Tag Archive: European Commission

Proposed Expansion of European Central Bank Power

The European Commission has called for a mass overhaul of the current banking system in the Eurozone. It involves the European Central Bank being allowed to monitor banks in each of the 17 countries that use the euro. This in an attempt to deal with the monetary crisis in the Eurozone.

The European Central Bank (ECB) was created in 1998 prior to the adoption of the euro as common currency for Europe.The ECB’s current role is setting interest rates and printing money, but this proposition would expand its power to allowing the institution to monitor banks more closely in their everyday business practices.  There are staunch supporters as well as those who oppose this proposal for many different reasons.

The opposition includes some non-Eurozone countries that are concerned with the effect that this banking union would have on their banks. For instance Sweden and Denmark are concerned with having to bail out weak Eurozone banks or having to relinquish some of their power to run their own banks. These non-eurozone countries do not want to weaken “national supervision”, and this banking union proposal has caused some countries to re-consider adopting the euro as currency. Moreover some EU officials are apprehensive about the ECB being able to dictate the direction of banking policy and legislation surrounding those policies, and whether or not expanding the powers will actually help.   Some member states want to “keep them {ECB} at arms length as it’s none of their business”.

In contrast some support the expansion of the ECB’s power because of the institutions budgetary reforms and steadfastness during the fiscal crisis.  For instance,  Jörg Asmussen believes that ECB’s approach was necessary but that there must be controls subject to parliamentary and judicial review, and that it’s difficult to have a common currency without common fiscal policies. In addition France’s Financial Minister, Pierre Moscovici, does not think issues surrounding the banking union will prevent the legislation from being passed before the end of this year.

Either way the heads of European Parliament and Council have to approve this legislation before any major changes can take effect, and it seems that this will be a hard fought battle whatever the outcome may be in the end.

The EU and Boardroom Gender Quotas

The EU plans to issue a proposal next month that would require European companies to appoint women to 40 percent of seats on supervisory boards by 2020. The proposal was made by Viviane Reding, the European Union justice commissioner. The law would apply to all listed companies with more than 250 employees and annual sales of more than 50 million euros ($63 million). Companies that fail to comply with the quotas will be subject to sanctions including fines and could be excluded from state aid and contracts. In 2011, Reding gave European companies a final opportunity to improve their records of gender imbalance in top management positions but there has been only marginal improvement.

In brief, the EU proposal aims to combat the significant gender imbalance that is still seen in many boardrooms across the EU. Specifically, the European Commission issued a report that demonstrated that just 13.7 percent of board seats in the EU belong to women. Furthermore, the report showed that there was only a 1.9 percentage point increase between October 2010 and January 2012. The report also noted that varying rates of improvement have led to highly divergent results within the EU. The legislation requires the approval from the EU’s 27 governments and the European Parliament to take effect.

The gender quota proposal has faced fierce criticism, mainly from conservative politicians and some major technology and manufacturing companies. France, the Netherlands, Italy and Spain have already introduced national quotas. However, Sweden and the United Kingdom are generally opposed to the proposal. For example, Marina Yannakoudakis, a Conservative member of the European Parliament who represents London, argues that the measure is “bad for genuine equality.” Yannakoudakis argues, “Imposing strict quotas, which are both arbitrary and artificial, cuts across the freedom of businesses to make their own decisions and the freedom of women to succeed on merit.”

It will be interesting to see how the EU faces challenges that the plan violates Article 16 of the EU Charter of Fundamental Rights which provides the freedom to conduct a business. However, one unnamed EU official notes that “companies would retain the freedom to choose among the best qualified executive directors to run day-to-day aspects of a business.” Another argument that opponents may consider is that the gender quota plan violates Article 21, a provision that explicitly prohibits any discrimination on the grounds of sex. However, this possible challenge will likely be rejected because Article 23 provides that “the principle of equality shall not prevent the maintenance or adoption of measures providing for specific advantages in favour of the under-represented sex.”

Supporters of the EU measure contend that now is the time to act and that self-regulation has not addressed the gender imbalance. Supporters argue that mandatory quotas are the only way to effectively address the systematic problem of women being underrepresented in management positions. Certain factors support the use of quotas, including: (1) women now have higher graduation rates than men in Europe but their professional careers continue to fall behind those of men; (2) women represent a growing underused pool of qualified workers, thus are an untapped potential for a poor economy; and (3) studies suggest a strong link between gender balance and professional performance. Indeed, supporters often cite Norway as a model of success for the advancement of women in business since the country instituted gender quotas several years ago. Before the Norwegian gender quota was put into effect, women occupied only 7 percent of seats on supervisory boards. Women in Norway now make up 42 percent of the board seats.

The Future of the EU and the Euro

According to German government sources, German Chancellor Angela Merkel seeks further reform of the Lisbon Treaty (“Treaty”).  Just last month, Merkel convinced her fellow European heads of state to explore the possibility of further economic integration within the EU.   One possible way of accomplishing this further integration, according to Merkel, is through limited Treaty changes.  The central theme of her proposed Treaty changes is to grant the EU institutions greater control over Member State budgets.

This control would be distributed among three of the EU Institutions: the Commission, Council, and the ECJ.  The Commission’s role would be strengthened through closer monitoring of Member States under the excessive deficit procedure.  Furthermore, the Member State would submit its draft national budget to the Commission who would then forward the budge to the Council with its recommendations.  The Council would then adopt an opinion on the budget before its adoption by the Member State’s legislative body.  However under TFEU Art. 288, a Council opinion is not binding on the Member State.  Merkel has also suggested the ECJ should monitor the Stability and Growth Pact (“SGP”) obligations that lead to the excessive deficit procedure.  Under this proposal, the ECJ would have the power to review the Member  State’s budget and possibly declare it null and void.

Merkel’s suggestion to grant the ECJ power to declare Member State’s budgets null and void has not been included in her proposals at the EU Summit.  The furthest EU involvement in Member State budgets under the current proposals involves modification of the Treaty to include sanctions for SGP breaches.  This could largely be attributed to a recent ruling by the German Constitutional Court on challenges to the Euro Rescue Package.  In its September 7th ruling, the Court found the current rescue package constitutional.  Yet the Court cautioned that the German Constitution requires full budget sovereignty be maintained through approval by the German Bundestag’s Budget Committee.  It is surprising that Merkel would even suggest such EU intervention into national sovereignty because it seems to be in direct conflict with her own nation’s constitution.  However with the current European debt crisis spreading that in turn leads to more requests for contributions from Germany, she could be just voicing the rising frustration of her countrymen and women.

The NCAA, College Sports, Student Athletes, and Improper Benefits: Analyzing the Issue from an EU Context

Recently, Yahoo Sports published an investigational report on Nevin Shapiro, a former booster with the University of Miami,  for giving “improper benefits” to at least seventy two student-athletes, high school recruits, and coaches for eight years. The article states that the administration knew about the recurrent infractions and yet, turned a blind eye to the problem citing Mr. Shapiro’s major contributions to the athletic department as the main reason. In a summer in which the National Collegiate Athletic Association (NCAA) is investigating a number of major athletic programs for violations, the enormity of the Miami situation strengthens the calls for NCAA reform. Yet, there is no consensus on specific reforms, where opinions run the gamut from enacting harsher penalties for repeat violators to paying student athletes for their services. But questions remain as to whether the NCAA needs major reform and what would be the consequences of reform.  If we look across the Atlantic, does the EU have a model that the US could copy or adapt in its search for reform?

The NCAA is an organization of higher education institutions and conferences of these institutions, whose policy is to maintain “a clear line of demarcation between intercollegiate athletics and professional sports”. Each NCAA Division is led by a presidential committee comprised of university presidents, whose goal is to “promote and develop educational leadership, physical fitness, athletics excellence and athletics participation as a recreational pursuit”. As delegated by its constitution, the NCAA is a supra-governing entity whose functions have been handed over by member universities and conferences, which historically have not been able to effectively discharge these functions alone.  Sports scandals seem ubiquitous in the U.S. Yet, in Europe, where sports seem just as popular, scandals seem nearly unheard of. So,  how does the EU regulate sport?

Before delving into the regulations, an understanding of sports in the EU warrants an introduction. As in the United States, universities in the EU do field teams in various athletic competitions but there is a low emphasis placed on the priority of the competition.  On par with the high level university competition in American football and basketball,  private teams/clubs in major sports such as football have developed a tiered professional feeder system. The clubs recruit  and contract with adolescents with professional potential, develop their talents, and possibly implement the recruits into their professional team. This system displays similarities to feeder systems we see in Major League Baseball and the National Hockey League .

So with this understanding, how does the EU regulate sport? Prior to the entry into force of the Lisbon Treaty, the EU had no explicit powers to regulate athletics. But, the European Court of Justice (ECJ) disagreed that sport was autonomous from EU oversight and viewed sport as being encompassed within the Treaty as an economic activity (See Walrave and Koch, Case 36/74 [1974] ECR 1405). In Union Royale Belge des Sociétés de Football Association ASBL v Jean-Marc Bosman, the ECJ recognized the fundamental right of movement of athletes in sport by invalidating a rule preventing a footballer from transferring to another club after his contract had expired without the consent of the original club (Case C-415/93 [1995] ECR I-4921). Yet, the ECJ has recognized that a sport does present a unique situation, where latitude must be given to the regulatory bodies in order to maintain effective competition and fairness in its administration. In Deliége v Ligue de Judo, the ECJ reasoned that when a national federation for a sport selects individuals for international competition, it may hurt the economic interests of those who were not selected but rules and criteria for selection are necessary in high level international competition (Cases C-51/96 & C-191/97 [2000] ECR I-2549). In Meca-Medina and Majcen v Commission, the ECJ upheld a two year ban on two swimmers for failing a drug test stating that even though the intent of a regulation is not economic, the true test is whether it exerts economic effects (Case C-519/04 P [2006] ECR I-6991). Yet, the ECJ recognized the special characteristic of sports by recognizing that adverse effects of doping penalties are inherent in the necessity of maintaining fairness in competition.

As of December 1, 2009, the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) granted sports formal status. Specifically, Article 165 of the TFEU stated that the EU “shall contribute to the promotion of European sporting issues, while taking account of the specific nature of sport, its structures based on voluntary activity and its social and educational function.” Article 165(2) aims to “develop[] the European dimension in sport, by promoting fairness and openness in sporting competitions and cooperation between bodies responsible for sports, and by protecting the physical and moral integrity of sportsmen and sportswomen, especially the youngest sportsmen and sportswomen.”

Being enabled by the rules as set forth by the treaties and the ECJ, the European Commission for sports published in 2007 a white paper containing a number of actions and justifications intended to guide its activities related to sports. This white paper presents an analysis of the broad impact that sports has on the EU and raises a number of issues of concern in sports such as the fundamental freedom of movement and the protection of minors.

What impact do these rules have on sport in the EU? It appears that controversies and regulations involving sports are placed under a balancing test, where the athletic economic and non-economic interests are weighed against the interest for fairness and openness in competition as well as the social functions that sport serves. These interests are not necessarily antagonistic and the uniqueness of sport does require a level of understanding that goes beyond economic effects, even though economic effects do play a strong role into the equation.

So within this paradigm, how would the EU handle the NCAA’s current predicament? Where should the balance lie between the economic interest of a student-athlete and the maintenance of fairness and openness in competition? Would the EU disagree with the NCAA absolute prohibition on “benefits” being given to student-athletes or would the EU view this as a protection on the interests of students from individuals such as Mr. Shapiro? We have to remember that the face of college sports has changed to a large extent, where major industries have developed around collegiate sports. One commentator claims that amateur college sport is now packaged and sold in a “professional” wrapping and potential reforms to the NCAA should account for this. How would the EU view this analysis? To this extent, what impact should the universities’ economic effects play into this balancing test? In particular, does a booster for a university inherently create a conflict of interest? Would forcing an athlete into a particular league violate the internal market of the EU or is this a protection of the moral integrity of the student-athletes? In the end, the NCAA system of regulation and sports regulation within the EU do not harmonize together in their specific function but from a policy context, a fresh look from another point of view may present new insight into a particularly complex problem.

Recent Proposal To Strengthen the Schengen Area

The Schengen area, which became effective in 1995, ensures that community citizens are afforded freedom of movement between Member States. The area creates one external border for immigration checks into the area using harmonized rules.  Internal border checks have been abolished in these areas.

Earlier this year, conflict arose when Italy gave travel papers and residence permits to Tunisian migrants. As a result, France placed police on the shared border with Italy and began to perform checks.  This created a debate about freedom of movement, and whether the border checks were in conflict with the goal of the Schengen area.

In response to the controversy, members of the European Commission will discuss a proposal on Friday, September 16, 2011 which will provide authorization for Member States to police borders for five days during emergencies only. It would also provide authorization for the European Commission to remove police borders after emergency action taken by Member States. Advocates of the proposal argue it would protect freedom of movement principles by restricting visceral national reactions and providing for a more measured and collective response.

Original members of the European community France and Germany, along with a newer member, Spain, issued a statement in opposition to the proposal. The concern raised in the  statement focuses on national sovereignty with respect to national security. The statement advocated the position that national security decisions should be localized with the Member States and their governmental processes.

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