy goals the Community has

developed for telecommunications.

A. European Telecommunications in the 19705

By the end of the 19703 many industry watchers
expressed concern at the declining position of the Community
in telecommunications and related industries. The Nora and
Minc report to the French government294 had increased
awareness regarding the importance of telecommunications in
the age of computerization, but until that time the European
contribution to the field had been primarily intellectual.
The United States and Japan were reaping all the commercial
benefits. The inability of the Member States to compete in
the field was the result of a variety of reasons having to
do with regulatory regimes, business practices and the
political climate.295

The main reason the Member States lagged behind the
United States and Japan was the lack of cooperation at the
European level. European telecommunications firms were
operating in a fragmented, heterogeneous market, unable to

produce equipment for mass consumption because technologies,

 

2“Simon Nora & Alain Minc, The Computerization of Society
(1980).

2958ee Alain Dumont, Technology, Competitiveness and
Cooperation in Europe, in The Technical Challenges and
Opportunities of a United Europe 68, 69-70 (1990).

110
standards and procurement procedures differed from country
to country. Therefore, firms did business almost
exclusively in their home markets, which prevented them from
taking advantage of economies of scale.

The 19703 were also a time of technophobia in the
Community. The environmentally-conscious Greens movement,
which strongly opposed advances in nuclear power and
biotechnology, put pressure on governments to resist
technological buildup, a state of affairs that extended to
telecommunications and related industries. There was also
some resistance to technology within telecommunications
firms. Managers in finance and marketing positions were
promoted more quickly than those in R & D or manufacturing,
making the former positions more attractive. Many other
Europeans were also reluctant and cautious about technology,
fearing loss of employment and invasions of privacy.296

Further aggravating the situation, European firms
remained isolated from sources of innovation and investment
during the 1970s. Few of them established connections with
research universities to gain fresh ideas. There was also
little contact with venture capitalists, who could provide
the investment capital necessary to develop and support new
projects. Chauvinistic industrial and procurement policies
also contributed to the problem. Most Member States

promoted a national champion in each industry, thus

 

”‘Id. at 69.

111

isolating a single firm from effective competition.297

Despite this protectionist approach to
telecommunications in the 19703, the industry did experience
some growth. However, given various problems in the
regulatory regimes, business practices and the political
climate, the Community was unable to take full advantage of
the potential for telecommunications, perhaps because the
dual role of telecommunications in the economy was not

appreciated.

B. The Dual Role of Telecommunications in the Economy

Since the 19703 the use of digital electronics and the
integration of computers with telecommunications has
increased the potential applications of telecommunications
for both residential and business use. These improvements
have increased the utility and marketability of existing
services and have created interest in new ways to handle
information and enhance business productivity. The result
is an increase in demand for telecommunications equipment
and services. Thus, telecommunications has come to play a
dual role in the economy. On the one hand it makes a direct
contribution to the economy; on the other it has an indirect
impact as an input into the production process of many

industries. Understanding the relationship between

 

”’Id. at 69-70.

112
telecommunications and the Community economy is necessary to
appreciate both its importance for establishing the single
market and the telecommunications policy framework the

Community has created to achieve that goal.

A. The Direct Role

The telecommunications industry in the Community has
experienced a revolution since the 19703. The growth of the
industry through network infrastructure and new service
offerings has made its importance to the Community economy
comparable to that of other large industrial sectors such as
the aerospace and electric industries. This direct effect
on the economies of the Member States is reflected in the
increased penetration of telephone mainlines, increases in
telecommunications revenues and investments and the overall
contribution of the sector to GDP.

In the period from 1978 to 1989, the number of
telephone mainlines in Member States grew at an accelerated
pace (Table 1). During that period the telephone became a
mass consumption item rather than something restricted to
business and emergency use. The total number of mainlines
throughout the Community increased by 81% during the 11-year
period.

The increase in telephone penetration was coupled with

113

 

 

Table 1
Telephone Mainlines in the Com-unity--1978-1989l

(0003)
Countrv 1978 1983 1989
Belgium 2,178.00 2,843.06 3,747.91
Denmark 2,055.00 2,403.00 2,848.00
France 12,010.00 20,942.00 26,942.45
Germany FR 17,305.00 23,549.86 28,400.00
Greece 2,025.00 2,714.40 3,786.43
Ireland 412.00 613.46 903.00
Italy 11,456.00 15,601.03 21,265.52
Luxembourg 122.00 142.94 176.36
Netherlands 4,279.90 5,462.00 6,691.00
Portugal 904.28 1,248.91 2,035.10
Spain 6,185.00 8,456.71 11,797.16
Un' n o 15.173100 19.550.00 25.363.00
Total 74,104.28 103,527.37 133,955.93
Increase
1978-1989: 81%

 

Source: OECD

1. Although Greece did not join the EC until 1981 and Spain
and Portugal did not join until 1986, data for those Member
States is included for the entire period for the sake of
continuity.

 

114
an extension in the telephone network and an increase in new
technologies and service offerings. Total investment in
telecommunications throughout the Community increased by 39%
from 1978 to 1989 (Table 2). New service offerings nearly
doubled between 1975 and 1984 and are expected to at least
double again by the year 2000.293 By 1989, total
telecommunications revenues in the Community amounted to
over US$88 billion (Table 3). This represented
approximately 2% of the GDP in the Community.

These overall increases in the telecommunications
penetration, investment and revenues, however, can be
misleading. On the one hand they represent efforts to catch
up with the United States and Japan by bringing the
Community into the information age. On the other hand,
these efforts developed largely through a national, rather
than Community-wide, focus. Most services and equipment
were provided on a national basis under strict monopoly
regimes. Therefore, technology changed slowly and was
depreciated over long periods, usually 20 years or more.

In a nationally fragmented environment protected from
the operation of market forces, the costs of advancing
telecommunications were higher than otherwise could have
been achieved. In the short term the costs of ”non-Europe"

‘were higher prices for telephone introduction and the

 

298See Herbert Ungerer & Nicholas P. Costello,
Telecommunications in Europe 21-22 (1988).

115

Table 2

Telecommunications Investment, 1978-1989

(1987 US$m adjusted for inflation and exchange rates)1

 

 

Countrv 1978 1983 1989
Belgium 552.77 580.70 593.48
Denmark 413.46 341.64 440.29
France 6,537.30 5,035.40 4,688.75
Germany FR 4,782.34 6,684.31 8,460.40
Greece 205.98 373.07 251.01
Ireland 165.35 313.91 200.55
Italy 4,202.08 4,237.86 6,708.80
Luxembourg 33.63 14.78 37.65
Netherlands 799.28 597.17 1,005.73
Portugal 125.05 224.12 546.74
Spain 1,832.59 1,626.75 3,839.17
United Kingdom 2,346.76 2,821.64 3,813.65
Total 21,996.59 22,851.35 30,586.22
Increase

1978-1989: 39%

 

Source: OECD

1. Although Greece did not join the EC until 1981 and Spain
and Portugal did not join until 1986, data for those Member
States is included for the entire period for the sake of
continuity.

 

116

Table 3

TOIOOOII‘HIAOCEAODI ROVOIIIIOI 19 89

Telecom 1989 Revenue per Telecom as

 

 

COUNTRY Revenues Mainline 1989 percent of GDP
(US$m) (US$m)

Belgium 2,140.00 570.99 1.41
Denmark 1,946.24 683.37 1.85
France 16,316.14 605.59 1.72
Germany FR 19,906.76 700.94 1.66
Greece 992.35 262.08 1.84
Ireland 967.94 1,071.92 2.96
Italy 13,901.77 653.72 1.61
Luxembourg 120.40 682.69 1.82
Netherlands 3,969.83 593.31 1.76
Portugal‘ 940.52 452.15 2.03
Spain 6,122.85 519.01 1.63
United

__Kingggm1. 220.819.97 1820.88 2.50
Total 88,144.77 635.55 1.70

 

Source: OECD
1.1988 Data.

 

117
delayed introduction of new services that often could be
offered only on a national basis because of non-harmonized
standards.299 In the longer term, however, the costs of
”non-Europe" were higher. The fragmented market structure
of the Community made it difficult to achieve cost-
efficiency and take advantage of the economies of scale a
larger market could offer. Without a Community-wide
initiative these problems could only become worse with the
increased integration of computers with telecommunications,
a situation characterized by rapid innovation, expanded
service offerings, dynamic markets and aggressive

international competition.

B. The Indirect Role

The shift to a more service-oriented economy and the
advent of computer integration has led to wider applications
of telecommunications in various industries. Of course,
not all firms can add value through the use of
telecommunications because some industries, such as banking,
insurance, manufacturing and travel, are simply more

telecommunications-intensive than others. However, as

 

299Fora detailed.discussion of the costs of non-Europe in
the telecommunications sector, see Jurgen Muller, The Benefits
of Completing the Internal Market for Telecommunication
Equipmentcand Services in the Community (1988).

118

economies become more service oriented, the derived
demand3°° for telecommunications in business should continue
to increase. Thus, the use of telecommunications has an
indirect but positive effect on the economy, adding value to
firms by facilitating certain operations or processes, thus
leading to improvements in information management and
increased productivity and competitiveness.301

A primary use for telecommunications is for information
management. Information is important in business because
managers control businesses through the use and flow of
information. Telecommunications technologies provide means
to collect, store, retrieve and manipulate the information
necessary for a firm to be competitive. The continuing
globalization of production processes and markets has made
the efficient management of information more vital. In
addition, new concepts in manufacturing, such as flexibility
and variability, make managing information more difficult
and necessary. Terms of trading between firms can also
improve through the timely flow of commercial information.

Telecommunications technologies also help firms reduce

costs by improving logistics. Better communication helps

 

300A derived demand is a demand for sources that are
inputs for production processes. See Cristiano Antonelli,
Information Technology and Derived Demand for
frelecommunications Services in Manufacturing, 4 Information
JEconomics and Policy 45 (1989/90).

3‘”See id.; Rob van Tulder & Gerd Junne, European
Multinationals in Core Technologies 1-26 (1988) ; and Frederick
Williams, The New Telecommunications 3-57 (1991) .

119

firms react more quickly to market developments, directing
workers to where they are most needed. It also helps
facilitate just-in-time delivery, thereby saving costs
related to raw materials and reducing inventories. In
addition, when information is easily accessible, questions
can be answered and problems can be resolved more quickly, 3
thus allowing management to intervene directly to reduce
costly slowdowns, interruptions or unwanted developments.

Because one of the basic functions of

 

telecommunications is to overcome distance, its use allows
firms to save costs through decentralized operations.
Satellite offices and plants and research and development
centers can all be linked through networks. This allows
firms to transmit information from one location to another
rather than transporting goods or people, thus saving time
and costs associated with shipping, commuting and energy.
Any disadvantages related to decentralized operations can
also be overcome with telecommunications, which allows firms
to exert control from a distance.

Problems related to time can also be overcome.
Capacity within units of time can be extended through high-
speed transmission. Networks allow the processing of
information in real time, which allows several users
simultaneous access to various data and network

functions.3m Store-and-retrieve systems such as electronic

 

3mSee Nora & Minc, supra note 294, at 13, 174.

120
mail allow for operations in delayed time. Finally, the use
of automated systems through telecommunications integration
in manufacturing processes allows work to occur around the
clock.

These varied uses of telecommunications at the firm
level improve information management and logistics and help
overcome problems associated with distance and time. The
resulting decreases in costs and increases in productivity
improve the overall operations of firms by increasing the
ratio of costs to returns, leading to greater profits and
competitiveness. This leads to a positive albeit indirect
effect on the economy through the use of telecommunications

at the firm level.

C. Conclusion

Throughout the 19803 telecommunications and information
technology had become increasingly important to the economic
development of the Community. However, in order to take
full advantage of the economic benefits offered by
telecommunications and reduce the costs of non-Europe,
changes in policy in the Member States were necessary.
Divisive nationalistic approaches would only continue to
fragment the market and isolate firms, thus weakening
efforts by the Community to not only close the gap between

it and the United States and Japan, but to achieve

121
Community-wide economic integration as well. Therefore,
concerted action in telecommunications was necessary for the
Community to meet both the external economic and
technological challenge and the greater, though self-
imposed, challenge of establishing a single market.

The impetus to develop a Community-wide
telecommunications policy was based on the rapid
technological progress in information technologies,
particularly by companies such as IBM.303 Although early
policy making efforts primarily involved data processing,
the essential issues addressed were the same: creating a
homogeneous market through harmonizing standards and public
procurement policiesu“” .After studying the recommendations
made in the Dublin Report, the Commission issued a follow-up
report?” one year later calling on the Council to develop a
comprehensive strategy to meet the challenge of the new
technologies. Drawing together the various policies
developed in the 19703, the Commission proposed lines of

action with three principle aims: 1) initiating measures to

 

303See Community Policy for Data-Processing, COM(75)467
final at 3; Eur. Parl. Doc. (No. 153) 26 (1974).

30‘For a discussion of the history of Community policy
making in data processing, see Thomas J. Ramsey, Europe
Respond's to the Challenge of the New Information
Technologies: A Taleinformatics Strategy for the 19803, 14
Cornell Int'l L.J. 237 (1981).

30“See New Information Technologies: First Commission
Report, COM(80) 513 final [hereinafter First Commission
Report].

 

122
facilitate the introduction of new technologies, 2)
establishing a uniform Community market by encouraging
common standards and 3) strengthening European industrial
capacity in the field.""5 However, despite the consensus on
the future importance of telecommunications, policy
development moved slowly until 1983 when the Commission
created the Task Force on Information Technology and
Telecommunications.

The framework of the approach to telecommunications
policy was finally laid in the 1984 Community Action Program
on telecommunications,” which the Commission drafted with
the assistance of the Senior Officials Group on
Telecommunications (SOG-T), a group of representatives from
the Member States that advised the Commission on all aspects
of telecommunications policy. In the action program the
Commission identified four major handicaps inhibiting the
development of telecommunications in the Community:

- compartmentalized markets which stunt supply
and demand;

- the uncertainty of carriers and companies over
what development strategies to put in hand;

- weaknesses in the fundamental technologies of
telecommunications;

- backwardness of less favoured areas in respect
of networks, equipment, and advanced

 

30“Id. at 3.

307See 1984 Community Action Program, supra note 15.

 

123
telecommunications services.308
The Commission requested that the Council approve the
implementation of a Community program to overcome these
handicaps.309
The Council acted quickly. Later that same year, on
the basis of the recommendations of the Commission, the
Council approved a program for

(a) the creation of a Community market for
telecommunications equipment and terminals...;

(b) improving the development of advanced
telecommunications services and networks...;

(c) improved access for less favored regions of
the Community...to the development of advanced
services and networks; [and]
(d) coordination of negotiating positions within
the international organizations dealing with
telecommunications....”°
Thus, the way was paved for the goals for telecommunications

to be translated into active policy.

 

30"Id. at 14.

309The Commission requested that the Council "approve the
implementation of a Community programme, aimed at creating a
consolidated European ‘telecommunications territory, which
would giver both carriers and industry the benefits and added
dimension of working on the Community-wide scale, and would
put at users' disposal the services essential to promote
competitiveness...." Id. at 20.

3”Minutes of the 979th meeting of the Council, 17 Dec.
1984.

 

CHAPTER VI

DEVELOPING TELECOMMUNICATION POLICY
IN THE EUROPEAN COMMUNITY

By approving the 1984 Community Action Program the
Council set in motion a telecommunications policy program
that soon accelerated.1033" Substantial progress was made
between 1984 and 1987, during which time the Council took
several actions. Then in June 1987, the Commission issued a
Green Paper on telecommunications,312 which included ten
proposed positions aimed at improving the infrastructure,
services and competition in the sector. The Green Paper
launched a Community-wide debate on the future regulatory
regime for telecommunications and resulted in several new
directives issued by Community institutions. This chapter
reviews the major telecommunications legislation issued by
the Community since the approval of the 1984 Community

Action Program.

 

3"The policy work in the telecommunication sector was
part of a more concentrated effort toward establishing the
single market officially expressed in 1985, when Lord
Cockfield, the Commissioner responsible for the internal
market, presented the White Paper to the European Council,
which was later implemented in part by the Single European
Act" See supra notes 11-13 and accompanying texts One of the
areas addressed in the White Paper is telecommunications, and
the point is made that establishing a single internal market
requires telecommunications networks with common standards at
the Community level.

312See supra note 19.

124

 

125

A. Council ACtiOl‘lS November 1984-June 1987

Between November 1984 and June 1987, Community
telecommunications policy development progressed rapidly.
The Council issued nine recommendations, decisions
regulations and directives in the areas it had approved from
the 1984 Community Action Program (Figure 5). The
legislation mainly concerns telecommunications standards,
although the Council also addressed research and development

programs and procurement contracts.

1. Telecommunications Standards

Much of the Community action taken during the mid-19803
in the area of technical standards involved developing the
framework of cooperation between the Community and various
standards organizations, in particular the CEPT.313 131
November 1984, the Council issued a general recommendation
addressed to the Member States asking that future new
services be introduced on the basis of common, harmonized

standards determined through the CEPT and other standards

 

313Although the CEPT had been working in the area of
standards since 1959, the standards it adopted were not
mandatory. As a result the Member States often adopted
different standards, usually taking into consideration those
of favored national industries and equipment suppliers.

126

Council Recommendation of 12 November 1984 concerning the
Implementation of Harmonization in the Field of
Telecommunications, 1984 0.J. (L 298) 49.

Council Recommendation of 12 November 1984 concerning the
First Phase of Opening Up Access to Public
Telecommunications Contracts, 1984 0.J. (L 298) 51.

Council Decision of 25 July 1985 on a Definition Phase for a
Community Action in the Field of Telecommunications
Technologies--R&D Programme in Advanced Communication
Technologies for Europe (RACE), 1985 0.J. (L 210) 24.

Council Directive of 24 July 1986 on the Initial Stage of
the Mutual Recognition of Type Approval for
Telecommunications Terminal Equipment, 1986 0.J. (L 217) 21.

Council Regulation of 27 October 1986 Instituting a
Community Programme for the Development of Certain Less-
favored Regions of the Community by Improving Access to
Advanced Telecommunications Services (STAR) Programme, 1986
0.J. (L 305) 1.

Council Decision of 22 December 1986 on Standardization in
the Field of Information Technology and Telecommunications,
1936 0.J. (L 36) 31.

Council Recommendation of 22 December 1986 on the
Coordinated Introduction of the Integrated Services Digital
Network (ISDN) in the European Community, 1986 0.J. (L 382)
36.

Council Recommendation of 25 June 1987 on the Coordinated

Introduction of Public Pan-European Cellular Digital Land-
based Mobile Communications in the Community, 1987 0.J. (L
196) 31.

Council Directive of 25 June 1987 on the Frequency Bands to
be Reserved for the Coordinated Introduction of Public Pan-
European Cellular Digital Land-based Mobile Communications
in the Community, 1987 0.J. (L 196) 85.

Figure 5

Council Actions Taken November 1984-June 1987

127

organizations.314 The recommendation also requests that
from 1986 onwards the telecommunications administrations
(PTTs) take into account the recognized Community standards
when ordering digital transmission and switching systems.”5
The purpose of the recommendation is to help establish
common guidelines for the technological innovation necessary
for creating a dynamic Community market for
telecommunications equipment and harmonized telematic
services."6

A program for work on common standards specifications
(corresponding to normes Européenes de telecommunication
(NET3)) by the CEPT and their mutual recognition is set
forth in the Council directive issued in July 1986 regarding
the initial stage for mutual recognition of type approval
for telecommunications terminal equipment.”7 In:
particular, that directive requires the Member States to

”implement the mutual recognition of the results of tests of

 

31‘Council Recommendation of 12 November 1984 concerning
the Implementation of Harmonization in the Field of
Telecommunications, 1984 0.J. (L 298) 49, para. 1-2
[hereinafter Harmonization Recommendation] . See supra pp. 87-
88.

315533 Harmonization Recommendation, supra note 314, para.
3 .

3“‘Id. Recitals.

317Council Directive of 24 July 1986 on the Initial Stage

of the Mutual Recognition of Type Approval for
Telecommunications Terminal Equipment, supra note 21.

128
conformity with common conformity specifications for mass-
produced telecommunications terminal equipment. ”3“ The
mutual recognition procedure requires the CEPT to draw up
NETs and designate the testing laboratories, or other
competent authorities, approved to issue conformity
certificates verifying that terminal equipment conforms to
the NETs. Such certificates must then be recognized
throughout the Community, thereby foregoing the need to test
equipment for type approval in each Member State in which it
is marketed.319 Thus, the directive essentially explains in
more detail part of the authority of the CEPT to determine
Community technical standards.

In a decision issued in December 1986, the Council
recognized the need for common standards in the field of
information technology--in particular computer systems
components and software}20 The decision also covers
functional specifications for services offered over the
public networks for the exchange of information and data
between information technology systems.321 The decision is

intended to promote common standards developed by the

 

3“‘Id. art. 1.
319Id. art. 1 and art. 2, para. 16.
320Council Decision of 22 December 1986 on Standardization

in the Field of Information Technology and Telecommunications,
1936 0.J. (L 36) 31.

321Id. art. 3 and 5.

 

129

standards organizations and as such, complements the
directive on mutual recognition for type approval of
terminal equipment.322

The Council also has issued recommendations in more
specific areas, such as integrated services digital networks
(ISDN)323 and cellular mobile communications.“ Each
recommendation outlines a plan for the coordinated
introduction of the technology into the Community and
recommends that the Member States work within the CEPT to
harmonize standards. In tandem with the recommendation
regarding cellular mobile communications the Council issued
a directive requiring the Member States to reserve certain
frequency bands for cellular digital mobile

communications.”5

 

322Thedecision specifically states that it does not cover
the common technical specifications for terminal equipment
that are covered in ‘the. directive 'regarding’ the :mutual
recognition of type approval for terminal equipments .Id. art.
3.

33833 Council Recommendation of 22 December 1986 on the
Coordinated Introduction of the Integrated Services Digital
Network (ISDN) in the EuropeanLCommunity, 1986 0.J. (L 382) 36
[hereinafter ISDN Recommendation).

32“See Council Recommendation of 25 June 1987 on the
Coordinated Introduction of Public Pan-European Cellular
Digital Land-based Mobile Communications in the Community,
1987 0.J. (L 196) 81 [hereinafter Cellular Mobile
Recommendation].

32”See Council Directive of 25 June 1987 on the Frequency
Bands to be Reserved for the Coordinated Introduction of
Public Pan-European Cellular Digital Land-based Mobile
Communications in the Community, 1987 0.J. (L 196) 85.

130

2. Research and Development Programs

In addition to concentrating on standards
harmonization, in the mid-19803 the Council also initiated
several research and development programs dealing with
telecommunications. In a decision issued in July 1985, the
Council initiated the definition phase of the R & D Program
in Advanced Communications Technologies for Europe
(RACE) .32“ The definition phase of RACE was to consist of
exploration projects in integrated broadband
communicationstfl7 In addition, the Council issued a
regulation initiating a Community program for developing
improved access to advanced telecommunications services in
the less-favored regions of the Community (STAR Program),328
in Greece, Ireland, Northern Ireland and Portugal. The
objective of the STAR Program was to integrate those areas

into the advanced telecommunications networks in the

 

326See Council Decision of 25 July 1985 on a Definition
Phase for a Community Action in the Field of
Telecommunications Technologies--R&D Programme in Advanced
Communication Technologies for Europe (RACE), 1985 0.J. (L
210) 24; Ungerer & Costello, supra note 298, at 153-57.

327Id. art. 2.

328See Council Regulation of 27 October 1986 Instituting
a Community Programme for the Development of Certain Less-
favored Regions of the Community by Improving Access to
Advanced Telecommunications Services (STAR) Programme, 1986
0.J. (L 305) 1; Ungerer & Costello, supra note 298, at 158-60.
The STAR Program is funded through the European Regional
Development Fund.

 

131

Community through investment projects.329

Both the RACE and the STAR programs are related to the
framework program for research and technological development
established under the Single European Act.33° Also part of
the framework program are the second phase of the European
Strategic Program for Research and Development in
Information Technology (ESPRIT) and various programs
regarding the applications of information technology, such
as the pilot phase of the program in Advanced Informatics in
Medicine in Europe (AIM) .3” Together these programs
represent the legitimization of R 8 D within the Community

system.

 

329Id. art. 1 and 2.

330The Council approved the budget for the framework
program in July 1987. See Council Decision of 28 September
1987 Concerning the Framework Programme for Community
Activities in the Field of Research and Technological
Development, 1987 0.J. (L 302) 1. For a discussion of the
various R 8 D projects involving telecommunications, see
Ungerer 8 Costello, supra note 298, at 172-83.

331See Commission Proposal for a Regulation on Community
Action in the Field of Information Technology and
Telecommunications Applied to Health Care--Pilot Phase,
cou(37)352 final.

 

132

3. Procurement Contracts

In November 1984, the Council issued a recommendation
regarding public telecommunications contracts.332 According
to the recommendation Member State governments asked to
ensure that their telecommunications administrations allow
companies from other Member States to tender bids for
various equipment contracts, including those for telematic

terminals, switching and transmission equipment.333

B. The Green Paper on Telecommunications

Despite the progress made regarding the 1984 Community
Action Program, more wide-sweeping changes in the regulatory
environment were necessary before the far-reaching effects
of telecommunications would help the Community meet its
established goals. To that end the Commission issued a
Green Paper in June 1987 addressing the future regulatory
environment of telecommunicationsfin‘ The Commission issued
the Green Paper "to initiate a common thinking process

regarding the fundamental adjustment of the institutional

 

332See Council Recommendation of 12 November 1984
concerning the First Phase of Opening Up Access to Public
Telecommunications Contracts, 1984 0.J. (L 298) 51.

333Id. para. 2-3.

33‘See Green paper, supra note 19.

 

133
and regulatory conditions which the telecommunications
sector now faces."”5 This process was conceived as a
consultative one that would build on the consensus achieved
in the 1984 Community Action Program.336 It would take into
account the views of all parties concerned--Community
institutions, PTTs and recognized private operating
agencies, industry representatives, users, trade unions and
other organizations with interests in the area--and identify
common positions, analyze common objectives and examine the
external problems posed by the world telecommunications
market.” More than forty-five organizations would
eventually participate in the process.

The importance of the telecommunications sector to
future Community development is reiterated at the beginning
of the Green Paper.338 In general, the thrust of the Green
Paper proposes increased competition in a Community-wide

market in order to fully develop the potential of

 

3351d. at 10.
336Id. at 19.
3”Id..

338The Commission stated that "a technically advanced,
Europe-wide and low cost telecommunications network will
provide an essential infrastructure for improving the
competitiveness of the European economy, achieving the
internal market and strengthening Community cohesion--which
constitute priority Community goals reaffirmed in the Single
European Act. Telecommunications have a great influence not
only on services in general, such as financial services,
transport and tourism, but also in trade in goods and on
European industrial cooperation.” Id. at 9.

 

134
telecommunications. To that end the Commission identifies
three tasks the Community must perform:

1) creating the necessary European scale and
dimension in the sector;

2) avoiding the creation of new barriers within
the Community during the adjustment of
regulatory conditions; and

3) removing existing barriers in the course of the
adjustment.339

These tasks involve restructuring the telecommunications
sector in the Member States to take advantage of Community-
wide economies of scale. In turn, the tasks are related to
the general objectives the Commission implies throughout the
Green Paper:

1) creating a common market in terminal equipment
in order to ensure broad choices for users;

2) creating a common market in services to develop
the infrastructure necessary to achieve the
overriding objective of the 1992 market; and
3) creating a common market in network equipment
to assure the Community's future position in
information technology."0
These objectives involve the close relationship between the
telecommunications sector and establishing the single
market.
The Commission sets out ten proposed positions

regarding issues that the Commission believes must be

resolved at the Community level for all Member States

 

3”Id. at 10-11.

3“"See id., Figure 13.

135
(Figure 6).’" The proposed positions deal with a number of
areas, including safeguarding the ability of the
telecommunications administrations (PTTs) to develop
networks and services (Positions A and B), opening the
market for services and terminal equipment (Positions C, D,
E and F), creating the regulatory dynamics for an open
market (Position G), fairness of competition (Positions H
and I) and the external Community position in international
telecommunications regulation (Position J). In the ten
proposed positions the Commission tries to balance the
responsibilities and needs of the PTTs with the requirements
for developing competition in the sector and establishing
the single market.

After receiving comments on the Green Paper from
concerned parties, in February 1988 the Commission further
outlined its program of action for the progressive opening
of the Community telecommunications market to

competition."2 The Commission established priorities

 

3“Id. at 184. Issues to be dealt with at the national
level are left for the Member States to decide individually.
Such issues include the status of telecommunications
administrations best suited for a developing competitive
market, the method of financing the telecommunications
administrations and their employment relations concerns. Id.

3”See Towards a Competitive Community-wide
Telecommunications market in 1992--Implementing the Green
Paper on the Development of the Common market for
Telecommunications Services and equipment--State of
Discussions and Proposals by the Commission, COM(88) 48.

136

Member State telecommunications administrations (PTTs)
to continue to have exclusive rights to provide and
operate the network infrastructure, with the possible
exception of two-way satellite communication.

PTTs to continue to have exclusive rights to provide
certain basic services, especially voice telephony.

Free and unrestricted provision of all other services,
including value-added services, within and between the
Member States.

Strict requirements regarding standards for the network
infrastructure and services provided by the PTTs to
maintain or create Community-wide inter-operability,
otherwise known as open network provision (ONP).

Clear definition in directives of the general
requirements imposed by PTTs on providers of competitive
services for use of the network, including definitions
regarding network infrastructure provision.

Free and unrestricted provision of terminal equipment
within and between Member States subject to type
approval.

Separation of the regulatory and operational activities
of PTTs to avoid conflicts of interest.

Strict review of commercial activities under Article 90
of the EEC Treaty and the competition rules.

Strict review of private service providers in the
newly liberalized sectors under the competition rules.

Full application of the Community common commercial

policy to telecommunications, particularly to build up a

consistent Community position for GATT negotiations.
Figure 6

Proposed Positions of the Green Paper

137
proposed positions in the Green Paper and announced a
schedule of planned measures for their implementation.“3
On June 30, 1988, the Council issued a resolution announcing
its support for the major policy objectives outlined by the

Commission.“‘

C. Implementing the Green Paper

1. Competition in Terminal Equipment

After outlining its policy program the Commission
wasted little time before taking action. Even before the
Council announced its approval of the program--which was not
required--the Commission issued its directive on competition
in the market for terminal equipment (Terminal Equipment
Directive) .3“ The Commission issued the directive under
Article 90(3) of the EEC Treaty, which requires the
Commission to ensure the application of the competition
rules and issue directives or decisions to the Member States

whenever necessary.” France and other Member States

 

3”m .

3“See Council Resolution of 30 June 1988 on the
Development of the Common Market for Telecommunication
Services and Equipment up to 1992, 1988 0.J. (C 257) 1.

3“See Terminal Equipment Directive, supra note 21.

346See EEC Treaty, supra note 1, art. 90(3). The Court of
Justice had already held that a public body such as a
telecommunications administration was considered an
undertaking engaged in commercial activity and therefore
subject to the Community competition rules. See Case 41/83,

138

challenged the validity of the directive,” but the Court
of Justice rejected their application for the most part,
holding that the Commission had authority under Article
90(3) of the EEC Treaty to issue the directive.“8

The Terminal Equipment Directive is intended to correct
the monopoly control Member States have extended beyond
network infrastructure to the supply of user terminal
equipment for connection to the network.349 The Commission
believes that the extension of monopoly control to terminal
equipment disadvantages suppliers of equipment from other
Member States and restricts consumers from renting or
purchasing cheaper equipment.”0 Because the Commission
considers such control incompatible with the EEC Treaty, it
issued the Terminal Equipment Directive to abolish such
control and to introduce greater competition in the market

in terminal equipment. The Commission seeks to accomplish

 

Italy v. Commission, 2 C.M.L. Rep. 368 (1985) (British Telecom
judgment). Article 90(3) does not require the Commission to
consult other Community institutions before issuing a
directive.

3"’See Case C-202/88, France v. Commission, Proceedings of
the Court of Justice and the Court of First Instance of the
European Communities, Mar. 11-22, 1991, No. 07-91, 5.

3“Id. However, the Court did declare the directive void
in two respects: (1) in so far as it applied to special, but
not exclusive, rights and (2) in so far as it applied to the
termination of state contracts. Id..

349See Terminal Equipment Directive, supra note 21,
Recitals, para. 1.

3"‘oId. para. 5.

139

this goal, in part, by the following means:

1)

2)

3)

4)

5)

6)

All exclusive rights granted by Member States
to a public or private body for the
importation, marketing, connection, bringing
into service or maintenance of
telecommunications terminal equipment are
abolishedf“1

Economic operators must have the right to
import, market, connect, bring into service or
maintain terminal equipment;”

Users must have access to new public network
termination points, and the physical
characteristics of such points must be
published;353

A body independent of public or private
telecommunications monopolies must have the
responsibility for drawing up all technical
specifications and type approval procedures
for terminal equipment;”‘

Member State PTTs must allow customers to
terminate, with maximum notice of one year,
leasing or maintenance contracts which concern
terminal equipment.”5

Member States must submit an annual report to
the Commission regarding compliance with the
Directive.”‘

The Terminal Equipment Directive implements proposed

 

3"Id. art. 2. The text of Article 2 also refers to
special rights. However, the Court of Justice declared the
Directive void for lack of reasoning in so far as it refers to
special rights. See Case C-202/88, supra note 347.

3”Id. art. 2.

3”Id. art. 4.

3“Id. art. 6.

3”Id. art. 7.

3"“Id. art. 9.

140
positions from the Green Paper?” Before the Directive was
issued, Member State PTTs had distorted the market for
terminal equipment through their exercise of monopoly
control. However, their assent to developing a more open,
Community-wide terminal equipment market was evidenced in
the Council resolution approving the Green Paper
objectives.”a Therefore, although the Commission issued
the Terminal Equipment Directive without having consulted
other Community institutions, the Member States had had

input into its development.

2. Competition in Services

The Commission complemented its Terminal Equipment
Directive by issuing a directive on competition in the
market for telecommunications services in June 1990
(Services Directive) .359 Like the Terminal Equipment
Directive, the Services Directive was issued under Article
90(3) of the EEC Treaty. The Services Directive opens up
value-added services to competition immediately and basic

data transmission beginning January 1, 1993. Telex, mobile

 

3”See Figure 6, supra, Position F and H.

3”See Council Resolution, supra note 344, para. 4. The
Council Resolution was adopted by a Technical Council
comprised of the telecommunications ministers of the Member
States.

3”See Services Directive, supra note 22.

141
radiotelephony, paging and satellite services are excluded
from the Services Directive.360 In addition, voice
telephony is excluded on the grounds that opening it up to
competition might threaten the financial stability of the
PTTs . 3“
The Services Directive promotes the goal of opening up
services to competition in the following ways:
1) Special and exclusive rights for providing
services to the general public other than
voice telephony are to be abolished;362
2) Technical interfaces providing information
necessary to private operators must be
published;363
3) All restrictions on the processing of signals
before and after their transmission via the
public network must be abolished;“‘
4) A body independent of the PTTs must carry out
the grant of operating licenses, the control

of type approval and other regulatory
activities ;”5 and

 

360Id. art. 1, para. 2.

361Id. Recitals, para. 18; art. 2. Under Article 90(2) of
the EEC Treaty, "[u]ndertakings entrusted with the operation
of services of general economic interest. or having' the
character of a revenue-producing monopoly” may be excluded
from the Community competition rules where their application
would obstruct the performance of such undertakings. The
Commission recognized this provision in noting that revenues
from voice telephony provide substantial financial resources
for the development of the network. Id. Preamble, para. 18.

362Id. art. 2.
363Id. art. 3.
3“‘Id. art. 6.

3“Id. art. 7.

142

5) Long-term contracts should be allowed to be
terminated . 3“

Although the Services Directive has not been challenged,
the judgment of the Court of Justice regarding the Terminal
Equipment Directive” is relevant to the validity of the
provisions regarding special rights and the termination of
contracts.

Like the Terminal Equipment Directive, the Services
Directive implements policy positions the Commission
proposed in the Green Paper.“58 Before the Services
Directive was issued Member State PTTs had distorted the
market for services through their exercise of monopoly
control. A more competitive market in services was
necessary to achieve the objective outlined in the Green
Paper and establish the single market. At the same time
public service obligations had to be respected, so the PTTs
were allowed to retain their monopoly with respect to voice
telephony. Although the Directive requires a separation of
the regulatory and operational functions of the PTTs, such a
separation may amount to more a matter of form than of
substance. The same civil servants may still be deciding

such matters, although under the name of a new organization.

 

366Id. art. 8.
36"’See supra notes 347-48 and accompanying text.

368See Figure 6, supra, Positions B, C, G and H.

143

3. Open Network Provision

The Services Directive is tied to the adoption of the
Open Network Provision Directive (ONP Directive) adopted by
the Council on the same day:*” 'The ONP Directive is a
framework directive concerning the ”harmonization of
conditions for open and efficient access to and use of the
public telecommunications networks. . . ."370 The conditions
must be based on objective criteria and be transparent,
published and non-discriminatory?” A Member State may
limit access to one of its public networks or services only
for reasons regarding the security of network operations,
the maintenance of network integrity, the interoperability
of services or the protection of data.372

As a framework directive the ONP Directive provides for
the development of further rules and principles. ONP
conditions are to be defined in stages373 from the following
areas: leased lines, packet- and circuit-switched data

services, ISDN, voice telephony, telex and mobile

 

369See ONP Directive, supra note 24.
370Id. art. 1.

371Id. art. 3, para. 1.

372Id. para. 2.

3”Id. art. 4.

144
services.374 The Commission may call upon the ETSI to draw
up European standards as a basis for harmonized technical
interfaces and service features related to ONP.”’

The ONP Directive established a framework for
implementing one of the proposed positions in the Green
paper.“5 Issued under Article 100a of the EEC Treaty,
which requires the cooperation procedure, the ONP Directive
is the work of several Community committees and
institutions. In general the text of the ONP Directive
follows the substance of the Commission proposalJ’" The

Parliament prepared Opinions after both its readings378 and

 

37‘Id. Annex I. A timetable for the adoption of specific
directives in these areas is set forth in Annex III. The
Commission has already proposed a directive on the application
of ONP to leased lines, including provisions regarding the
disclosure of information with respect to leased lines and
supply and usage conditions. See Proposal for a Council
Directive on the Application of Open Network Provision to
Leased Lines, COM(91)30 final.

37sSee ONP Directive, supra note 24, art. 4, para. 4(c) .
”‘See Figure 6, supra, Position D.

’"See Proposal for a Council Directive on the
Establishment of the Internal Market for Telecommunications
Services Through the Implementation of Open Network Provision
(ONP), 1939 0.J. (c 39) 3.

378See Parliament Opinion on the Proposal for a Council
Directive on the Establishment of the Internal Market for
Telecommunications Services Through the Implementation of Open
Network Provision (ONP), 1989 0.J. (C 158) 300; Parliament
Opinion on the Proposal for a Council Directive on the
Establishment of the Internal Market for Telecommunications
Services Through the Implementation of Open Network Provision
(ONP), 1990 0.J. (c 149) 1.

 

145
the ESC also prepared an Opinion.379 However, the text of
the ONP Directive reveals that Council changed little from
the Commission proposal. Those changes that were made are

changes in of form rather than substance.380

4. Radio Paging :

In October 1990, the Council issued a directive

following the cooperation procedure, which designated the

 

frequencies to be reserved for pan-European land-based
public radio paging service (Radio Paging Directive).381
Issued under Article 100a of the EEC Treaty, the Radio
Paging Directive is designed to allow the effective
introduction of the European Radio Messaging System, an
advanced radio paging system specified by the ETSI.382
The Parliament and the ESC approved the proposal by the

Commission for the Directive, which simply lists the

 

”’See Economic and Social Committee, Opinion on the
Proposal for a Council Directive on the Establishment of the
Internal Market for Telecommunications Services Through the
Implementation of Open Network Provision (ONP), 1989 0.J. (C
159) 37.

380Such changes by the Council are not uncommon and
include renumber or reorganizing the articles in the
Commission proposal.

381See Council Directive of 9 October 1990 on the
Frequency Bands Designated for the Coordinated Introduction of
Pan-European Land-Based Public Radio Paging in the Community,
1990 0.J. (L 310) 28.

382Id. Recitals.

146

frequencies to be reserved.383

5. Full Mutual Recognition of Terminal Equipment

Given that the terminal equipment sector is so vital a

part of the telecommunications industry, the Community

- am IP‘LL a

institutions have paid particular attention to it in the

directives that implement the objectives of the Green Paper.

 

In April 1991, the Council issued a directive on full mutual g
recognition of terminal equipment (Full Mutual Recognition A
Directive) .3“ As of November 1992, the Full Mutual

Recognition Directive repeals the directive issued in July

1986 which introduced limited mutual recognition of type

approval for mass-produced telecommunications terminal

equipment.” Full mutual recognition will enable

manufacturers of terminal equipment to go through a single

equipment approval procedure common to all twelve Member

States which is conducted by a laboratory or certification

body on a Community list.386

The Full Mutual Recognition Directive applies to

 

383Id. art. 1-4.
384See Full Mutual Recognition Directive, supra note 21.
3“See supra Chapter V.

3“See Full Mutual Recognition Directive, supra note 21,
art. 2-3. Under the old system of mutual recognition for type
approval, a manufacturer wanting to market equipment various
Member States was required to go through a separate body in
each Member State.

147

terminal equipment intended to be connected to the
termination of a public telecommunications network or to
interwork with a public telecommunications network.” The
connection may be by wire, radio, optical or other
electromagnetic system.388 Member States are prohibited
under the Directive from restricting the free circulation
and use of terminal equipment that complies with the
provisions of the Directive.389 Of particular importance
are the essential requirements that terminal equipment must
satisfy:

1) user safety;

2) safety of employees of public
telecommunications operators;

3) electromagnetic compatibility;

4) protection of the public telecommunications
network from harm;

5) effective use of the radio frequency spectrum;

6) interworking of terminal equipment with public
telecommunications network equipment; and

7) interworking of terminal equipment via the
public telecommunications network
equipment . 39°
Member States must presume compliance with the essential

requirements regarding safety with respect to terminal

 

3”Id. art. 1, para. 2.
3‘““Id . .
3891a . art 0 5 0

3”Id. art. 4.

F1

148

equipment which is in conformity with the national standards
implementing the relevant harmonized standards determined by
standards organizations.391 Manufacturers may subject their
terminal equipment to either a type examination or a
declaration of conformity.392

Like the other directives, the Full Mutual Recognition
Directive implements a proposed position from the Green
paper.393 The Full Mutual Recognition Directive was issued
under Article 100a of the EEC Treaty, which requires the
cooperation procedure. After the Commission issued its
proposal for a directive,“ on its second reading the
Parliament proposed amendments to the common position of the
Council .395 However, those amendments amounted to changes
in form rather than substance. In its final draft of the
Directive the Council did not include any of the amendments

suggested by the Parliament. The ESC approved the proposal

 

391Id. art. 6, para. 1.
392Id. art. 9-12.

393See Figure 6, supra, Position F. The history of the
involvement of the Member States in policy making in the area
of mutual recognition of telecommunication terminal equipment
pre-dates the 1984 Community Action Program.

39‘See Proposal for a Council Directive on the
Approximation of the Laws of the Member States Concerning
Telecommunications Terminal Equipment, Including the Mutual
Recognition of Their Conformity, 1989 0.J. (C 211) 12.

3"SSee Decision on the Common Position Established by the
Council with a View to the Adoption of a Directive on the
Approximation of the Laws of the Member States Concerning
Telecommunications Terminal Equipment, Including the Mutual
Recognition of Their Conformity, 1991 0.J. (C 19) 88.

149

without suggesting any amendments.”°

6. Digital European Cordless Communications

In June 1991, the Council issued a directive, following
the cooperation procedure, which designated the frequencies
to be reserved for Digital European Cordless Communications
(DECT Directive)5”’ Issued under Article 100a of the EEC
Treaty, the DECT Directive is intended to allow the
coordinated introduction of the European cordless telephone
system developed by the ETSI.“ Like the Radio Paging
Directive, the DECT Directive is technical in nature and the
proposal of the Commission was approved by the Parliament

and the ESC before the Council issued the Directive.

 

396See Economic and Social Committee Opinion on the
Proposal for a Council Directive on the Approximation of the
Laws of the Member States Concerning Telecommunications
Terminal Equipment, Including the.Mutual Recognition of Their
Conformity, 1939 0.J. (c 329) 1.

39"’See Council Directive on the Frequency Band to be
Designated for the Coordinated Introduction of Digital
European Cordless Telecommunications (DECT) into the
Community, 1991 0.J. (L 144) 45.

398Id. Recitals.

.u 1._.__—'

150

D. Conclusion

Community policy development in the telecommunications
sector has been considered a success story399 and reflects
the importance of the sector in achieving the goal of
establishing the internal market. Opening up national
markets in terminal equipment and services to competition,
liberalizing procurement by the Member State PTTs and

harmonizing standards procedures should all help increase

 

demand for products and services. Although changes in 3
technology and the global market have spurred the need for
changes in telecommunications regulatory regimes, the
Community policy making system has been responsible for the
work necessary to surmount barriers to more fully realizing
the potential of telecommunications in the Community.

Since June 1987, all of the policy positions proposed
in the Green Paper have been enacted, either directly or
indirectly, at the Community level through the Terminal
Equipment Directive, the Services Directive, the ONP
Directive and the Full Mutual Recognition Directive. Such
swift enactment through processes that are often slow is
evidence of the assent of the Member States to the goals and
ideals expressed in those positions. Behind that assent,

however, is control. The Member States have retained a good

 

399See Economist Intelligence Unit, Special Internal
Market Report: Telecommunications, 4 European Trends 14
(1991).

151
measure of control in determining Community
telecommunications policy. Although their input is not
always obvious on the face of the Community documents and
legislation, it is inherent in the policy making processes
at all levels, from the pre-proposal stages in the working
committees and D63 to the final stages of implementation at
the national levels.“”

Evidence of Member State control in Community policy
making is most apparent in the final stage: implementing the
directives at the national level. The language of the
recent telecommunications directives i3 imprecise but makes
clear the policy goals to be achieved. Those directives
that require implementation through national measures401
clearly give the Member States that authority rather than
delegate any rule-making authority to the Commission.‘02
Critics of the directives note that change in the
telecommunications regulatory regimes at the national level

will not come easily, especially given the stake the PTTs

 

‘mSee supra, Chapter IV.

‘mOnly the ONP Directive and the Full Mutual Recognition
Directive require specific measures for implementation at the
national level. The two directives issued by the Commission,
the Terminal Equipment Directive and the Services Directive,
require the Member States and their PTTs to ensure fair
business practices in opening up the markets to competition.

‘mSee ONP Directive, supra note 24, art. 11; Full Mutual
Recognition Directive, supra note 21, art. 17.

152
have in their national markets.‘03 Thus, there is the
potential for the Member States to exert ultimate control by
interpreting the imprecise language of the directives to the

benefit of their national telephone monopolies.

 

“See Linda Bernier, Political Compromise May Tangle
Europe Telecom Deregulation, Electronic Business, Apr. 16,
1991, at 70.

 

CHAPTER VII

CONCLUSION

The unique qualities of the European Community
(Community) are apparent in its legal order and
institutions, but at its heart the Community remains
international, an organization of twelve different nation-
states. Although over time the Community has changed,
growing in size and enlarging its scope, its basis has
always been its Member States, without which there would be
no Community.

As the Community continues its path toward establishing
a single market, it continues to evolve from its inception
as a customs union to becoming a complete common market. It
engages in this process by working as a confederation in
which Community policy is determined as a collective but
implemented on the national level, in most cases,
individually. Although under the Community legal order
Community law has direct effect and supremacy over national
law, the Member States still retain a good measure of
control within that legal order. The Member States are not
only actively involved in the policy making processes that
determine what becomes Community law, but also in

specifically implementing and enforcing Community law at

153

home.

The Community has recognized the importance of the
telecommunications sector to its economic improvement and
future goals. Through a series of recent action programs,
research and development programs and, most importantly,
legislation the Community has taken affirmative steps to
translate Community goals into Community policy. However,
the effectiveness of that policy remains to be seen as the
Member States endeavor to implement it on the national level
and change business practices that have become habitual and
entrenched over the years. It is at this final stage of
telecommunications policy making that the Member States may
exert the most control in order to protect their PTTs and
national suppliers.

Telecommunications policy making in the Community is by
no means at an end and can provide sources for additional
research. Many more telecommunications directives are on
the way, particularly in the area of ONP. The specific ways
in which the Member States implement existing and future
directives can provide sources of both qualitative and
quantitative evidence regarding national control in the
telecommunications sector, especially where differences in
national implementation arise. In addition, future
developments in technology and in the political structure of
the Community might result in changes in the dynamics and

structure of the current policy making processes. Thus, the

154

control Member States currently enjoy in the Community

policy making might change with the Community.

155

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