FACTSHEETS

1. How the European

Union works

---1.1. Historical development of European integration.......................................... 3

------1.1.1. The First Treaties.............................................................................................. 3
------1.1.2. Developments up to the Single European Act............................................. 7
------1.1.3. The Maastricht and Amsterdam Treaties.....................................................12
------1.1.4. The Treaty of Nice and the Convention on the Future of Europe............ 16
------1.1.5. The Treaty of Lisbon...................................................................................... 21
---1.2. The European Union’s legal system and decision-making procedures........27
------1.2.1. Sources and scope of European Union law................................................ 27
------1.2.2. The principle of subsidiarity......................................................................... 34
------1.2.3. Supranational decision-making procedures............................................... 41
------1.2.4. Intergovernmental decision-making procedures.......................................47
------1.2.5. The budgetary procedure.............................................................................53
---1.3. European Union institutions and bodies.....................................................58
------1.3.1. The European Parliament: Historical background...................................... 58
------1.3.2. The European Parliament: Powers...............................................................63
------1.3.3. The European Parliament: organisation and operation............................. 69
------1.3.4. The European Parliament: electoral procedures........................................75
------1.3.5. European Parliament: relations with the national parliaments.................84
------1.3.6. The European Council................................................................................... 90
------1.3.7. The Council of the European Union............................................................ 98
------1.3.8. The European Commission......................................................................... 104
------1.3.9. The Court of Justice of the European Union.............................................111
------1.3.10. Competences of the Court of Justice of the European Union..............118

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------1.3.11. The European Central Bank (ECB)........................................................... 125

------1.3.12. The Court of Auditors................................................................................130
------1.3.13. The European Economic and Social Committee.................................... 135
------1.3.14. The European Committee of the Regions...............................................140
------1.3.15. The European Investment Bank............................................................... 145
------1.3.16. The European Ombudsman....................................................................... 151
---1.4. Financing................................................................................................... 157
------1.4.1. The Union’s revenue.....................................................................................157
------1.4.2. The EU’s expenditure.................................................................................. 162
------1.4.3. Multiannual financial framework.................................................................169
------1.4.4. Implementation of the budget................................................................... 177
------1.4.5. Budgetary control........................................................................................ 182
------1.4.6. Combating fraud and protecting the EU’s financial interests................ 187

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1.1. HISTORICAL DEVELOPMENT

OF EUROPEAN INTEGRATION

1.1.1. THE FIRST TREATIES

The disastrous effects of the Second World War and the constant threat of an East-
West confrontation meant that Franco-German reconciliation had become a top
priority. The decision to pool the coal and steel industries of six European countries,
brought into force by the Treaty of Paris in 1951, marked the first step towards
European integration. The Treaties of Rome of 1957 strengthened the foundations
of this integration, as well as the notion of a common future for the six European
countries involved.

LEGAL BASIS
— The Treaty establishing the European Coal and Steel Community (ECSC), or
Treaty of Paris, was signed on 18 April 1951 and came into force on 23 July 1952.
For the first time, six European States agreed to work towards integration. This
Treaty laid the foundations of the Community by setting up an executive known as
the ‘High Authority’, a Parliamentary Assembly, a Council of Ministers, a Court of
Justice and a Consultative Committee. The ECSC Treaty expired on 23 July 2002
at the end of the 50-year validity period laid down in Article 97. In accordance
with the Protocol (No 37) annexed to the Treaties (the Treaty on European Union
and the Treaty on the Functioning of the European Union), the net worth of the
ECSC’s assets at the time of its dissolution was assigned to the Research Fund
for Coal and Steel to finance research by Member States in sectors relating to the
coal and steel industry.
— The Treaties establishing the European Economic Community (EEC) and the
European Atomic Energy Community (EAEC, otherwise known as ‘Euratom’), or

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the Treaties of Rome, were signed on 25 March 1957 and came into force on
1 January 1958. Unlike the ECSC Treaty, the Treaties of Rome were concluded ‘for
an unlimited period’ (Article 240 of the EEC Treaty and Article 208 of the EAEC
Treaty), which conferred quasi-constitutional status on them.
— The six founding countries were Belgium, France, Germany, Italy, Luxembourg
and the Netherlands.

OBJECTIVES
— The founders of the ECSC were clear about their intentions for the Treaty, namely
that it was merely the first step towards a ‘European Federation’. The common
coal and steel market was to be an experiment which could gradually be extended
to other economic spheres, culminating in a political Europe.
— The aim of the European Economic Community was to establish a common
market based on the four freedoms of movement (goods, persons, capital and
services).
— The aim of Euratom was to coordinate the supply of fissile materials and the
research programmes initiated or being prepared by Member States on the
peaceful use of nuclear energy.
— The preambles to the three Treaties reveal a unity of purpose behind the creation
of the Communities, namely the conviction that the States of Europe must work
together to build a common future as this alone will enable them to control their
destiny.

MAIN PRINCIPLES
The European Communities (the ECSC, EEC and Euratom) were born of the desire for
a united Europe, an idea which gradually took shape as a direct response to the events
that had shattered the continent. In the wake of the Second World War, the strategic
industries, in particular the steel industry, needed reorganising. The future of Europe,
threatened by East-West confrontation, lay in Franco-German reconciliation.
The appeal made by Robert Schuman, the French Foreign Minister, on 9 May 1950
can be regarded as the starting point for European integration. At that time, the
choice of coal and steel was highly symbolic: in the early 1950s, coal and steel were
vital industries and the basis of a country’s power. In addition to the clear economic
benefits, the pooling of French and German resources was intended to mark the end
of the rivalry between the two countries. On 9 May 1950, Robert Schuman declared:
‘Europe will not be made all at once, or according to a single plan. It will be built
through concrete achievements which first create a de facto solidarity.’ It was on the
basis of that principle that France, Italy, Germany and the Benelux countries (Belgium,
the Netherlands and Luxembourg) signed the Treaty of Paris, which concentrated
predominantly on ensuring:
— Free movement of goods and free access to sources of production;
— Permanent monitoring of the market to avoid distortions which could lead to the
introduction of production quotas;

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— Compliance with the rules of competition and the principle of price transparency;
— Support for modernisation and conversion of the coal and steel sectors.
Following the signing of the Treaty of Paris, and despite France being opposed to
the re-establishment of a German national military force, René Pleven was giving
thought to the formation of a European army. The European Defence Community
(EDC), negotiated in 1952, was to have been accompanied by a Political Community
(EPC). Both plans were shelved following the French National Assembly’s refusal to
ratify the treaty on 30 August 1954.
Efforts to get the process of European integration under way again following the
failure of the EDC took the form of specific proposals at the Messina Conference (in
June 1955) on a customs union and atomic energy. They culminated in the signing of
the EEC and EAEC Treaties.
The provisions of the Treaty establishing the European Economic Community (EEC
Treaty, the Treaty of Rome) included:
— The elimination of customs duties between Member States;
— The establishment of an external Common Customs Tariff;
— The introduction of common policies for agriculture and transport;
— The creation of a European Social Fund;
— The establishment of a European Investment Bank;
— The development of closer relations between the Member States.
To achieve these objectives the EEC Treaty laid down guiding principles and set the
framework for the legislative activities of the Community institutions. These involved
common policies: the common agricultural policy (Articles 38 to 43), transport policy
(Articles 74 and 75) and a common commercial policy (Articles 110 to 113).
The common market is intended to guarantee the free movement of goods and the
mobility of factors of production (the free movement of workers and enterprises, the
freedom to provide services and the free movement of capital).
The Treaty establishing the European Atomic Energy Community (The Euratom
Treaty) had originally set highly ambitious objectives, including the ‘speedy
establishment and growth of nuclear industries’. However, owing to the complex
and sensitive nature of the nuclear sector, which touched on the vital interests of
the Member States (defence and national independence), those ambitions had to be
scaled back.
The Convention on certain institutions common to the European Communities, which
was signed and entered into force at the same time as the Treaties of Rome, stipulated
that the Parliamentary Assembly and Court of Justice would be common institutions.
This Convention lapsed on 1 May 1999. All that remained was for the ‘Executives’ to be
merged, so the Treaty establishing a Single Council and a Single Commission of the
European Communities of 8 April 1965, known as the ‘Merger Treaty’, duly completed
the process of unifying the institutions.

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From then on, the EEC held sway over the sectoral communities, the ECSC, and the
EAEC. This amounted to a victory for the general EEC system over the coexistence
of organisations with sectoral competence, and an establishment of its institutions.
This fact sheet was prepared by the European Parliament’s Policy Department for
Citizens’ Rights and Constitutional Affairs.

Mariusz Maciejewski / Rudolfs Verdins

04/2024

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1.1.2. DEVELOPMENTS UP TO
THE SINGLE EUROPEAN ACT

The main developments of the early Treaties are related to the creation of
Community own resources, the reinforcement of the budgetary powers of
Parliament, election of MEPs by direct universal suffrage and the setting-up of the
European Monetary System (EMS). The entry into force of the Single European Act
in 1986, which substantially altered the Treaty of Rome, bolstered the notion of
integration by creating a large internal market.

MAIN ACHIEVEMENTS IN THE FIRST STAGE OF INTEGRATION

Article 8 of the Treaty establishing the European Economic Community (EEC), also
known as the Treaty of Rome, provided for the completion of a common market
over a transitional period of 12 years, in three stages, ending on 31 December 1969.
Its first aim, the customs union, was completed more quickly than expected. The
transitional period for enlarging quotas and phasing out internal customs ended as
early as 1 July 1968. Even so, at the end of the transitional period there were still major
obstacles to freedom of movement. By then, the EEC had adopted a common external
tariff for trade with non-EEC countries.
Creating a ‘Green Europe’ was another major project for European integration. The
first regulations on the common agricultural policy (CAP) were adopted and the
European Agricultural Guidance and Guarantee Fund was set up in 1962.

FIRST TREATY AMENDMENTS

A. Improvements to the institutions
The first institutional change came about with the Merger Treaty of 8 April 1965, which
merged the executive bodies. This took effect in 1967, setting up a single Council and
Commission of the European Communities (the European Coal and Steel Community,
the EEC and the European Atomic Energy Community) and introducing the principle
of a single budget.
B. Own resources and budgetary powers
The Council decision of 21 April 1970 on the replacement of financial contributions
from Member States by the Communities’ own resources set up a system of
Community own resources, replacing financial contributions by the Member States
(1.4.1).
— The Treaty of Luxembourg of 22 April 1970 granted Parliament certain budgetary
powers (1.3.1).
— The Treaty amending certain financial provisions of the Treaties establishing the
European Economic Communities and of the Treaty establishing a single Council
of the European Communities (the Treaty of Brussels) of 22 July 1975 gave
Parliament the right to reject the budget and to grant the Commission a discharge

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for implementing the budget. The same Treaty set up the Court of Auditors,
a body responsible for scrutinising the Community’s accounts and for financial
management (1.3.12).
C. Elections
The Act of 20 September 1976 gave Parliament new legitimacy and authority by
introducing election by direct universal suffrage (1.3.4). The Act was revised in 2002
to introduce the general principle of proportional representation and other framework
provisions for national legislation on the European elections.
D. Enlargement
The UK joined the Community on 1 January 1973, together with Denmark and Ireland;
the Norwegian people had voted against accession in a referendum. Greece became
a member in 1981 and Portugal and Spain joined in 1986.
E. EU budget
After the first round of enlargement, there were calls for greater budgetary rigour
and reform of the CAP. The 1979 European Council reached agreement on a
series of complementary measures. The 1984 Fontainebleau agreements produced a
sustainable solution based on the principle that adjustments could be made to assist
any Member State with a financial burden that was excessive in terms of its relative
prosperity.

PLANS FOR FURTHER INTEGRATION

Building on the initial successes of the economic community, the aim of also uniting
the Member States politically resurfaced in the early 1960s, despite the failure of the
European Defence Community in August 1954.
A. Failure of an attempt to achieve political union
At the 1961 Bonn summit, the Heads of State or Government of the six founding
Member States of the European Community asked an intergovernmental committee,
chaired by French ambassador Christian Fouchet, to put forward proposals on the
political status of a union of European peoples. The study committee tried in vain,
on two occasions between 1960 and 1962, to present the Member States with a draft
treaty that was acceptable to all, even though Fouchet based his plan on strict respect
for the identity of the Member States, thus rejecting the federal option.
In the absence of a political community, its substitute took the form of European
Political Cooperation, or EPC. At the summit conference in The Hague in
December 1969, the Heads of State or Government decided to look into the best way
of making progress in the field of political unification. The Davignon report, adopted
by the foreign ministers in October 1970 and subsequently elaborated on by further
reports, formed the basis of EPC until the Single European Act (SEA) entered into
force.
B. The 1966 crisis
A serious crisis arose when, at the third stage of the transition period, voting
procedures in the Council were to change from the unanimity rule to qualified majority
voting in a number of areas. France opposed a range of Commission proposals,

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which included measures for financing the CAP, and stopped attending the main
Community meetings (the ‘empty chair’ policy). Eventually, agreement was reached
on the Luxembourg Compromise (1.3.7), which stated that, when vital interests of one
or more countries were at stake, members of the Council would endeavour to reach
solutions that could be adopted by all while respecting their mutual interests.
C. The increasing importance of European ‘summits’
Though remaining outside the Community institutional context, the conferences of
Heads of State or Government of the Member States started to provide political
guidance and to settle the problems that the Council of Ministers could not handle.
After early meetings in 1961 and 1967, the conferences took on increasing significance
with the summit at The Hague on 1 and 2 December 1969, which allowed negotiations
to begin on enlarging the Community and saw agreement on the Community finance
system, and with the Fontainebleau summit (in December 1974), at which major
political decisions were taken on the direct election of the European Parliament and
the decision-taking procedure within the Council. At that summit, the Heads of State
or Government also decided to meet three times a year as the ‘European Council’ to
discuss Community affairs and political cooperation (1.3.6).
D. Institutional reform and monetary policy
Towards the end of the 1970s, there were various initiatives in the Member States to
bring their economic and fiscal policies into line with each other. To solve the problem
of monetary instability and its adverse effects on the CAP and cohesion between
Member States, the Bremen and Brussels European Councils in 1978 set up the EMS.
Established on a voluntary and differentiated basis – the UK decided not to participate
in the exchange-rate mechanism – the EMS was based on a common accounting unit,
the European currency unit.
At the London European Council in 1981, the Foreign Ministers of Germany and Italy,
Hans-Dietrich Genscher and Emilio Colombo, put forward a proposal for a ‘European
Act’ covering a range of subjects: political cooperation, culture, fundamental rights,
harmonisation of the law outside the fields covered by the Community Treaties, and
ways of dealing with violence, terrorism and crime. It was not adopted in its original
form, but some parts of it resurfaced in the ‘Solemn declaration on European Union’
adopted in Stuttgart on 19 June 1983.
E. The Spinelli project
A few months after its first direct election in 1979, Parliament’s relations with the
Council were thrown into a serious crisis by the budget for 1980. At the instigation
of Altiero Spinelli, MEP, founder of the European Federalist Movement and a former
commissioner, a group of nine MEPs met in July 1980 to discuss ways of revitalising
the operation of the institutions. In July 1981, Parliament set up an institutional affairs
committee, with Spinelli as its coordinating rapporteur, to draw up a plan for amending
the existing Treaties. The committee decided to formulate plans for what was to
become the constitution of the European Union. The draft treaty was adopted by a
large majority on 14 February 1984. Legislative power would come under a bicameral

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system akin to that of a federal state[1]. The system aimed to strike a balance between
Parliament and the Council, but it was not acceptable to the Member States.

THE SINGLE EUROPEAN ACT

Having settled the Community budget dispute of the early 1980s, the European
Council decided at its Fontainebleau meeting in June 1984 to set up an ad hoc
committee of the personal representatives of the Heads of State or Government,
named the Dooge Committee after its chairman. The committee was asked to
make proposals for improving the functioning of the Community system and of
political cooperation. The June 1985 Milan European Council decided by a majority
(seven votes to three), in an exceptional procedure for that body, to convene
an intergovernmental conference to consider strengthening the powers of the
institutions, extending Community activities to new areas and establishing a ‘genuine’
internal market.
On 17 February 1986, nine Member States signed the SEA, followed later, on
28 February 1986, by Denmark (after a referendum vote in favour), Italy and Greece.
The SEA was ratified by the Member States’ parliaments in 1986, but, because a private
citizen had appealed to the Irish courts, its entry into force was delayed for six months
until 1 July 1987. The SEA was the first substantial change to the Treaty of Rome. Its
principal provisions were as follows:
A. Extension of the Union’s powers
1. Through the creation of a large internal market
A fully operational internal market was to be completed by 1 January 1993, taking up
and broadening the objective of the common market introduced in 1958 (2.1.1).
2. Through the establishment of new powers as regards:
— Monetary policy;
— Social policy;
— Economic and social cohesion;
— Research and technological development;
— The environment;
— Cooperation in the field of foreign policy.
B. Improvement in the decision-making capacity of the Council of Ministers
Qualified majority voting replaced unanimity in four of the Community’s existing areas
of responsibility (amendment of the common customs tariff, freedom to provide
services, the free movement of capital and the common sea and air transport policy).
Qualified majority voting was also introduced for several new areas of responsibility,
such as the internal market, social policy, economic and social cohesion, research
and technological development, and environmental policy. Finally, qualified majority
voting was the subject of an amendment to the Council’s internal rules of procedure,
so as to comply with a previous presidency declaration that, in future, the Council

[1]Amato, G., Bribosia, H., De Witte, B., Genesis and destiny of the European Constitution, Bruylant, Brussels, 2007, p. 14.

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could be called upon to vote not only on the initiative of its president, but also at the
request of the Commission or a Member State if a simple majority of the Council’s
members were in favour.
C. Growth of the role of the European Parliament
Parliament’s powers were strengthened by:
— Making Community agreements on enlargement and association agreements
subject to Parliament’s assent;
— Introducing a procedure for cooperation with the Council (1.2.3), which gave
Parliament real, albeit limited, legislative powers; it applied to about a dozen legal
bases at the time and marked a watershed in turning Parliament into a genuine
co-legislator.
This fact sheet was prepared by the European Parliament’s Policy Department for
Citizens’ Rights and Constitutional Affairs.

Mariusz Maciejewski / Rudolfs Verdins

04/2024

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1.1.3. THE MAASTRICHT AND AMSTERDAM TREATIES

The Maastricht Treaty altered the former European treaties and created a European
Union based on three pillars: the European Communities, the common foreign and
security policy (CFSP) and cooperation in the field of justice and home affairs
(JHI). With a view to the enlargement of the Union, the Amsterdam Treaty made
the adjustments needed to enable the Union to function more efficiently and
democratically.

THE MAASTRICHT TREATY

The Treaty on European Union[1], signed in Maastricht on 7 February 1992, entered into
force on 1 November 1993.
A. The Union’s structures
By instituting a European Union, the Maastricht Treaty marked a new step in
the process of creating an ‘ever-closer union among the peoples of Europe’. The
Union was based on the European Communities and supported by policies and
forms of cooperation provided for in the Treaty on European Union. It had a
single institutional structure, consisting of the Council, the European Parliament,
the European Commission, the Court of Justice and the Court of Auditors which
(being at the time strictly speaking the only EU institutions) exercised their powers
in accordance with the Treaties. The Treaty established an Economic and Social
Committee and a European Committee of the Regions, which both had advisory
powers. A European System of Central Banks and a European Central Bank were set
up under the provisions of the Treaty in addition to the existing financial institutions in
the EIB group, namely the European Investment Bank and the European Investment
Fund.
B. The Union’s powers
The Union created by the Maastricht Treaty was given certain powers by the Treaty,
which were classified into three groups and were commonly referred to as ‘pillars’: the
first pillar consisted of the European Communities and provided a framework enabling
powers for which Member States had transferred sovereignty in areas governed by
the Treaty to be exercised by the Community institutions. The second pillar was the
common foreign and security policy laid down in Title V of the Treaty. The third pillar
was cooperation in the fields of justice and home affairs laid down in Title VI of the
Treaty. Titles V and VI provided for intergovernmental cooperation using the common
institutions, with certain supranational features such as involving the Commission and
consulting Parliament.
1. The European Community (first pillar)
The Community’s task was to make the single market work and to promote, among
other things, a harmonious, balanced and sustainable development of economic
activities, a high level of employment and of social protection and equality between

[1]OJ C 191, 29.7.1992, p. 1.

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men and women. The Community pursued these objectives, acting within the limits of
its powers, by establishing a common market and related measures set out in Article 3
of the EC Treaty and by initiating the economic and single monetary policy referred to
in Article 4. Community activities had to respect the principle of proportionality and,
in areas that did not fall within its exclusive competence, the principle of subsidiarity
(Article 5 of the EC Treaty).
2. The common foreign and security policy (CFSP) (second pillar)
The Union had the task of defining and implementing, by intergovernmental methods,
a common foreign and security policy. The Member States were to support this policy
actively and unreservedly in a spirit of loyalty and mutual solidarity. Its objectives were:
to safeguard the common values, fundamental interests, independence and integrity
of the Union in conformity with the principles of the United Nations Charter; to
strengthen the security of the Union in all ways; to promote international cooperation;
to develop and consolidate democracy and the rule of law, and respect for human
rights and fundamental freedoms.
3. Cooperation in the fields of justice and home affairs (third pillar)
The Union’s objective was to develop common action in these areas by
intergovernmental methods to provide citizens with a high level of safety within an
area of freedom, security and justice. It covered the following areas:
— Rules and the exercise of controls on crossing the Community’s external borders;
— Combating terrorism, serious crime, drug trafficking and international fraud;
— Judicial cooperation in criminal and civil matters;
— Creation of a European Police Office (Europol) with a system for exchanging
information between national police forces;
— Controlling illegal immigration;
— Common asylum policy.

THE AMSTERDAM TREATY

The Treaty of Amsterdam amending the Treaty on European Union, the Treaties
establishing the European Communities and certain related acts[2], signed in
Amsterdam on 2 October 1997, entered into force on 1 May 1999.
A. Increased powers for the Union
1. European Community
With regard to objectives, special prominence was given to balanced and sustainable
development and a high level of employment. A mechanism was set up to coordinate
Member States’ policies on employment, and there was a possibility of some
Community measures in this area. The Agreement on Social Policy was incorporated
into the EC Treaty with some improvements (removal of the opt-out). The Community
method now applied to some major areas which had hitherto come under the third
pillar, such as asylum, immigration, crossing external borders, combating fraud,

[2]OJ C 340, 10.11.1997, p. 115

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customs cooperation and judicial cooperation in civil matters, in addition to some

of the cooperation under the Schengen Agreement, which the EU and Communities
endorsed in full.
2. European Union
Intergovernmental cooperation in the areas of police and judicial cooperation was
strengthened by defining objectives and precise tasks and creating a new legal
instrument similar to a directive. The instruments of the common foreign and security
policy were developed later, in particular by creating a new instrument, the common
strategy, a new office, the ‘Secretary-General of the Council responsible for the
CFSP’, and a new structure, the ‘Policy Planning and Early Warning Unit’.
B. A stronger position for Parliament
1. Legislative power
Under the codecision procedure, which was extended to the existing 15 legal
bases under the EC Treaty, Parliament and the Council became co-legislators on a
practically equal footing. With the exception of agriculture and competition policy, the
codecision procedure applied to all the areas where the Council was permitted to take
decisions by qualified majority. In four cases (Articles 18, 42 and 47 and Article 151 on
cultural policy, which remained unchanged) the codecision procedure was combined
with a requirement for a unanimous decision in the Council. The other legislative areas
where unanimity was required were not subject to codecision.
2. Power of control
As well as voting to approve the Commission as a body, Parliament also had a vote
to approve in advance the person nominated as President of the future Commission
(Article 214).
3. Election and statute of Members
With regard to the procedure for elections to Parliament by direct universal suffrage
(Article 190 of the EC Treaty), the Community’s power to adopt common principles
was added to the existing power to adopt a uniform procedure. A legal basis making it
possible to adopt a single statute for MEPs was included in the same article. However,
there was still no provision allowing measures to develop political parties at European
level (cf. Article 191).
C. Closer cooperation
For the first time, the Treaties contained general provisions allowing some Member
States under certain conditions to take advantage of common institutions to organise
closer cooperation between themselves. This option was in addition to the closer
cooperation covered by specific provisions, such as economic and monetary union,
creation of the area of freedom, security and justice and incorporating the Schengen
provisions. The areas where closer cooperation was possible were the third pillar and,
under particularly restrictive conditions, matters subject to non-exclusive Community
competence. The conditions which any closer cooperation had to fulfil and the planned
decision-making procedures had been drawn up in such a way as to ensure that this
new factor in the process of integration would remain exceptional and, at all events,

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could only be used to move further towards integration and not to take retrograde
steps.
D. Simplification
The Amsterdam Treaty removed from the European Treaties all provisions that the
passage of time had rendered void or obsolete, while ensuring that this did not affect
the legal effects derived from them in the past. It also renumbered the Treaty articles.
For legal and political reasons the Treaty was signed and submitted for ratification in
the form of amendments to the existing Treaties.
E. Institutional reforms with a view to enlargement
1. The Amsterdam Treaty set the maximum number of Members of the European
Parliament, in line with Parliament’s request, at 700 (Article 189).
2. The composition of the Commission and the question of weighted votes were
covered by a ‘Protocol on the Institutions’ attached to the Treaty. This provided
that, in a Union of up to 20 Member States, the Commission would comprise
one national of each Member State, provided that by that date, weighting of
the votes in the Council had been modified. At all events, at least a year before
the 21st Member State joined, a new intergovernmental conference would have
to comprehensively review the Treaties’ provisions on the institutions.
3. There was provision for the Council to use qualified majority voting in a number
of the legal bases newly established by the Amsterdam Treaty. However, of the
existing Community policies, only research policy had new provisions on qualified
majority voting, with other policies still requiring unanimity.
F. Other matters
A protocol covered Community procedures for implementing the principle of
subsidiarity. New provisions on access to documents (Article 255) and greater
openness in the Council’s legislative work (Article 207(3)) improved transparency.

ROLE OF THE EUROPEAN PARLIAMENT

The European Parliament was consulted before an intergovernmental conference was
called. Parliament was also involved in the intergovernmental conferences according
to ad hoc formulas; during the last three it was represented, depending on the case,
by its President or by two of its members.
This fact sheet was prepared by the European Parliament’s Policy Department for
Citizens’ Rights and Constitutional Affairs.

Mariusz Maciejewski
07/2024

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1.1.4. THE TREATY OF NICE AND THE

CONVENTION ON THE FUTURE OF EUROPE

The Treaty of Nice prepared the European Union only partially for the important
enlargements to the east and south on 1 May 2004 and 1 January 2007. Therefore,
following up on the questions raised in the Laeken Declaration, the European
Convention made an effort to produce a new legal basis for the Union in the
form of the Treaty establishing a Constitution for Europe. Following ‘no’ votes in
referendums in two Member States, that treaty was not ratified.

TREATY OF NICE
The Treaty was signed on 26 February 2001 and entered into force on 1 February 2003.
A. Objectives
The conclusions of the 1999 Helsinki European Council required that, by the end
of 2002, the EU be able to welcome as new Member States those applicant countries
which were ready for accession. Since only two of the applicant countries were more
populous than the Member State average at the time, the political weight of countries
with a smaller population was due to increase considerably. The Treaty of Nice was
therefore meant to make the EU institutions more efficient and legitimate and to
prepare the EU for its next major enlargement.
B. Background
A number of institutional issues (which became known as the ‘Amsterdam
leftovers’) had been addressed by the Maastricht and Amsterdam Intergovernmental
Conferences (IGCs) but not satisfactorily resolved. These included size and
composition of the Commission, weighting of votes in the Council, and extension
of qualified majority voting. On the basis of a report by the Finnish Presidency, the
Helsinki European Council decided in late 1999 that an IGC should deal with the
leftovers and all other changes required in preparation for enlargement.
C. Content
The IGC opened on 14 February 2000 and completed its work in Nice on
10 December 2000, reaching agreement on the institutional questions, and on a
range of other points, namely a new distribution of seats in the European Parliament,
more flexible arrangements for enhanced cooperation, the monitoring of fundamental
rights and values in the EU, and a strengthening of the EU judicial system.
1. Weighting of votes in the Council
Taking together the system of voting in the Council, the composition of the
Commission and, to some extent, the distribution of seats in the European Parliament,
the IGC realised that the main imperative was to change the relative weighting of the
Member States, a subject no other IGC had addressed since the Treaty of Rome.
Two methods of defining a qualified majority were considered: a new system of
weighting (modifying the existing one) or application of a dual majority (of votes and

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of population) – the latter solution having been proposed by the Commission and
endorsed by Parliament. The IGC chose the first option. The number of votes was
increased for all Member States, but the share accounted for by the most populous
Member States decreased: previously 55% of votes, it fell to 45% when the 10 new
members joined, and to 44.5% on 1 January 2007. This was why the demographic
‘safety net’ was introduced: a Member State may request verification that the qualified
majority represents at least 62% of the total population of the Union. If it does not, the
decision concerned will not be adopted.
2. The Commission
a. Composition
Since 2005 the Commission has comprised one Commissioner per Member State.
The Council has the power to decide, acting unanimously, on the number of
Commissioners and on arrangements for a rotation system, provided that each
Commission reflects the demographic and geographical range of the Member States.
b. Internal organisation
The Treaty of Nice provides the President of the Commission with the power to
allocate responsibilities to the Commissioners and to reassign them during his or her
term of office, as well as to select and determine the number of Vice-Presidents.
3. The European Parliament
a. Composition
The Treaty of Amsterdam had set the maximum number of MEPs at 700. At Nice,
the European Council thought it necessary, with an eye to enlargement, to revise the
number of MEPs for each Member State. The new composition of Parliament was also
used to counterbalance the altered weighting of votes in the Council. The maximum
number of MEPs was therefore set at 732.
b. Powers
Parliament was enabled, like the Council, the Commission, and the Member States, to
bring a legal challenge to acts of the Council, the Commission or the European Central
Bank on grounds of lack of competence, infringement of an essential procedural
requirement, infringement of the Treaty or of any rule of law relating to its application,
or misuse of powers.
Further to a proposal by the Commission, Article 191 was turned into an operational
legal basis for the adoption, under the co-decision procedure, of regulations
governing political parties at EU level and rules on their funding.
Parliament’s legislative powers were increased through a slight broadening of the
scope of the co-decision procedure and by requiring Parliament’s assent for the
establishment of enhanced cooperation in areas covered by co-decision. Parliament
must also be asked for its opinion should the Council adopt a position on the risk of a
serious breach of fundamental rights in a Member State.

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4. Reform of the judicial system

a. The Court of Justice of the European Union
The Court of Justice was empowered to sit in a number of different ways: in chambers
(where it consists of three or five judges), in a Grand Chamber (11 judges) or as the
full Court. The Council, acting unanimously, may increase the number of Advocates-
General. The Court of Justice of the EU retained jurisdiction over questions referred
for a preliminary ruling, but it was able, under its Statute, to refer to the Court of
First Instance types of matters other than those listed in Article 225 of the Treaty
Establishing the European Community (TEC).
b. General Court
The powers of the General Court (formerly the Court of First Instance prior to the
Lisbon Treaty coming into force on 1 December 2009) were increased to include
certain categories of preliminary ruling, with the possibility of judicial panels being
established by unanimous decision of the Council. All these operating provisions,
notably on the powers of the Court, were thereafter set out in the Treaty itself.
5. Legislative procedures
Although a considerable number of new policies and measures (27) now required
qualified majority voting in the Council, co-decision was extended only to a few minor
areas (covered by former Articles 13, 62, 63, 65, 157, 159 and 191 of the TEC Treaty);
for matters covered by former Article 161 assent was now required.
6. Enhanced cooperation
Like the Amsterdam Treaty, the Treaty of Nice contained general provisions applying
to all areas of enhanced cooperation and provisions specific to the pillar concerned.
Whereas the Amsterdam Treaty provided for enhanced cooperation under the first
and third pillars only, the Treaty of Nice encompassed all three pillars.
The Treaty of Nice made further changes: referral to the European Council ceased to
be an option, the concept of ‘a reasonable period of time’ was clarified, and the assent
of Parliament was now required in all areas where enhanced cooperation related to a
question covered by the co-decision procedure.
7. Protection of fundamental rights
A paragraph was added to Article 7 of the Treaty on European Union (TEU) to cover
cases where a patent breach of fundamental rights has not actually occurred but
where there is a ‘clear risk’ that it may occur. The Council, acting by a majority of
four fifths of its members and after obtaining the assent of Parliament, determines
the existence of the risk and addresses appropriate recommendations to the Member
State in question. A non-binding Charter of Fundamental Rights was proclaimed.
D. Role of the European Parliament
As with earlier intergovernmental conferences, Parliament was actively involved in
preparations for the IGC in 2000. In its resolutions of 18 November 1999 on the
preparation of the reform of the Treaties and the next Intergovernmental Conference
and of 31 May 2001 on the Treaty of Nice and the future of the European Union,
it provided its views on the conference agenda and its progress and objectives.

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Parliament also expressed its opinion on the substance and judicial implications of
the Charter of Fundamental Rights. Parliament insisted that the next IGC should
be a transparent process, involving European and national parliamentarians and the
Commission, as well as input from ordinary people, and that what it produced should
be a constitution-type document.

CONVENTION ON THE FUTURE OF EUROPE

A. Basis and objectives
In accordance with Declaration No 23 annexed to the Treaty of Nice, the Laeken
European Council of 14 and 15 December 2001 decided to organise a Convention
bringing together the main parties concerned for a debate on the future of the
European Union. The objectives were to prepare for the next IGC as transparently
as possible and to address the four main issues concerning the further development
of the EU: a better division of competences; simplification of the EU’s instruments
for action; increased democracy, transparency and efficiency; and the drafting of a
constitution for Europe’s citizens.
B. Organisation
The Convention comprised a chair (Valéry Giscard D’Estaing), two vice-chairs
(Giuliano Amato and Jean-Luc Dehaene), 15 representatives of the Member States’
heads of state or government, 30 members of the national parliaments (two per
Member State), 16 members of the European Parliament and two members of the
Commission. The countries that had applied to join the Union also took part in the
debate on an equal footing, but could not block any consensus which might emerge
among the Member States. The Convention therefore had a total of 105 members.
In addition to the chair and vice-chairs, the Praesidium comprised nine members of
the Convention and an invited representative chosen by the applicant countries. The
Praesidium had the role of lending impetus to the Convention and providing it with a
basis on which to work.
C. Outcome
The work of the Convention comprised: a ‘listening phase’, in which it sought to
identify the expectations and needs of Member States and Europe’s citizens, a phase
in which the ideas expressed were studied, and a phase in which recommendations
based on the essence of the debate were drafted. At the end of 2002, 11 working
groups presented their findings to the Convention. During the first half of 2003, the
Convention drew up and debated a text which became the draft Treaty establishing
a Constitution for Europe.
Part I of the Treaty (principles and institutions; 59 articles) and Part II (Charter
of Fundamental Rights; 54 articles) were laid before the Thessaloniki European
Council on 20 June 2003. Part III (policies; 338 articles) and Part IV (final provisions;
10 articles) were presented to the Italian Presidency on 18 July 2003. The European
Council adopted this text on 18 June 2004, retaining the basic structure of the
Convention’s draft, albeit with a considerable number of amendments. Approved by
the European Parliament, the Treaty was then rejected by France (29 May 2005) and
the Netherlands (1 June 2005) in their national referendums. As a result of two ‘no’

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votes in referendums in France and the Netherlands, the ratification procedure for the
Treaty establishing a Constitution for Europe was not completed.
D. Role of the European Parliament
The impact of MEPs during the work of the European Convention was seen by
most observers as decisive. Thanks to several factors, including their experience of
negotiating in an international environment and the fact that the Convention was
meeting on Parliament’s premises, MEPs were able to leave a strong imprint on the
debates and on the outcome of the Convention. They were also instrumental in the
formation of political families comprising MEPs and national MPs. Parliament thus
achieved a considerable number of its original aims, and most of that achievement is
now safeguarded in the Treaty of Lisbon.
This fact sheet is prepared by the European Parliament’s Policy Department for
Citizens’ Rights and Constitutional Affairs.

Mariusz Maciejewski
04/2024

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1.1.5. THE TREATY OF LISBON

This fact sheet presents the background and essential provisions of the Treaty of
Lisbon. The objective is to provide a historical context for the emergence of this
latest fundamental EU text from those that came before it. The specific provisions
(with article references) and their effects on European Union policies are explained
in more detail in the fact sheets dealing with particular policies and issues.

LEGAL BASIS
Treaty of Lisbon amending the Treaty on European Union and the Treaty
establishing the European Community (OJ C 306, 17.12.2007); entry into force on
1 December 2009.

HISTORY
The Treaty of Lisbon started as a constitutional project at the end of 2001 (European
Council declaration on the future of the European Union, or Laeken Declaration),
and was followed up in 2002 and 2003 by the European Convention which drafted
the Treaty establishing a Constitution for Europe (Constitutional Treaty) (1.1.4). The
process leading to the Treaty of Lisbon is a result of the negative outcome of
two referendums on the Constitutional Treaty in May and June 2005, in response
to which the European Council decided to have a two-year ‘period of reflection’.
Finally, on the basis of the Berlin Declaration of March 2007, the European Council of
21 to 23 June 2007 adopted a detailed mandate for a subsequent Intergovernmental
Conference (IGC), under the Portuguese Presidency. The IGC concluded its work
in October 2007. The Treaty was signed by the European Council in Lisbon on
13 December 2007 and has been ratified by all Member States.

CONTENT
A. Objectives and legal principles
The Treaty establishing the European Community is renamed the ‘Treaty on the
Functioning of the European Union’ (TFEU) and the term ‘Community’ is replaced by
‘Union’ throughout the text. The Union takes the place of the Community and is its
legal successor. The Treaty of Lisbon does not create state-like Union symbols like a
flag or an anthem. Although the new text is, hence, no longer a constitutional treaty
by name, it preserves most of the substantial achievements.
No additional exclusive competences are transferred to the Union by the Treaty of
Lisbon. However, it changes the way the Union exercises its existing powers and some
new (shared) powers, by enhancing citizens’ participation and protection, creating a
new institutional set-up and modifying the decision-making processes for increased
efficiency and transparency. A higher level of parliamentary scrutiny and democratic
accountability is therefore attained.

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Unlike the Constitutional Treaty, the Treaty of Lisbon contains no article formally
enshrining the supremacy of Union law over national legislation. However, a
declaration was attached to the Treaty to this effect (Declaration 17); it explains how
EU law takes precedence over national law in accordance with well settled case-law
of the Court of Justice of the European Union.
The Treaty of Lisbon for the first time clarifies the powers of the Union. It distinguishes
between three types of competences: exclusive competence, where the Union alone
can legislate, and Member States only implement; shared competence, where the
Member States can legislate and adopt legally binding measures if the Union has not
done so; and supporting competence, where the EU adopts measures to support or
complement Member States’ policies. Union competences can now be handed back
to the Member States in the course of a Treaty revision.
The Treaty of Lisbon gives the EU full legal personality. Therefore, the Union obtains
the ability to sign international treaties in the areas of its attributed powers or to join
an international organisation. Member States may only sign international agreements
that are compatible with EU law.
The Treaty for the first time provides for a formal procedure to be followed by
Member States wishing to withdraw from the European Union in accordance with their
constitutional requirements, namely Article 50 of the Treaty on European Union (TEU).
The Treaty of Lisbon completes the absorption of the remaining third pillar aspects
of the area of freedom, security and justice, i.e. police and judicial cooperation in
criminal matters, into the first pillar. The former intergovernmental structure ceases
to exist, as the acts adopted in this area are now made subject to the ordinary
legislative procedure (qualified majority and codecision), using the legal instruments
of the Community method (regulations, directives and decisions), unless otherwise
specified.
With the Treaty of Lisbon in force, Parliament is able to propose amendments to the
Treaties, as was already the case for the Council, a Member State government or
the Commission. Normally, such an amendment would require the convocation of a
convention which would recommend amendments to an IGC (the European Council
could, however, decide not to convene such a convention, subject to Parliament’s
consent (Article 48(3) TEU, second paragraph)). An IGC could then be convened
to determine amendments to the Treaties by common accord. It is, however, also
possible to revise the Treaties without convening an IGC and through simplified
revision procedures, where the revision concerns the internal policies and actions of
the Union (Article 48(6) and 48(7) TEU). The revision would then be adopted as a
decision of the European Council, but might remain subject to national ratification
rules.
B. Enhanced democracy and better protection of fundamental rights
The Treaty of Lisbon expresses the three fundamental principles of democratic
equality, representative democracy and participatory democracy. Participatory
democracy takes the new form of a citizens’ initiative (4.1.5).

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The Charter of Fundamental Rights is not incorporated directly into the Treaty of
Lisbon, but acquires a legally binding character through Article 6(1) TEU, which gives
the Charter the same legal value as the Treaties (4.1.2).
The process of the EU’s accession to the European Convention on Human Rights
(ECHR) was opened when the 14th protocol to the ECHR entered into force on
1 June 2010. This allows not only states but also an international organisation, i.e.
the European Union, to become signatories of the ECHR. Accession still requires
ratification by all states that are parties to the ECHR, as well as by the EU itself.
Negotiations between Council of Europe and EU representatives led to the finalisation
of a draft agreement in April 2013, which, however, was deemed incompatible with
Article 6 TEU by the Court of Justice of the European Union in its Opinion 2/13. Further
negotiations will be necessary before accession can take place.
C. A new institutional set-up
1. The European Parliament
Pursuant to Article 14(2) TEU, Parliament is now ‘composed of representatives of the
Union’s citizens’, not of representatives of ‘the peoples of the States’.
Parliament’s legislative powers have been increased through the ‘ordinary legislative
procedure’, which replaces the former codecision procedure. This procedure now
applies to more than 40 new policy areas, raising the total number to 85. The assent
procedure continues to exist as ‘consent’, and the consultation procedure remains
unchanged. The new budgetary procedure creates full parity between Parliament and
the Council for approval of the annual budget. The multiannual financial framework
has to be agreed by Parliament.
Parliament now elects the President of the Commission by a majority of its members
on a proposal from the European Council, which is obliged to select a candidate
by qualified majority, taking into account the outcome of the European elections.
Parliament continues to approve the Commission as a college.
The maximum number of MEPs has been set at 751, with citizens’ representation
being degressively proportional. The maximum number of seats per Member State
is reduced to 96, while the minimum number is increased to 6. On 7 February 2018,
Parliament voted in favour of reducing the number of its seats from 751 to 705 after
the UK’s departure from the EU and re-distributing some of the seats thereby freed
up among those Member States that were slightly under-represented (1.3.3).
The UK left the EU on 1 February 2020. As of this date, the new composition of 705
MEPs has been applied. Of the 73 seats vacated by the UK’s withdrawal, 27 seats
have been reallocated to better reflect the principle of degressive proportionality: the
27 seats have been distributed to France (+5), Spain (+5), Italy (+3), the Netherlands
(+3), Ireland (+2), Sweden (+1), Austria (+1), Denmark (+1), Finland (+1), Slovakia (+1),
Croatia (+1), Estonia (+1), Poland (+1) and Romania (+1). No Member State has lost
any seats.
2. The European Council
The Treaty of Lisbon formally recognises the European Council as an EU institution,
responsible for providing the Union with the ‘impetus necessary for its development’

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and for defining its ‘general political directions and priorities’. The European Council
has no legislative functions. A long-term presidency replaces the previous system of
six-month rotation. The President is elected by a qualified majority of the European
Council for a renewable term of 30 months. This should improve the continuity and
coherence of the European Council’s work. The President also represents the Union
externally, without prejudice to the duties of the High Representative of the Union for
Foreign Affairs and Security Policy (see below).
3. The Vice-President of the Commission / High Representative of the Union for
Foreign Affairs and Security Policy (VP / HR)
The VP / HR is appointed by a qualified majority of the European Council with
the agreement of the President of the Commission and is responsible for the EU’s
common foreign and security policy, with the right to put forward proposals. Besides
chairing the Foreign Affairs Council, the VP / HR also has the role of Vice-President
of the Commission. The VP / HR is assisted by the European External Action Service,
which comprises staff from the Council, the Commission and national diplomatic
services.
4. The Council
The Treaty of Lisbon maintains the principle of double majority voting (citizens
and Member States). However, the previous arrangements remained in place until
November 2014; since 1 November 2014, the new rules have applied.
A qualified majority is reached when 55% of members of the Council (in practice,
15 states out of 27), comprising at least 65% of the population, support a proposal
(Article 16(4) TEU). When the Council is not acting on a proposal from the Commission
or the VP / HR, the necessary majority of Member States increases to 72%
(Article 238(2) TFEU). To block legislation, at least four Member States have to vote
against a proposal. A new scheme inspired by the ‘Ioannina compromise’ allows 55%
(75% until 1 April 2017) of the Member States necessary for the blocking minority to
ask for reconsideration of a proposal during a ‘reasonable time period’ (Declaration 7).
The Council meets in public when it deliberates and votes on a draft legislative act.
To this end, each Council meeting is divided into two parts, dealing respectively
with legislative acts and non-legislative activities. The Council presidency continues
to rotate on a six-month basis, but there are 18-month group presidencies of three
Member States in order to ensure better continuity of work. As an exception, the
Foreign Affairs Council is continuously chaired by the VP / HR.
5. The Commission
Since the President of the Commission is now chosen and elected taking into account
the outcome of the European elections, the political legitimacy of the office is
increased. The President is responsible for the internal organisation of the college
(appointment of commissioners, distribution of portfolios, requests to resign under
particular circumstances).

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6. The Court of Justice of the European Union

The jurisdiction of the Court is extended to all activities of the Union with the
exception of the common foreign and security policy (CFSP). Access to the Court is
facilitated for individuals.
D. More efficient and democratic policymaking with new policies and new
competencies
Several passerelle clauses allow for a change from unanimous decision-making
to qualified majority voting and from the consultation procedure to codecision
(Article 31(3) TEU, Articles 81, 153, 192, 312 and 333 TFEU, plus some passerelle-type
procedures concerning judicial cooperation in criminal matters) (1.2.4). In his 2017
State of the Union speech, Commission President Juncker announced initiatives to
move away from the unanimity rule in a number of areas by using the passerelle
clauses. As a follow-up, the Commission has adopted four communications, proposing
to enhance the use of qualified majority voting instead of unanimity in the fields of the
CFSP (September 2018), tax policy (January 2019), energy and climate (April 2019)
and social policy (April 2019). These communications aim to render decision-making
more prompt, flexible and efficient where an EU competence already exists.
In areas where the Union has no exclusive powers, at least nine Member States can
establish enhanced cooperation among themselves. Authorisation for its use must be
granted by the Council after obtaining the consent of the European Parliament. On
CFSP matters, unanimity applies.
The Treaty of Lisbon considerably strengthens the principle of subsidiarity by
involving the national parliaments in the EU decision-making process (1.2.2) (1.3.5).
A certain number of new or extended policies have been introduced in environment
policy, which now includes the fight against climate change, and energy policy, which
makes new references to solidarity and the security and interconnectivity of supply.
Furthermore, intellectual property rights, sport, space, tourism, civil protection and
administrative cooperation are now possible subjects of EU lawmaking.
On the common security and defence policy (5.1.2), the Treaty of Lisbon introduces a
mutual defence clause which provides that all Member States are obliged to provide
help to a Member State under attack. A solidarity clause provides that the Union
and each of its Member States have to provide assistance by all possible means
to a Member State affected by a human or natural catastrophe or by a terrorist
attack. A ‘permanent structured cooperation’ is open to all Member States that
commit themselves to taking part in European military equipment programmes and
to providing combat units that are available for immediate action. To establish such
cooperation, it is necessary to obtain a qualified majority in Council after consultation
with the VP / HR.

ROLE OF THE EUROPEAN PARLIAMENT

See 1.1.4 for Parliament’s contributions to the European Convention and its
involvement in previous IGCs. With respect to the 2007 IGC, leading to the signature

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of the Treaty of Lisbon, Parliament for the first time sent three representatives to the
conference under the Portuguese Presidency.
Almost a decade after the signature of the Treaty of Lisbon, Parliament acknowledged
that some of its provisions were not being used to the fullest. Therefore, on
16 February 2017 it adopted a resolution on improving the functioning of the European
Union by building on the potential of the Lisbon Treaty, which puts forward a number
of recommendations on how to unblock this potential in order to enhance the Union’s
capacity to tackle current global challenges.
On the same day, Parliament also adopted a resolution on the possible evolution of
and adjustments to the current institutional set-up of the European Union, suggesting
concrete proposals for Treaty reforms.
The EU has lately faced several crises linked to, in particular, Brexit, the rule of law, the
multiannual financial framework, the COVID-19 pandemic and the Russian invasion of
Ukraine. The handling of these crises has again exposed shortcomings in the current
system of governance, and the lack of efficient decision-making has contributed to a
decrease in public support for the European project. In response to current challenges,
on 10 March 2021, the EU institutions launched the Conference on the Future of
Europe, designed to give citizens a say on how to reshape the EU and increase the
effectiveness and transparency of its decision-making procedures. On 9 May 2022,
the Conference concluded its work, which resulted in 49 proposals, some of which
require changes to the EU Treaties. Consequently, Parliament adopted a resolution on
the call for a convention for the revision of the Treaties on 9 June 2022; a resolution on
the implementation of the passerelle clauses in the EU Treaties on 11 July 2023; and a
resolution on proposals for the amendment of the Treaties on 22 November 2023. By
urging the European Council to call for a convention to revise the Treaties, Parliament
wants to modernise legislative procedures to address current challenges and enhance
EU effectiveness.

Eeva Pavy
04/2024

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1.2. THE EUROPEAN UNION’S

LEGAL SYSTEM AND DECISION-
MAKING PROCEDURES

1.2.1. SOURCES AND SCOPE

OF EUROPEAN UNION LAW

The European Union has legal personality and as such its own legal order separate
from international law. Furthermore, EU law has direct or indirect effect on the laws
of its Member States and becomes part of the legal system of each Member State.
The European Union is in itself a source of law. The legal order is usually divided into
primary legislation (the Treaties and general legal principles), secondary legislation
(based on the Treaties) and supplementary law.

SOURCES AND HIERARCHY OF UNION LAW

— Treaty on European Union (TEU), Treaty on the Functioning of the European
Union (TFEU), and their protocols (there are 37 protocols, 2 annexes and
65 declarations, which are attached to the treaties to fill in details, without being
incorporated into the full legal text) 1.1.5;
— Charter of Fundamental Rights of the European Union 4.1.2;
— The Treaty Establishing the European Atomic Energy Community (Euratom) is
still in force as a separate treaty;
— International agreements 5.2.1;
— General principles of Union law;
— Secondary legislation.

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The European Union is a Union based on the rule of law that has established a complete
system of legal remedies and procedures designed to enable the Court of Justice
of the European Union (CJEU) to review the legality of the EU institutions’ acts
(Article 263 TFEU). The Treaties and the general principles are at the top of the
hierarchy, and are known as primary legislation. Following the entry into force of the
Lisbon Treaty on 1 December 2009, the same value was also given to the Charter of
Fundamental Rights. International agreements concluded by the European Union are
subordinate to primary legislation. Secondary legislation is the next level down in the
hierarchy and is valid only if it is consistent with the acts and agreements which have
precedence over it. The doctrine of primacy of EU law is a fundamental pillar of the EU
legal order and aims to ensure the unity and consistency of EU law. The CJEU formally
insists that EU law has absolute primacy over the domestic laws of the Member States,
and that this must be taken into account by domestic courts in their decisions. It has
always claimed ultimate authority in determining the relationship between EU and
domestic law. In the landmark cases van Gend en Loos v Nederlandse Administratie
der Belastingen and Costa v ENEL, the CJEU developed the fundamental doctrines of
direct effect and primacy of EU law. The CJEU upheld these doctrines in subsequent
cases. Notably, it argued in Internationale Handelsgesellschaft that EU law enjoys
primacy even with respect to fundamental rights guaranteed in national constitutions.

OBJECTIVES
Creation of a legal order for the Union to achieve the objectives stipulated in the
Treaties.

EU SOURCES OF LAW
A. Primary legislation of the European Union 1.1.1, 1.1.2, 1.1.3, 1.1.4, 1.1.5, 4.1.2
B. Secondary legislation of the European Union
1. General points
The legal acts of the Union are listed in Article 288 TFEU. They are regulations,
directives, decisions, recommendations and opinions. EU institutions may adopt legal
acts of these kinds only if they are empowered to do so by the Treaties. The limits
of Union competences are governed by the principle of conferral, which is enshrined
in Article 5(1) TEU. The TFEU defines the scope of Union competences, dividing
them into three categories: exclusive competences (Article 3), shared competences
(Article 4) and supporting competences (Article 6), whereby the EU adopts measures
to support or complement Member States’ policies. Articles 3, 4 and 6 TFEU list the
areas that come under each category of Union competence. In the absence of the
necessary powers to attain one of the objectives set out in the Treaties, the institutions
may apply the provisions of Article 352 TFEU, and thus adopt the ‘appropriate
measures’.
The institutions adopt only those legal instruments listed in Article 288 TFEU. The
only exceptions are the common foreign, security and defence policies, to which
the intergovernmental method still applies. In this area, common strategies, common
actions and common positions have been replaced by ‘general guidelines’ and

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‘decisions defining’ actions to be undertaken and positions to be adopted by the

Union, and the arrangements for the implementation of those decisions (Article 25
TEU).
There are, in addition, various forms of action, such as recommendations,
communications and acts on the organisation and running of the institutions (including
interinstitutional agreements), the designation, structure and legal effects of which
stem from various provisions in the Treaties or the rules adopted pursuant to the
Treaties.
2. Hierarchy of EU secondary legislation
A hierarchy of secondary legislation is established by Articles 289, 290 and 291
TFEU between legislative acts, delegated acts and implementing acts. Legislative
acts are legal acts which are adopted through the ordinary or a special legislative
procedure. Delegated acts for their part are non-legislative acts of general application
that supplement or amend certain non-essential elements of a legislative act. The
power to adopt these acts may be delegated to the Commission by the legislator
(Parliament and the Council). The objectives, content, scope and duration of the
delegation of power are defined in the legislative act, as are any urgent procedures,
where applicable. In addition, the legislator lays down the conditions to which the
delegation is subject, which may be the authority to revoke the delegation or the right
to express an objection.
Implementing acts are generally adopted by the Commission, which is competent to
do so in cases where uniform conditions for implementing legally binding acts are
needed. Implementing acts are a matter for the Council only in specific cases which
are duly justified and in areas of common foreign and security policy. Where a basic
act is adopted under the ordinary legislative procedure, the European Parliament or
the Council may at any time indicate to the Commission that, in its view, a draft
implementing act goes beyond the implementing powers provided for in the basic act.
In this case, the Commission must revise the draft act in question.
3. The various types of EU secondary legislation
a. Regulations
Regulations are of general application, binding in their entirety and directly applicable.
They must be complied with fully by those to whom they apply (private individuals,
Member States, EU institutions). Regulations are directly applicable in all the Member
States as soon as they enter into force (on the date stipulated or, failing that, on the
twentieth day following their publication in the Official Journal of the European Union)
and do not need to be transposed into national law.
They are designed to ensure the uniform application of Union law in all the Member
States. Regulations supersede national laws incompatible with their substantive
provisions.
b. Directives
Directives are binding, as to the result to be achieved, upon any or all of the
Member States to whom they are addressed, but leave to the national authorities
the choice of form and methods. National legislators must adopt a transposing act
or ‘national implementing measure’ to transpose directives and bring national law

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into line with their objectives. Individual citizens are given rights and bound by
the legal act only once the transposing act has been adopted. Member States are
given some discretion, in transposing directives, to take account of specific national
circumstances. Transposition must be effected within the period laid down in the
directive. In transposing directives, Member States guarantee the effectiveness of EU
law, in accordance with the principle of sincere cooperation established in Article 4(3)
TEU.
In principle, directives are not directly applicable. The CJEU, however, has ruled
that certain provisions of a directive may, exceptionally, have direct effects in a
Member State even if the latter has not yet adopted a transposing act in cases where:
(a) the directive has not been transposed into national law or has been transposed
incorrectly; (b) the provisions of the directive are imperative and sufficiently clear and
precise; and (c) the provisions of the directive confer rights on individuals.
If these conditions have been met, individuals may invoke the provision in question
in their dealings with the public authorities. Even when the provision does not confer
any rights on the individual, and only the first and second conditions have been met,
Member State authorities are required to take account of the untransposed directive.
This ruling is based chiefly on the principles of effectiveness, the prevention of Treaty
violations and legal protection. On the other hand, an individual may not rely on
the direct effect of an untransposed directive in dealings with other individuals (the
‘horizontal effect’; Faccini Dori v Recreb Srl, Case C-91/92, point 25).
According to the case law of the CJEU (Francovich, joined cases C-6/90 and C-9/90),
an individual citizen is entitled to seek compensation from a Member State that is not
complying with Union law. This is possible, in the case of a directive which has not been
transposed or which has been transposed inadequately, where: (a) the directive is
intended to confer rights on individuals; (b) the content of the rights can be identified
on the basis of the provisions of the directive; and (c) there is a causal link between the
breach of the obligation to transpose the directive and the loss and damage suffered
by the injured parties. Fault on the part of the Member State does not then have to
be demonstrated in order to establish liability.
c. Decisions, recommendations and opinions
Decisions are binding in their entirety. Where those to whom they are addressed are
stipulated (Member States, natural or legal persons), they are binding only on them,
and address situations specific to those Member States or persons. An individual may
invoke the rights conferred by a decision addressed to a Member State only if that
Member State has adopted a transposing act. Decisions may be directly applicable on
the same basis as directives.
Recommendations and opinions do not confer any rights or obligations on those to
whom they are addressed, but may provide guidance as to the interpretation and
content of Union law.
As actions brought against Member States under Article 263 TFEU must concern acts
that have been adopted by EU institutions, bodies, offices or agencies, the CJEU has
no jurisdiction over the decisions of the representatives of the Member States, e.g. as
regards establishing the seats of the EU agencies. Acts adopted by representatives
of the Member States acting, not in their capacity as members of the Council, but

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as representatives of their governments, and thus collectively exercising the powers

of the Member States, are not subject to judicial review by EU courts, according to
a judgment of the Court of 14 July 2022 in the case of relocation of the European
Medicines Agency (EMA)[1]. The Court held that Article 341 TFEU does not apply to
the designation of the location of the seat of a body, office or agency of the Union,
only to institutions. The competence to determine the location of the seat of Union
agencies lies with the EU legislature, which must act to that end in accordance with
the procedures laid down by the substantively relevant provisions of the Treaties. The
decision in question was a non-binding measure of political cooperation, which is not
capable of limiting the discretion of the EU legislature. In that sense, the decision is
not capable of limiting the discretion of the EU legislature or the European Parliament.
4. Provisions on competences, procedures, implementation and enforcement of
legal acts
a. Legislative competence, right of initiative and legislative procedures: 1.3.2, 1.3.6,
1.3.8 and 1.2.3
Parliament, the Council and the Commission take part in the adoption of the Union’s
legislation to varying degrees, depending on the individual legal basis. Parliament can
ask the Commission to present legislative proposals to itself and to the Council.
b. Implementation of Union legislation
Under primary law, the EU has only limited powers of enforcement, as EU law is usually
enforced by the Member States. Furthermore, Article 291(1) TFEU adds that ‘Member
States shall adopt all measures of national law necessary to implement legally binding
Union acts’. Where uniform conditions for implementing legally binding Union acts are
needed, the Commission exercises its implementing powers (Article 291(2) TFEU).
c. Choice of type of legal act
In many cases, the Treaties lay down the type of legal act to be adopted. In many other
cases, however, no type of legal act is specified. In these cases, Article 296(1) TFEU
states that the institutions must select it on a case-by-case basis, ‘in compliance with
the applicable procedures and with the principle of proportionality’.
C. General principles of Union law and fundamental rights
The Treaties make very few references to the general principles of Union law. These
principles have mainly been developed in the case law of the CJEU (legal certainty,
institutional balance, legitimate expectation, etc.), which is also the basis for the
recognition of fundamental rights as general principles of Union law. These principles
are now enshrined in Article 6(3) TEU, which refers to the fundamental rights as
guaranteed by the Convention for the Protection of Human Rights and Fundamental
Freedoms and as they result from the constitutional traditions common to the Member
States and the Charter of Fundamental Rights of the European Union (4.1.2).
D. International agreements concluded by the EU under Articles 216 and 217 TFEU
The Union may, within its sphere of competence, conclude international agreements
with third countries or international organisations (Article 216(1) TFEU). These

[1]See Joined Cases C-59/18 Italy v Council and C-182/18 Comune di Milano v Council, Joined Cases C-106/19 Italy v Council
and Parliament and C-232/19 Comune di Milano v Parliament and Council, and Case C-743/19 Parliament v Council).

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agreements are binding on the Union and the Member States, and are an integral
part of Union law (Article 216(2) TFEU). According to Article 217 TFEU, the EU
may also conclude agreements establishing an association involving reciprocal
rights and obligations, common action and special procedure. The Trade and
Cooperation Agreement between the European Union and the European Atomic
Energy Community, of the one part, and the United Kingdom of Great Britain and
Northern Ireland, of the other part, was concluded in accordance with this provision.
On 28 April 2021, Parliament gave its consent under Article 218, paragraph 6a, TFEU.
According to the case law of the CJEU, international law takes precedence over
(secondary) EU law: ‘It should also be pointed out that, by virtue of Article 216(2)
TFEU, where international agreements are concluded by the European Union they are
binding upon its institutions and, consequently, they prevail over acts of the European
Union’.
E. Independent expertise and better law-making
In 2004, Parliament created five policy departments providing high-level independent
expertise, analysis and policy advice at the request of committees and other
parliamentary bodies. This independent research – connecting MEPs, academia and
citizens – should accompany every legislative initiative, from its planning until the
evaluation of its implementation. It should contribute to the high quality of legislation
and its interpretation, as an indispensable part of preparatory work[2].
Optimal EU legislation can lead to potential gains of over EUR 2 200 billion annually.
Research prepared for the European Parliament by the policy departments indicates
that annual gains of EUR 386 billion can be achieved for the free movement of goods,
EUR 189 billion for the customs union, EUR 289 billion for the free movement of
services and EUR 177 billion for the digital single market.
The Interinstitutional Agreement on Better Law-Making covers annual and multiannual
programming and all aspects of the policy cycle. It also sets out the institutions’
various commitments to deliver high-quality EU legislation that is efficient, effective,
simple and clear, and that avoids overregulation and unnecessary burdens for
individuals, public authorities and businesses, especially small and medium-sized
enterprises.
However, recent research commissioned by the European Parliament indicates that
the involvement of independent research needs to be: (1) improved at the stage
of formulating and planning EU strategies[3], including by shortening delays to
introducing legislative reforms, (2) equally applied to all legislative initiatives (e.g.
exceptions for urgent files lower the quality of EU legislation in important areas), and
(3) equally applied to evaluations of the effects of EU law, which currently lack crucial
assessments of quantified effects due to a lack of data collection[4].

[2]Maciejewski M., Role of the European Parliament in promoting the use of independent expertise in the legislative process,
Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, December 2018.
[3]Jones S. et al., Better regulation in the EU: Improving quality and reducing delays, Policy Department for Citizens’ Rights
and Constitutional Affairs, European Parliament, June 2022.
[4]Sartor G. et al., The way forward for better regulation in the EU – better focus, synergies, data and technology, Policy
Department for Citizens’ Rights and Constitutional Affairs, European Parliament, August 2022.

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ROLE OF THE EUROPEAN PARLIAMENT

Under Article 14(1) TEU: ‘The European Parliament shall, jointly with the Council,
exercise legislative (via the ‘ordinary legislative procedure’) and budgetary (via
a special legislative procedure under Article 314 TFEU) functions’. Parliament is
seeking to simplify the legislative process, improve the drafting quality of legal
texts and ensure that more effective penalties are imposed on Member States that
fail to comply with Union law. The Commission’s Annual Working and Legislative
Programme presents the major political priorities of the Commission and identifies
concrete actions, either legislative or non-legislative, that translate these priorities
into operational terms. Parliament plays a genuine role in creating new laws, since it
examines the Commission’s Annual Programme of Work and says which laws it would
like to see introduced.
Having gained legal personality, the Union can conclude international agreements
(Article 216-217 TFEU). Any agreement concluded in the field of the common
commercial policy and in all fields whose policies fall under the ordinary legislative
procedure require the consent of the European Parliament (Article 218(6)(a) TFEU).
For example, Parliament gave its consent on 28 April 2021 to the EU-UK Trade and
Cooperation Agreement. On other occasions, Parliament had already shown that it
will not hesitate to use its veto if it has serious concerns. For example, it rejected the
Anti-Counterfeiting Trade Agreement (ACTA) in 2012.
In July 2022, Parliament adopted an own-initiative report in response to the
communication from the Commission entitled ‘Better Regulation: Joining forces to
make better laws’.
Research commissioned by the European Parliament’s policy departments indicates
a need for reform to promote better law making and regulation in the EU[5]. The
research also shows that EU legislation can benefit from a reform of its drafting
and its structure so as to indicate its benefits more clearly and facilitate the digital
use of legislation by EU citizens[6]. A recent study on Law and ICT recommends the
progressive digitalisation of the EU legal system, including its sources.[7]

Udo Bux / Mariusz Maciejewski

05/2024

[5]Jones, S. et al., Better regulation in the EU, Policy Department for Citizens’ Rights and Constitutional Affairs, European
Parliament, October 2023.
[6]Xanthaki H., The ‘one in, one out’ principle. A real better lawmaking tool?, Policy Department for Citizens’ Rights and
Constitutional Affairs, European Parliament, October 2023.
[7]Maciejewski M., Law and ICT, Policy Department for Citizens’ Rights and Constitutional Affairs, European Parliament,
April 2024.

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1.2.2. THE PRINCIPLE OF SUBSIDIARITY

In areas in which the European Union does not have exclusive competence, the
principle of subsidiarity, laid down in the Treaty on European Union, defines the
circumstances in which it is preferable for action to be taken by the Union, rather
than the Member States.

LEGAL BASIS
Article 5(3) of the Treaty on European Union (TEU) and Protocol (No 2) on the
application of the principles of subsidiarity and proportionality.

OBJECTIVES
The principles of subsidiarity and proportionality govern the exercise of the EU’s
competences. In areas in which the EU does not have exclusive competence, the
principle of subsidiarity seeks to safeguard the ability of the Member States to take
decisions and action and authorises intervention by the Union when the objectives of
an action cannot be sufficiently achieved by the Member States, but can be better
achieved at Union level, ‘by reason of the scale and effects of the proposed action’.
The purpose of including a reference to the principle in the EU Treaties is also to ensure
that powers are exercised as close to the citizen as possible, in accordance with the
proximity principle referred to in Article 10(3) of the TEU.

ACHIEVEMENTS
A. Origin and history
The principle of subsidiarity was formally enshrined by the TEU, signed in 1992: the
TEU included a reference to the principle in the Treaty establishing the European
Community (TEC). The Single European Act, signed in 1986, had already incorporated
a subsidiarity criterion into environmental policy, however, albeit without referring to
it explicitly as such. In its judgment of 21 February 1995 (T-29/92), the Court of First
Instance of the European Communities ruled that the principle of subsidiarity was not
a general principle of law, against which the legality of Community action should have
been tested, prior to the entry into force of the TEU.
Without changing the wording of the reference to the principle of subsidiarity in
the renumbered Article 5, second paragraph, of the TEC, the Treaty of Amsterdam,
signed in 1997, annexed to the TEC a Protocol on the application of the principles of
subsidiarity and proportionality (hereinafter ‘1997 protocol’). The overall approach to
the application of the principle of subsidiarity, previously agreed at the 1992 European
Council in Edinburgh, thus became legally binding and subject to judicial review via
the protocol on subsidiarity.
The Treaty of Lisbon amending the TEU and TEC, signed in 2007, incorporated the
principle of subsidiarity into Article 5(3) of the TEU and repealed the corresponding
provision of the TEC while retaining its wording. It also added an explicit reference

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to the regional and local dimension of the principle of subsidiarity. What is more,
the Treaty of Lisbon replaced the 1997 protocol with a new Protocol No 2, the main
difference being the new role of the national parliaments in ensuring compliance with
the principle of subsidiarity (1.3.5).
B. Definition
The general aim of the principle of subsidiarity is to guarantee a degree of
independence for a lower authority in relation to a higher body or for a local authority
in relation to central government. It therefore involves the sharing of powers between
several levels of authority, a principle which forms the institutional basis for federal
states.
When applied in the context of the EU, the principle of subsidiarity serves to regulate
the exercise of the Union’s non-exclusive powers. It rules out Union intervention when
an issue can be dealt with effectively by Member States themselves at central, regional
or local level. The Union is justified in exercising its powers only when Member States
are unable to achieve the objectives of a proposed action satisfactorily and added
value can be provided if the action is carried out at Union level.
Under Article 5(3) of the TEU, there are three preconditions for intervention by
Union institutions in accordance with the principle of subsidiarity: (a) the area
concerned does not fall within the Union’s exclusive competence (i.e. non-exclusive
competence); (b) the objectives of the proposed action cannot be sufficiently
achieved by the Member States (i.e. necessity); (c) the action can therefore, by reason
of its scale or effects, be implemented more successfully by the Union (i.e. added
value).
C. Scope
1. The demarcation of Union competences
The principle of subsidiarity applies only to areas in which competence is shared
between the Union and the Member States. Following the entry into force of the
Treaty of Lisbon, the competences conferred on the Union have been more precisely
demarcated: Part One, Title I, of the Treaty on the Functioning of the European Union
(TFEU) (signed in 2007 and entered into force in 2009) divides the competences of
the Union into three categories (exclusive, shared and supporting) and lists the areas
covered by the three categories.
2. Where it applies
The principle of subsidiarity applies to all the EU institutions and has practical
significance for legislative procedures in particular. The Lisbon Treaty has
strengthened the role of both the national parliaments and the Court of Justice
in monitoring compliance with the principle of subsidiarity. It not only introduced
an explicit reference to the subnational dimension of the subsidiarity principle, but
also strengthened the role of the European Committee of the Regions and made
it possible, at the discretion of national parliaments, for regional parliaments with
legislative powers to be involved in the ex ante ‘early warning’ mechanism.

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D. National parliamentary scrutiny

In keeping with the second subparagraph of Article 5(3) and Article 12(b) of the
TEU, national parliaments monitor compliance with the principle of subsidiarity in
accordance with the procedure set out in Protocol No 2. Under the ex ante ‘early
warning’ mechanism referred to above, any national parliament or any chamber of a
national parliament has eight weeks from the date of forwarding of a draft legislative
act to send to the Presidents of the European Parliament, the Council and the
Commission a reasoned opinion stating why it considers that the draft in question
does not comply with the principle of subsidiarity. If reasoned opinions represent at
least one third (one vote per chamber for a bicameral parliamentary system and two
votes for a unicameral system) of the votes allocated to the national parliaments,
the draft must be reviewed (‘yellow card’). The institution which produced the draft
legislative act may decide to maintain, amend or withdraw it, giving reasons for that
decision. For draft acts relating to police cooperation or judicial cooperation in criminal
matters, the threshold is lower (one quarter of the votes). If, in the context of the
ordinary legislative procedure, at least a simple majority of the votes allocated to
national parliaments challenge the compliance of a proposal for a legislative act with
the principle of subsidiarity and the Commission decides to maintain its proposal,
the matter is referred to the legislator (Parliament and the Council), which takes a
decision at first reading. If the legislator considers that the legislative proposal is not
compatible with the principle of subsidiarity, it may reject it subject to a majority of 55
per cent of the members of the Council or a majority of the votes cast in the European
Parliament (‘orange card’).
To date, the ‘yellow card’ procedure has been triggered three times, while the ‘orange
card’ procedure has never been used. In May 2012, the first ‘yellow card’ was issued
with regard to a Commission proposal for a regulation concerning the exercise of the
right to take collective action within the context of the freedom of establishment and
the freedom to provide services (‘Monti II’)[1]. In total, 12 out of 40 national parliaments
or chambers thereof considered that the content of the proposal was not consistent
with the principle of subsidiarity. The Commission ultimately withdrew its proposal,
though it took the view that the subsidiarity principle had not been infringed. In
October 2013, another ‘yellow card’ was issued by 14 chambers of national parliaments
in 11 Member States following the submission of the proposal for a regulation on
the establishment of the European Public Prosecutor’s Office[2]. After examining the
reasoned opinions received from the national parliaments, the Commission decided
to maintain the proposal[3], arguing that it was in line with the subsidiarity principle.
In May 2016, a third ‘yellow card’ was issued by 14 chambers in 11 Member States
against the proposal for a revision of the directive on the posting of workers[4]. The

[1]Proposal for a Council Regulation on the exercise of the right to take collective action within the context of the freedom of
establishment and the freedom to provide services, (COM(2012)0130).
[2]Proposal for a Council Regulation on the establishment of the European Public Prosecutor’s Office, (COM(2013)0534).
[3]Communication from the Commission to the European Parliament, the Council and the National Parliaments on the review
of the proposal for a Council Regulation on the establishment of the European Public Prosecutor’s Office with regard to the
principle of subsidiarity, in accordance with Protocol No 2, (COM(2013)0851).
[4]Proposal for a Directive of the European Parliament and of the Council amending Directive 96/71/EC of the European
Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of
services, (COM(2016)0128).

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Commission gave extensive reasons[5] for maintaining its proposal, given that it did
not infringe the principle of subsidiarity, the posting of workers being, by definition,
a transnational issue.
The Conference of Parliamentary Committees for Union Affairs of Parliaments of
the European Union (COSAC) serves as a useful platform for national parliaments
to share information related to subsidiarity control. In addition, the Subsidiarity
Monitoring Network (SMN) maintained by the European Committee of the Regions
facilitates the exchange of information between local and regional authorities and
the EU institutions. SMN members include regional parliaments and governments
with legislative powers, local and regional authorities without legislative powers and
local government associations in the EU. It is also open to national delegations of the
European Committee of the Regions and chambers of national parliaments.
E. Conference on the Future of Europe
In March 2017, the Commission created a dedicated ‘Task Force on subsidiarity,
proportionality and doing less more efficiently’, as part of the Better Regulation
agenda, and in particular the debate on the future of Europe launched by Commission
President Juncker’s white paper. The Task Force aims to 1) make recommendations
on how to better apply the principles of subsidiarity and proportionality; 2) identify
policy areas where work could be re-delegated or definitely returned to EU countries;
and 3) find ways to better involve regional and local authorities in EU policy-making
and delivery.
Based on the recommendations given by the Task Force, the Commission published
its subsidiarity package in October 2018, aiming to strengthen the role of the
principles of subsidiarity and proportionality in EU policymaking. One of the main
Task Force recommendations taken on board was to incorporate a grid for assessing
subsidiarity and proportionality in the Commission’s better regulation guidance and to
use the grid to present the Commission’s findings in impact assessments, evaluations
and explanatory memorandums.
The principles of subsidiarity and proportionality were also in the spotlight of the
Conference on the Future of Europe, in line with the Joint Declaration on the
Conference on the Future of Europe signed by the Presidents of Parliament, the
Council and the Commission.
F. Judicial review
Compliance with the principle of subsidiarity may be reviewed retrospectively
(following the adoption of the legislative act) by means of a legal action brought
before the Court of Justice of the European Union. That is also stated in the protocol.
The Union institutions enjoy wide discretion in applying this principle, however. In its
judgments in cases C-84/94 and C-233/94, the Court found that compliance with the
principle of subsidiarity was one of the conditions covered by the requirement to state
the reasons for Union acts, under Article 296 of the TFEU. This requirement is met if it
is clear from reading the recitals that the principle has been complied with. In a more
recent judgment (Case C-547/14, Philip Morris, paragraph 218), the Court reaffirmed

[5]Communication from the Commission to the European Parliament, the Council and the National Parliaments on the
proposal for a Directive amending the Posting of Workers Directive, with regard to the principle of subsidiarity, in accordance
with Protocol No 2, (COM(2016)0505).

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that it must verify ‘whether the Union legislator was entitled to consider, on the basis
of a detailed statement, that the objective of the proposed action could be better
achieved at Union level’. Concerning procedural safeguards and, in particular, the
obligation to state reasons as regards subsidiarity, the Court recalled that observance
of that obligation ‘must be evaluated not only by reference to the wording of the
contested act, but also by reference to its context and the circumstances of the
individual case’ (paragraph 225).
Member States may bring actions for annulment before the Court against a legislative
act on grounds of infringement of the principle of subsidiarity on behalf of their
national parliament or a chamber thereof, in accordance with their legal system. The
European Committee of the Regions may also bring such actions against legislative
acts if the TFEU provides that it must be consulted.

ROLE OF THE EUROPEAN PARLIAMENT

Parliament was the instigator of the concept of subsidiarity and, on 14 February 1984,
in adopting the draft Treaty on European Union, proposed a provision stipulating that
in cases where the Treaty conferred on the Union a competence which was concurrent
with that of the Member States, the Member States could act as long as the Union had
not legislated. Moreover, it stressed that the Community should only act to carry out
those tasks which could be undertaken more effectively in common than by individual
states acting separately.
Parliament was to reiterate these proposals in many resolutions (for example those of
23 November and 14 December 1989, 12 July and 21 November 1990 and 18 May 1995),
in which it reaffirmed its support for the principle of subsidiarity.
A. Interinstitutional agreements
Parliament adopted a series of measures to carry out its role under the Treaties as
regards the application of the principle of subsidiarity. Pursuant to Rule 43 of its Rules
of Procedure, ‘during the examination of a proposal for a legislative act, Parliament
shall pay particular attention to whether that proposal respects the principles of
subsidiarity and proportionality’. The Committee on Legal Affairs is the parliamentary
committee with horizontal responsibility for monitoring compliance with the principle
of subsidiarity. In this regard, it regularly draws up a report on the Commission’s annual
reports on subsidiarity and proportionality.
On 25 October 1993, the Council, Parliament and the Commission signed an
interinstitutional agreement[6] that demonstrated clearly the three institutions’
eagerness to take decisive steps in this area. They thus undertook to comply with the
principle of subsidiarity. The agreement lays down, by means of procedures governing
the application of the principle of subsidiarity, arrangements for the exercise of the
powers conferred on the Union institutions by the Treaties, so that the objectives laid
down in the Treaties can be attained. The Commission undertook to take into account
the principle of subsidiarity and show that it has been observed. The same applies to
Parliament and the Council, in the context of the powers conferred on them.

[6]Interinstitutional agreement of 25 October 1993 between the Parliament, the Council and the Commission on procedures
for implementing the principle of subsidiarity, OJ C 329, 6.12.1993, p. 135.

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Under the terms of the interinstitutional agreement of 13 April 2016 between

the European Parliament, the Council of the European Union and the European
Commission on Better Law-Making (replacing the Agreement of December 2003 and
the Interinstitutional Common Approach to Impact Assessment of November 2005),
the Commission must explain in its explanatory memoranda how the proposed
measures are justified in the light of the principle of subsidiarity and must take
this into account in its impact assessments. Moreover, in concluding the Framework
Agreement of 20 November 2010[7], Parliament and the Commission undertook to
cooperate with the national parliaments in order to facilitate the exercise by those
parliaments of their power to scrutinise compliance with the principle of subsidiarity.
B. European Parliament resolutions
In its resolution of 13 May 1997[8], Parliament already made clear its view that
the principle of subsidiarity was a binding legal principle but pointed out that
its implementation should not obstruct the exercise by the EU of its exclusive
competence, nor be used as a pretext to call into question the acquis communautaire.
In its resolution of 8 April 2003[9], Parliament added that disputes should preferably
be settled at political level, while taking into account the proposals made by
the Convention on the Future of Europe concerning the establishment by the
national parliaments of an ‘early warning’ mechanism in the area of subsidiarity. This
mechanism was indeed incorporated into the Lisbon Treaty (see above and 1.3.5).
In its resolution of 13 September 2012[10], Parliament welcomed the closer involvement
of the national parliaments in scrutinising legislative proposals in the light of
the principles of subsidiarity and proportionality and suggested that any ways to
alleviate impediments to national parliaments’ participation in the subsidiarity control
mechanism should be investigated.
In its resolution of 18 April 2018[11], Parliament noted the sharp increase in the number
of reasoned opinions submitted by national parliaments, which reveals their growing
involvement in the Union’s decision-making process. It also welcomed national
parliaments’ interest in adopting a more proactive role through the use of a ‘green
card’ procedure. In this respect, it recommended making full use of the existing tools
enabling national parliaments to participate in the legislative process without creating
new institutional and administrative structures.
In its resolution of 13 February 2019 on the state of the debate on the future
of Europe[12], Parliament highlighted the fundamental role of local authorities and,
in particular, regional parliaments with legislative powers. It also took note of the

[7]Framework Agreement on relations between the European Parliament and the European Commission, OJ L 304, 20.11.2010,
p. 47.
[8]European Parliament resolution on the Commission’s report to the European Council — ‘Better law-making 1997’, OJ C 98,
9.4.1999, p. 500
[9]European Parliament resolution on the Commission report to the European Council on better law-making 2000 (pursuant
to Article 9 of the Protocol to the EC Treaty on the application of the principles of subsidiarity and proportionality) and on the
Commission report to the European Council on better law-making 2001 (pursuant to Article 9 of the Protocol to the EC Treaty
on the application of the principles of subsidiarity and proportionality), OJ C 64E , 12.3.2004, p. 135.
[10]European Parliament resolution of 13 September 2012 on the 18th report on Better legislation – Application of the
principles of subsidiarity and proportionality (2010), OJ C 353E, 3.12.2013, p. 117.
[11]European Parliament resolution of 18 April 2018 on the Annual Reports 2015-2016 on subsidiarity and proportionality
(2017/2010(INI)), OJ C 390, 18.11.2019, p. 94.
[12]European Parliament resolution of 13 February 2019 on the state of the debate on the future of Europe (2018/2094(INI)).

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recommendations of the ‘Task Force on subsidiarity, proportionality and doing less

more efficiently’ but pointed out that many of them, particularly regarding the role
of national parliaments and the need to reform the early warning system, had already
been highlighted by Parliament.
In its resolution of 24 June 2021[13], Parliament pointed out that local and regional
authorities implement and use approximately 70% of EU legislation and called
on the Commission to better involve them in its consultation processes, and to
integrate a ‘model grid’ to assess the application of principles of subsidiarity and
proportionality throughout the decision-making process. Parliament also highlighted
that the current structure of the subsidiarity control mechanism procedure results
in national parliaments dedicating excessive amounts of time to technical and legal
assessments with short deadlines, which complicates the goal of holding a deeper
political discussion on European politics.

Eeva Pavy
03/2024

[13]European Parliament resolution of 24 June 2021 on European Union regulatory fitness and subsidiarity and proportionality
- report on Better Law Making covering the years 2017, 2018 and 2019 (2020/2262(INI)).

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1.2.3. SUPRANATIONAL DECISION-

MAKING PROCEDURES

The Member States of the European Union have agreed, as a result of their
membership of the EU, to transfer some of their powers to the EU institutions in
specified policy areas. Thus, EU institutions make supranational binding decisions
in their legislative and executive procedures, budgetary procedures, appointment
procedures and quasi-constitutional procedures.

HISTORY (1.1.1, 1.1.2, 1.1.3, 1.1.4 AND 1.1.5)

The Treaty of Rome gave the Commission powers of proposal and negotiation, mainly
in the fields of legislation and external economic relations, and allocated powers for
decision-making to the Council or, in the case of appointments, representatives of the
Member States’ governments. It gave Parliament a consultative power. Parliament’s
role has gradually grown, in the budgetary domain with the reforms of 1970 and 1975,
in the legislative domain with the Single European Act and all the following Treaties,
in the first place the Treaty of Maastricht introducing codecision with the Council,
which also increased Parliament’s role in appointments. Furthermore, the Single
European Act gave Parliament the power to authorise ratification of accession and
association treaties; Maastricht extended that power to other international treaties
of certain kinds. The Treaty of Amsterdam made substantial progress down the road
to democratising the Community, by simplifying the codecision procedure, extending
it to new areas and strengthening Parliament’s role in appointing the Commission.
Following this approach, the Treaty of Nice considerably increased Parliament’s
powers. On the one hand, the codecision procedure (in which Parliament has the same
powers as the Council) was applied to almost all new areas where the Council was
entitled to decide by qualified majority. On the other hand, Parliament acquired the
same powers as the Member States in terms of referring matters to the Court of
Justice. The Treaty of Lisbon is a further qualitative step towards full equality with the
Council in EU legislation and finance.

LEGISLATIVE PROCEDURES[1]
A. Ordinary legislative procedure (Article 289 and 294 TFEU)
1. Scope
The Lisbon Treaty added 40 further legal bases, in particular in the area of justice,
freedom and security and in agriculture, under which the Parliament now decides
on legislative acts on equal footing with the Council. Hence, the ordinary legislative
procedure, formerly called the codecision procedure, applies to 85 legal bases. The
ordinary legislative procedure includes qualified majority voting (QMV) in the Council
(Article 294 TFEU). However, it does not apply to several important areas, for example

[1]The Lisbon Treaty abolished the cooperation procedure which was introduced by the Single European Act of 1986.

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fiscal policy concerning direct taxation or transnational aspects of family law, which
require unanimity in the Council.
2. Procedure
The ordinary legislative procedure follows the same steps as the former codecision
procedure. However, the wording of the TFEU has changed considerably, notably to
underline the equal role of Council and Parliament in this procedure.
a. Commission proposal
b. First reading in Parliament
Parliament adopts its position by a simple majority.
c. First reading in the Council
The Council adopts its position by QMV.
In the fields of social security and police and judicial cooperation in criminal matters,
the proposal can be submitted to the European Council at the request of one Member
State (Articles 48 and 82 TFEU), and this suspends the ordinary legislative procedure
until the European Council reassigns the matter to the Council (at the latest after four
months). In the case of Article 82, at least nine Member States may decide to continue
deliberations under enhanced cooperation (Article 20 TEU and Article 326-334 TFEU).
If the Council approves Parliament’s position, the act is adopted in the wording which
corresponds to Parliament’s position.
d. Second reading in Parliament
Parliament receives the Council’s position and has three months to take a decision.
It may thus:
— Approve the proposal as amended by the Council or take no decision; in both
cases, the act as amended by the Council is adopted;
— Reject the Council’s position by an absolute majority of its Members; the act is
not adopted and the procedure ends;
— Adopt, by an absolute majority of its Members, amendments to the Council’s
position, which are then put to the Commission and the Council for their opinion.
e. Second reading in the Council
— If the Council, voting by a qualified majority on Parliament’s amendments, and
unanimously on those on which the Commission has delivered a negative opinion,
approves all of Parliament’s amendments no later than three months after
receiving them, the act is adopted.
— Otherwise, the Conciliation Committee is convened within six weeks.
f. Conciliation
— The Conciliation Committee consists of an equal number of Council and
Parliament representatives, assisted by the Commission. It considers the
positions of Parliament and the Council and has six weeks to agree on a joint text
supported by a QMV of Council representatives and a majority of Parliament’s
representatives.

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— The procedure stops and the act is not adopted if the Committee does not reach
agreement on a joint text by the deadline.
— If it does so, the joint text is sent to the Council and Parliament for approval.
g. Conclusion of the procedure (third reading)
— The Council and Parliament have six weeks to approve the joint text. The Council
acts by a qualified majority and Parliament by a majority of the votes cast.
— The act is adopted if the Council and Parliament approve the joint text.
— If either of the institutions has not approved it by the deadline, the procedure
stops and the act is not adopted.
Over the past few years, the number of first reading agreements based on informal
negotiations between the Council and Parliament has significantly increased.
Some bridge clauses allow the European Council to extend the application of the
ordinary procedure to areas exempted from it (for example social policy: Article 153(2)
TFEU).
B. Consultation procedure
Before taking a decision, the Council must take note of the opinion of Parliament
and, if necessary, of the European Economic and Social Committee and the European
Committee of the Regions. It is required to do so, as the absence of such consultation
makes the act illegal and capable of annulment by the Court of Justice (see judgment
in Cases 138 and 139/79). When the Council intends to substantially amend the
proposal, it is required to consult Parliament again (judgment in Case 65/90).
C. Consent procedure
1. Scope
As a result of the entry into force of the Lisbon Treaty, the consent procedure applies
in particular to the horizontal budgetary flexibility clause, as specified in Article 352
TFEU (former Article 308 TEC). Other examples are action to combat discrimination
(Article 19(1) TFEU) and membership of the Union (Articles 49 and 50 TEU). In addition,
Parliament’s consent is required for association agreements (Article 217 TFEU),
accession of the Union to the ECHR (Article 6(2) TEU), and agreements establishing a
specific institutional framework entailing major budgetary implications or concerning
areas where the ordinary legislative procedure applies (Article 218(6) TFEU).
2. Procedure
Parliament considers a draft act forwarded by the Council; it decides whether to
approve the draft (it cannot amend it) by an absolute majority of the votes cast.
The Treaty does not give Parliament any formal role in the preceding stages of the
procedure to consider the Commission proposal, but as a result of interinstitutional
arrangements it has become the practice to involve Parliament informally (see
Parliament’s Rules of Procedure).

APPOINTMENT PROCEDURES
1. Parliament elects the President of the Commission (Article 14(1) TEU) (1.3.8).

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2. The European Council, acting by qualified majority, appoints the High

Representative for Foreign Affairs and Security Policy (Article 18(1) TEU).
3. The Council, acting by qualified majority, adopts the list of the other persons
whom it proposes for appointment as Members of the Commission, by common
accord with the President-elect (Article 17(7) TEU).
4. The Council adopts the list of:
a. the members of the Court of Auditors (Article 286 TFEU), after consulting
Parliament and in accordance with the proposals put forward by the
Member States;
b. members and alternate members of the European Committee of the
Regions and the European Economic and Social Committee, drawn up in
accordance with the proposals made by each Member State (Articles 301,
302 and 305 TFEU).
5. Parliament elects the European Ombudsman (Article 228 TFEU).

CONCLUSION OF INTERNATIONAL AGREEMENTS

Having gained legal personality, the Union can now conclude international agreements
(Article 218 TFEU). The Lisbon Treaty requires the consent of the European Parliament
in any agreements concluded in the field of the Common Commercial Policy as well
as in all fields whose policies would fall under the ordinary legislative procedure
within the EU. The Council decides by QMV, with the exception of association
and accession agreements, agreements risking to prejudice the Union’s cultural and
linguistic diversity, and agreements in fields where unanimity would be required for
the adoption of internal acts.
— Procedure: The Commission or the High Representative of the Union for Foreign
Affairs and Security Policy (HR) presents recommendations to the Council, the
Council defines the mandate for the negotiations and nominates the Union
negotiator (from the Commission or the HR) to conduct negotiations. The
European Parliament must be immediately and fully informed at all stages of the
procedure (Article 218(10) TFEU).
— Decision: Council, by QMV, except in the fields mentioned above.
— Parliament’s role: consent for most agreements (see above), consultation for
agreements falling exclusively in the field of foreign and security policy.

QUASI-CONSTITUTIONAL PROCEDURES
A. System of own resources (Article 311 TFEU)
— Proposal: Commission;
— Parliament’s role: consultation;
— Decision: Council, unanimously, subject to adoption by the Member States in
accordance with their respective constitutional requirements.

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B. Provisions for election of Parliament by direct universal suffrage (Article 223

TFEU)
— Proposal: Parliament;
— Decision: Council, unanimously after obtaining Parliament’s consent and
recommending the proposal to the Member States for adoption according to their
constitutional requirements.
C. Adoption of the Statute for Members of the European Parliament (Article 223(2)
TFEU) and the Statute for the Ombudsman (Article 228(4) TFEU)
— Proposal: Parliament;
— Commission’s role: opinion;
— Council’s role: consent (by qualified majority except in relation to rules or
conditions governing the tax arrangements for Members or former Members, in
which case unanimity applies);
— Decision: Parliament.
D. Amendment of the protocol on the Statute of the Court of Justice (Article 281
TFEU)
— Proposal: Court of Justice (with consultation of the Commission) or Commission
(with consultation of the Court of Justice);
— Decision: Council and Parliament (ordinary legislative procedure).

ROLE OF THE EUROPEAN PARLIAMENT

At the 2000 Intergovernmental Conference (IGC), Parliament made several proposals
to extend the areas to which the ordinary legislative (formerly ‘codecision’) procedure
would apply. Parliament also repeatedly voiced its opinion that, if there was a change
from unanimity to qualified majority, co-decision should apply automatically. The
Treaty of Nice endorsed this position but did not fully align qualified majority and
codecision. As a result, the issue of simplifying procedures was one of the key
elements addressed at the Convention on the Future of Europe. It was proposed
that the cooperation and consultation procedures be abolished, that the codecision
procedure be simplified and extended to cover the entire legislative field, and that
the assent procedure be limited to the ratification of international agreements. Many
of these improvements were implemented by the Lisbon Treaty (1.1.5).
With regard to appointments, the Treaty of Lisbon failed to put an end to the wide
range of different procedures, although some streamlining was achieved. Unanimity
is still applied in some cases, and tends to cause political disputes and reduces the
influence of Parliament. Progress was achieved in particular after the entry into force
of the Treaty of Nice, with the move from unanimity to qualified majority for the
appointment of the Commission President. The Lisbon Treaty provides, in addition,
for the election of the Commission President by Parliament. The appointment of the
President-elect, after appropriate consultations of Parliament, must take due account
of the results of the European elections. This highlights the political legitimacy and
accountability of the European Commission. After the elections to the European

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Parliament in 2014, these provisions were implemented for the first time. The
European Council agreed to designate Jean-Claude Juncker as President of the
European Commission because the European People’s Party (EPP) was the largest
group in the European Parliament following the elections.

Martina Schonard
07/2024

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1.2.4. INTERGOVERNMENTAL
DECISION-MAKING PROCEDURES

In the Common Foreign and Security Policy (CFSP), as well as in several other
fields such as enhanced cooperation, certain appointments and treaty revision,
the decision-making procedure is different from that prevailing in the ordinary
legislative procedure. The dominant feature in these fields is a stronger component
of intergovernmental cooperation. The challenge of the public debt crisis has led
to increased use of such decision-making mechanisms, notably in the framework of
European economic governance.

LEGAL BASIS
Articles 20, 21-46, 48 and 49 of the Treaty on European Union (TEU); Articles 2(4), 31,
64(3), 81, 89, 103(1), 113, 115, 118, 127, 153, 191(3), 192, 194 (2), 215, 218, 220, 221, 312,
329 and 333 of the Treaty on the Functioning of the European Union (TFEU).

DESCRIPTION
A. Procedure for amendment of the Treaties (Article 48 of the TEU)
— Proposal: any Member State, Parliament or the Commission;
— Commission’s role: consultation and participation in the intergovernmental
conference;
— Parliament’s role: consultation before the intergovernmental conference is
convened (the conferences themselves involve Parliament on an ad hoc basis but
with increasing influence: for some time it was represented by either its President
or two of its Members; at the most recent intergovernmental conference it
provided three representatives);
— Role of the Governing Council of the European Central Bank: consultation in the
event of institutional changes in the monetary field;
— Decision: common accord of the governments on amendments to the Treaties,
which are then put to the Member States for ratification in accordance with their
constitutional requirements; before that, a decision by the European Council
is required, by a simple majority, on whether or not to convene a Convention,
following the consent of Parliament.
B. Procedure for the activation of passerelle clauses
— European Council: activates and decides, unanimously, on the use of the general
passerelle clause (Article 48 of the TEU) and the specific passerelle for the
multiannual financial framework (Article 312 of the TFEU). Any national parliament
has a right of veto for the general clause;

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— Council: other passerelle clauses can be decided by the Council, acting

unanimously or by qualified majority, depending on the relevant treaty provision
(Article 31 of the TEU, Articles 81, 153, 192 and 333 of the TFEU).
C. Accession procedure (Article 49 of the TEU)
— Applications: from any European state which complies with the Union’s principles
(Article 2 of the TEU); notification of national parliaments and European
Parliament; the European Council agrees on conditions of eligibility;
— Commission’s role: consultation; it plays an active part in preparing and
conducting negotiations;
— Parliament’s role: consent, by an absolute majority of its component Members;
— Decision: by the Council, unanimously; the agreement between the EU Member
States and the applicant state, setting out the terms of accession and the
adjustments required, is put to all the Member States for ratification in
accordance with their constitutional requirements.
D. Withdrawal procedure (Article 50 of the TEU)
— Request: the Member State concerned notifies the European Council of its
intention, in accordance with its own constitutional requirements;
— Conclusion: takes the form of a withdrawal agreement concluded by the Council
after obtaining the consent of Parliament, and acting by a special qualified
majority (Article 238(3)(b) of the TFEU); this is defined as 72 % of the members of
the Council representing the participating Member States (i.e. excluding the state
concerned), comprising at least 65 % of the population of these Member States.
E. Sanctions procedure for a serious and persistent breach of Union principles by
a Member State (Article 7 of the TEU)
1. Main procedure
— Proposal for a decision determining the existence of a serious and persistent
breach: one third of the Member States, or the Commission;
— Parliament’s consent: adopted by a two-thirds majority of the votes cast,
representing a majority of its Members (Rule 83(3) of Parliament’s Rules of
Procedure);
— Decision determining the existence of a breach: adopted by the European
Council, unanimously, without the participation of the Member State concerned,
after inviting the State in question to submit its observations on the matter;
— Decision to suspend certain rights of the Member State concerned: adopted by
the Council by a qualified majority (without the participation of the Member State
concerned).
2. The Treaty of Nice supplemented this procedure with a precautionary system
— Reasoned proposal for a decision determining a clear risk of a serious breach
of Union principles by a Member State: on the initiative of the Commission,
Parliament or one third of the Member States;

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— Parliament’s consent: adopted by a two-thirds majority of the votes cast,

representing a majority of its component Members;
— Decision: adopted by the Council by a four-fifths majority of its members,
after hearing the Member State in question. The Council can address
recommendations to the Member State before taking such a decision.
F. Enhanced cooperation procedure
1. General rules (Article 20 of the TEU, Article 329(1) of the TFEU)
— Proposal: exclusive right of the Commission; Member States which intend to
establish enhanced cooperation can address a request to the Commission to that
effect;
— Parliament’s role: consent;
— Decision: by the Council, acting by a qualified majority.
2. Cooperation in the field of the CFSP (Article 329(2) of the TFEU)
— Application to the Council by the Member States concerned;
— Proposal forwarded to the High Representative of the Union for Foreign Affairs
and Security Policy (HR), who gives an opinion;
— Information of Parliament;
— The Council acts on the basis of unanimity.
A similar procedure exists for initiating a structured cooperation in defence policy
introduced by the Treaty of Lisbon (5.1.2).
G. Procedure for decisions in foreign affairs
The Treaty of Lisbon abolished the three-pillar structure of the previous treaties but
kept foreign policy separate from the other EU policies. The objectives and provisions
of the CFSP are included in the Treaty on European Union. They are now better drafted
and more coherent than in the previous treaties.
A major institutional change is the creation of the office of the HR, who is assisted by
a new European External Action Service and can propose initiatives under the CFSP.
The CFSP has been integrated into the Union framework but follows specific rules and
procedures (Article 24(2) of the TEU).
— Proposal: any Member State, the HR or the Commission (Article 22 of the TEU);
— Parliament’s role: regularly informed by the Presidency and consulted on the main
aspects and basic choices. Under the interinstitutional agreement on financing
the CFSP, this consultation process is an annual event on the basis of a Council
document;
— Decision: European Council or Council, acting unanimously. The European
Council defines the priorities and strategic interests of the EU; the Council
takes decisions or actions. The HR and the Member States put these decisions
into effect, making use of national or Union resources. The President of the
European Council can convene an extraordinary meeting of the European Council
if international developments so require.

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H. Other legislative measures (2.6.8)

Intergovernmental decision-making is also maintained in a number of specific,
politically sensitive areas of EU policy, in particular:
— Justice and home affairs: measures regarding judicial cooperation in criminal
matters, judicial cooperation (Article 89 of the TFEU);
— The internal market: restrictions on movement of capital (Article 64(3) of
the TFEU), competition policy (Article 103(1) of the TFEU), tax harmonisation
measures (Article 113 of the TFEU), approximation of laws affecting the
establishment of the internal market (Article 115 of the TFEU), intellectual
property rights (Article 118 of the TFEU);
— Monetary policy: conferral of specific prudential supervision tasks on the
European Central Bank (ECB) (Article 127 of the TFEU);
— Other policy fields such as social policies and employment (Article 153 of the
TFEU), energy (Article 194(2) of the TFEU) or environment (Article 191(3) of the
TFEU).
I. Financial crisis management (2.6.8)
The advent of grave financial difficulties in some Member States in 2010 has made it
necessary to come to their rescue in different guises. Some components of the aid
package are managed by the Union, for instance the European Financial Stabilisation
Mechanism. The major part, notably the contributions to the European Financial
Stability Facility (EFSF), is paid directly by the Member States. The EFSF is a ‘special-
purpose vehicle’ created by an intergovernmental agreement among the euro area
Member States. The decisions required for such intergovernmental measures have
therefore had to be taken at the level of the European Council, or of the Heads of
State or Government of the Eurogroup, including ratification in the Member States
according to their national constitutional requirements. Two important reasons for this
development are the no-bail-out clause (Article 125 of the TFEU) and the resistance
of some national constitutional courts to a further transfer of financial and budgetary
powers to the European Union.
An amendment to Article 136 of the TFEU (economic policy coordination) was adopted
by the European Council on 25 March 2011, under the simplified treaty revision
procedure, without convening a Convention (European Council Decision 2011/199/
EU). It entered into force in April 2013, thus enabling permanent crisis prevention
mechanisms such as the European Stability Mechanism (ESM) to come into operation.
The latter was created by an intergovernmental treaty between the members of the
euro area, which entered into force on 27 September 2012. Voting procedures on
its executive board include a so-called ‘emergency procedure’, which provides for a
qualified majority of 85 % if the Commission and the ECB conclude that an urgent
decision related to financial assistance is needed. Finally, the Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union (TSCG) was
drawn up by Member State governments and entered into force on 1 January 2013,
after 12 contracting parties whose currency is the euro deposited their instrument of
ratification. The treaty provides, in particular, for a requirement for a balanced budget
rule in domestic legal orders (the Fiscal Compact). Of the 25 contracting parties to

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the TSCG, a total of 22 are formally bound by the Fiscal Compact (the 19 euro area
Member States, as well as Bulgaria, Denmark and Romania).
J. Appointments
— The European Council, acting by a qualified majority, appoints the President,
the Vice-President and the other four members of the Executive Board of the
European Central Bank, on a recommendation by the Council and after consulting
Parliament (Article 283(2) of the TFEU);
— The European Council, acting by a qualified majority and with the agreement
of the President of the Commission, appoints the High Representative of the
Union for Foreign Affairs and Security Policy (Article 18(1) of the TEU); in his/her
capacity as a Vice-President of the Commission, the HR is nevertheless subject,
together with the President of the Commission and the other members of the
Commission, to a vote of consent by the European Parliament;
— The Governments of the Member States appoint by common accord the judges
and advocates-general of the Court of Justice and the General Court (formerly
the Court of First Instance) (Article 19(2) of the TEU);
— The Council appoints the Members of the Court of Auditors by qualified majority,
on the recommendation of each Member State and after consulting Parliament
(Article 286(2) of the TFEU).

ROLE OF THE EUROPEAN PARLIAMENT

In the run-up to the 1996 Intergovernmental Conference, Parliament had already
called for ‘communitisation’ of the second and third pillars, so that the decision-
making procedures applicable under the Treaty establishing the European Community
would also apply to them.
Following Parliament’s continued efforts during the European Convention to make
the former second and third pillars part of the Union’s structure (1.1.4), the Treaty
of Lisbon extended supranational decision-making to the former third pillar (justice
and home affairs) and introduced a coherent institutional framework for foreign and
security policy, with important innovations such as the long-term President of the
European Council and the position of High Representative of the Union for Foreign
Affairs and Security Policy.
In a context of increasing inter-governmentalisation of economic and fiscal
governance, Parliament played its part in ensuring appropriate participation of the EU
institutions in the negotiations on the international treaty mentioned above in section
I.
In February 2019, Parliament adopted a resolution on the implementation of the Treaty
provisions concerning enhanced cooperation[1], in which it issued recommendations
for the future evolution of enhanced cooperation. In particular, Parliament considered
it necessary to devise a procedure for the fast-track authorisation of enhanced
cooperation in fields of high political salience to be accomplished within a shorter

[1]European Parliament resolution of 12 February 2019 on the implementation of the Treaty provisions concerning enhanced
cooperation (OJ C 449, 23.12.2020, p. 16).

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timeframe than the duration of two consecutive Council presidencies. It also called
on the Commission to propose a regulation to simplify and unify the relevant legal
framework for enhanced cooperation.
In its resolution of 13 February 2019 on the state of the debate on the future
of Europe[2], Parliament advocated the use of the general passerelle clauses
(Article 48(7)(1) and 48(7)(2) of the TEU) and other specific passerelle clauses to
help overcome the deadlock of requiring unanimous voting without having to seek
intergovernmental solutions outside the scope of the Treaties. The report on the
final outcome of the Conference on the Future of Europe, which was presented to
the Presidents of the three institutions on 9 May 2022, highlights the importance
of reviewing the decision-making processes based on unanimity. On 11 July 2023,
Parliament adopted a resolution[3] on the implementation of passerelle clauses in the
EU Treaties’.

Eeva Pavy
03/2024

[2]European Parliament resolution of 13 February 2019 on the state of the debate on the future of Europe (OJ C 449,
23.12.2020, p. 90).
[3]European Parliament resolution of 11 July 2023 on the implementation of the passerelle clauses in the EU Treaties, texts
adopted.

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1.2.5. THE BUDGETARY PROCEDURE

Parliament’s role in the budgetary process has progressively expanded since

the 1970 and 1975 Budgetary Treaties. In 2009, the Treaty of Lisbon gave Parliament
an equal say with the Council over the entire EU budget.

LEGAL BASIS
— Article 314 of the Treaty on the Functioning of the European Union (TFEU) and
Article 106a of the Treaty establishing the European Atomic Energy Community;
— Articles 39 to 55 of the Financial Regulation (Regulation (EU, Euratom) 2018/1046
of the European Parliament and of the Council of 18 July 2018 on the financial
rules applicable to the general budget of the Union, amending Regulations (EU)
No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU)
No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and
Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012);
— Interinstitutional Agreement (IIA) between the European Parliament, the Council
and the Commission on budgetary discipline, on cooperation in budgetary
matters and on sound financial management.

OBJECTIVES
The exercise of budgetary powers consists in determining the overall amount and
distribution of annual EU expenditure and the revenue necessary to cover it, as well as
exercising control over implementation of the budget. The budgetary procedure itself
involves the preparation and adoption of the budget (1.4.1 for details on EU revenue,
1.4.2 for details of expenditure, 1.4.3 for details of the multiannual financial framework
(MFF), 1.4.4 for details of implementation and 1.4.5 for details of budgetary control).

DESCRIPTION
A. Background
Parliament and the Council together form the budgetary authority. Prior to 1970,
budgetary powers were vested in the Council alone, with Parliament having only a
consultative role. The Treaties of 22 April 1970 and 22 July 1975 increased Parliament’s
budgetary powers:
— The 1970 Treaty, while maintaining the Council’s right to have the last word on
‘compulsory expenditure’ resulting from Treaty obligations or from acts adopted
under the Treaty, gave Parliament the final say on ‘non-compulsory expenditure’,
which initially amounted to 8% of the budget;
— The 1975 Treaty gave Parliament the right to reject the budget in its entirety.

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Until the Treaty of Lisbon came into force, the Council and Parliament each undertook
two readings in the course of the budgetary procedure, at the end of which Parliament
could either adopt the budget or reject it in its entirety.
No substantial modifications were introduced by subsequent Treaties until the major
changes brought by the Treaty of Lisbon, which introduced a simpler and more
transparent budgetary procedure (budgetary codecision). The modifications derive
mainly from the removal of the distinction between compulsory expenditure and non-
compulsory expenditure. This allows for equal treatment of all expenditure under the
same procedure, which has been further simplified, with only one reading in each
institution, based on the draft budget presented by the Commission.
B. The stages of the procedure
Article 314 TFEU sets out the stages and time limits applicable during the budgetary
procedure. Current practice, however, is for the institutions to agree on a ‘pragmatic’
calendar each year prior to the start of the budgetary procedure.
1. Stage one: submission of the draft budget by the Commission
Parliament and the Council lay down guidelines on the priorities for the budget. The
Commission draws up the draft budget and forwards it to the Council and Parliament
(no later than 1 September under Article 314(2) TFEU, but according to the pragmatic
timetable, by the end of April or beginning of May). The Commission may modify the
draft budget at a later stage to take account of new developments, but no later than
the point at which the Conciliation Committee (see below) is convened.
2. Stage two: adoption of the Council’s position on the draft budget
The Council adopts its position on the draft budget and forwards it to Parliament
(under Article 314(3) TFEU it must be submitted by 1 October at the latest, but
according to the pragmatic timetable it is sent by the end of July). The Council must
inform Parliament in full of the reasons why it adopted its position.
3. Stage three: Parliament’s reading
Parliament has 42 days in which to respond. During this period, it may either approve
the Council’s position or decline to take a decision, in which case the budget is deemed
finally adopted, or else Parliament can propose amendments if they are adopted by
a majority of its members, in which case the amended draft is referred back to both
the Council and the Commission. The President of Parliament, in agreement with the
President of the Council, must then immediately convene a meeting of the Conciliation
Committee.
4. Stage four: meeting of the Conciliation Committee and adoption of the budget
From the day on which it is convened, the Conciliation Committee (composed of an
equal number of representatives of the Council and Parliament) has 21 days to agree
on a joint text. To do so, it must take its decision by a qualified majority of the members
of the Council or their representatives and by a majority of the representatives of
Parliament. The Commission takes part in the Conciliation Committee’s proceedings
and takes all the necessary initiatives to seek to reconcile the positions of Parliament
and the Council.

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Should the Conciliation Committee fail to find an agreement on a joint text within
21 days, a new draft budget must be submitted by the Commission. If the Conciliation
Committee agrees on a joint text within the deadline, then Parliament and the Council
have 14 days from the date of that agreement to approve the joint text. The following
table summarises the possible outcomes at the end of that 14-day period.
Process of approval of the conciliation joint text

Positions on
Parliament Council Outcome
the joint text
+ Joint text adopted
+ − Parliament may confirm its position[1]
None Joint text adopted
+ = adopted
+ Joint text adopted
− = rejected
None − New draft budget from Commission
None = no
None Joint text adopted
decision taken
+ New draft budget from Commission
− − New draft budget from Commission
None New draft budget from Commission

If the procedure is successfully completed, the President of Parliament declares that

the budget has been definitively adopted. In the event that no agreement has been
reached by the beginning of a financial year, a system of provisional twelfths is put
in place until an agreement can be reached. In this case, a sum equivalent to no more
than one twelfth of the budget appropriations for the preceding financial year may
be spent each month in respect of any chapter of the budget. That sum must not,
however, exceed one twelfth of the appropriations provided for in the same chapter
of the draft budget. However, under Article 315 TFEU, the Council may, on a proposal
from the Commission, authorise expenditure in excess of one twelfth (in accordance
with Article 16 of the Financial Rules) unless Parliament decides within 30 days to
reduce the expenditure authorised by the Council.
5. Supplementary and amending budgets
In the event of unavoidable, exceptional or unforeseen circumstances (in accordance
with Article 44 of the Financial Rules), the Commission may propose draft amending
budgets to amend the budget adopted for the current year. These amending budgets
are subject to the same rules as the general budget.

ROLE OF THE EUROPEAN PARLIAMENT

A. Powers conferred by Article 314 TFEU
In 1970, Parliament gained the right to have the last word on non-compulsory
expenditure. The proportion of non-compulsory expenditure rose from 8% of the
budget in 1970 to more than 60% in the 2010 budget, the last year in which the
distinction was made. With the abolition of the distinction between compulsory and

[1]If Parliament approves the joint text, while the Council rejects it, Parliament may decide to confirm some or all of its
previous amendments, acting by a majority of its members and three-fifths of the votes cast. If Parliament does not reach the
required majority, the position agreed in the joint text is adopted.

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non-compulsory expenditure, Parliament now has joint powers with the Council to
determine overall budget expenditure. Parliament’s position can even be considered
stronger than that of the Council since the latter can never impose a budget against
the will of Parliament, while Parliament may in some circumstances have the last word
and impose a budget against the will of the Council (see B.4 above). However, this
is rather unlikely and it would be more appropriate to say that the new budgetary
procedure is based, for the most part, on a genuine (albeit specific) codecision
procedure in which Parliament and the Council act on an equal footing, covering all
Union expenditure. Parliament has rejected the budget in its entirety on two occasions
(in December 1979 and December 1984) since acquiring the power to do so in 1975.
Under the new rules agreed in the Treaty of Lisbon, the Conciliation Committee has
failed to reach an agreement on four occasions (on the 2011, 2013, 2015 and 2018
budgets). In all four cases, the new draft budget presented by the Commission,
reflecting the near-compromise in conciliation, was finally adopted.
In the case of the 2024 budget, Parliament and the Council reached a provisional
agreement on 11 November 2023, within the deadline of the conciliation period.
The Council adopted the final agreement on the budget on 20 November 2023 and
Parliament adopted it in plenary two days later, with the President of Parliament then
signing off on the final text. As agreed between Parliament and the Council, the 2024
budget sets an overall level of appropriations of EUR 189.4 billion in commitments and
EUR 142.6 billion in payments.
In the negotiations, Parliament secured almost EUR 670 million in additional funding
for the 2024 EU budget compared to the Commission’s original proposal. This
funding will go towards key priorities such as humanitarian aid, global challenges
(such as addressing the consequences of the war in Ukraine), Erasmus+, transport
infrastructure and supporting young farmers.
In February 2024, Parliament and the Council agreed on an unprecedented top-up of
the EU’s multiannual financial framework to enable the EU budget to better respond to
ongoing challenges. The 2024 budget needed to be amended to reflect these changes;
on 29 February 2024, the Commission put forward a draft amending budget to this
end.
B. The interinstitutional agreements on budgetary discipline (IIAs) and the
multiannual financial frameworks (MFFs) (1.4.3)
Following repeated disputes about the legal basis for the implementation of
the budget, the institutions adopted a joint declaration in 1982, which also
laid down measures designed to ensure smoother completion of the budgetary
procedure. This was followed by a series of interinstitutional agreements covering
the periods 1988-1992, 1993-1999, 2000-2006 and 2007-2013. The interinstitutional
agreement for 2021-2027 entered into force in December 2020. These successive
agreements provided an interinstitutional reference framework for the annual
budgetary procedures that considerably improved the way the budgetary procedure
works.
The current IIA aims to enforce budgetary discipline, improve the functioning of the
annual budgetary procedure and cooperation between the institutions on budgetary
matters, and ensure sound financial management. It is also designed to deliver

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cooperation and set out a roadmap towards the introduction, over the course of
the 2021-2027 MFF, of new own resources sufficient to cover the repayment of the
EU Recovery Instrument established under Council Regulation (EU) 2020/2094.
Although MFFs do not replace the annual budgetary procedure, the interinstitutional
agreements have introduced a form of budgetary codecision procedure, which allows
Parliament to assert its role as a fully fledged arm of the budgetary authority, to
consolidate its credibility as an institution and to direct the budget towards its political
priorities. The Treaty of Lisbon and the Financial Regulation also stipulate that the
annual budget must comply with the ceilings set in the MFF, which must itself comply
with the ceilings established in the decision on own resources.
C. The European Semester
On 7 September 2010, the Economic and Financial Affairs Council approved the
introduction of the ‘European Semester’, a cycle of economic policy coordination at
EU level with the aim of achieving the Europe 2020 targets. This is a six-month period
every year during which the Member States’ budgetary and structural policies are
reviewed to detect any inconsistencies and emerging imbalances. On the basis of
the analytical economic assessment, the Commission provides policy guidance and/
or recommendations to the Member States on fiscal, macroeconomic and structural
reforms. The aim of the European Semester is to strengthen coordination while
major budgetary decisions are still under preparation at national level. In addition to
coordination between national budgets, Parliament also seeks to exploit synergies and
strengthen coordination between the national budgets and the EU budget.
For more information, see the website of the Committee on Budgets.

Eleanor Remo James

04/2024

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1.3. EUROPEAN UNION

INSTITUTIONS AND BODIES

1.3.1. THE EUROPEAN PARLIAMENT:

HISTORICAL BACKGROUND

The origins of the European Parliament lie in the Common Assembly of the
European Coal and Steel Community (ECSC), which became the common assembly
of the three supranational European communities that existed at the time. The
assembly subsequently acquired the name ‘European Parliament’. Over time, the
institution, whose members have been directly elected since 1979, has undergone
profound changes: evolving from an assembly with appointed members to an
elected parliament that is recognised as a political agenda-setter of the European
Union.

LEGAL BASIS
— The original Treaties (1.1.1, 1.1.2, 1.1.3, 1.1.4, 1.1.5);
— Decision and Act concerning the election of the representatives of the Assembly
by direct universal suffrage (20 September 1976), as amended by the Council
Decision of 25 June and 23 September 2002.
— Articles 14(2) and 17(2) of the Treaty on European Union (TEU).

THREE COMMUNITIES, ONE ASSEMBLY

Following the establishment of the European Economic Community and the European
Atomic Energy Community, the ECSC Common Assembly was expanded to cover all
three communities. With 142 Members, the new assembly met for the first time in

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Strasbourg on 19 March 1958 as the ‘European Parliamentary Assembly’, changing its

name to the ‘European Parliament’ on 30 March 1962.

FROM APPOINTED ASSEMBLY TO ELECTED PARLIAMENT

Before the introduction of direct elections, Members of the European Parliament
(MEPs) were appointed by each of the Member States’ national parliaments. All MEPs
thus had a dual mandate.
The summit conference held in Paris on 9 and 10 December 1974 determined that
direct elections ‘should take place in or after 1978’ and asked Parliament to submit
new proposals to replace its original draft convention of 1960. In January 1975,
Parliament adopted a new draft convention, on the basis of which the Heads of State
or Government, after settling a number of differences, reached agreement at their
meeting of 12 and 13 July 1976.
The Decision and Act concerning the election of the representatives of the Assembly
by direct universal suffrage were signed in Brussels on 20 September 1976. Following
ratification by all Member States, the act entered into force in July 1978, and the first
elections took place on 7 and 10 June 1979.

ENLARGEMENTS
When Denmark, Ireland and the United Kingdom joined the European Communities
on 1 January 1973 (the first enlargement), the number of MEPs was increased by 198.
For the second enlargement, with the accession of Greece on 1 January 1981, 24 Greek
MEPs were appointed to Parliament by the Greek Parliament, to be replaced in
October 1981 by directly elected MEPs. The second direct elections were held on
14 and 17 June 1984.
On 1 January 1986, with the third enlargement, the number of seats rose from 434 to
518 with the arrival of 60 Spanish and 24 Portuguese MEPs, appointed by their national
parliaments and subsequently replaced by directly elected MEPs.
Following German unification, the composition of Parliament was adapted to reflect
the demographic change. In accordance with the proposals outlined by Parliament in
its resolution of 10 June 1992 entitled ‘a uniform electoral procedure: a scheme for
allocating the seats of Members of the European Parliament’, the number of MEPs
rose from 518 to 567 for the June 1994 elections. After the fourth EU enlargement, the
number of MEPs increased to 626, with a fair allocation of seats for the new Member
States in line with the resolution mentioned above.
The Intergovernmental Conference, which met throughout 2000 in Nice (France),
introduced a new distribution of seats in Parliament, which was applied to the
European elections in 2004. The maximum number of MEPs (previously set at 700)
was increased to 732. The allocation of seats to the 15 existing Member States was
reduced by 91 (from 626 to 535). The remaining 197 seats were distributed among all
of the existing and new Member States on a pro rata basis.
With the accession of Bulgaria and Romania on 1 January 2007, the number of seats
in Parliament was temporarily raised to 785 in order to welcome MEPs from those
countries. Following the 2009 elections, held from 4 to 7 June, the number of seats

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was reduced to 736. As the Treaty of Lisbon, pursuant to Article 14(2) TEU, had set a
maximum number of 751 MEPs, to be temporarily raised to 754 until the next elections,
18 MEPs were added to the 736 elected in June 2009 during the 2009-2014 term,
following the ratification by the Member States of an amending protocol adopted at
the Intergovernmental Conference of 23 June 2010. With the accession of Croatia on
1 July 2013, the maximum number of seats was temporarily raised to 766, in order to
welcome the 12 Croatian MEPs who were elected in April 2013 (in accordance with
Article 19 of the Act concerning the conditions of accession of the Republic of Croatia).
For the 2014 elections, the total number of seats was reduced to 751. The distribution
of seats was then reviewed again (with 705 MEPs) because of the withdrawal of the
United Kingdom, which took effect on 1 February 2020 (1.3.3). Reflecting demographic
changes in the Member States since the 2019 elections, an additional 11 seats were
allocated according to a proposal by Parliament in its resolution of 15 June 2023,
pursuant to Article 14(2) TEU. By its final decision of 22 September 2023, the European
Council further increased this by another four seats, setting the total number of MEPs
to be elected for the 2024-2029 parliamentary term at 720.

GRADUAL INCREASE IN POWERS

The replacement of Member State contributions by the Community’s own resources
(1.4.1) led to the first extension of Parliament’s budgetary powers under the Treaty
of Luxembourg, signed on 22 April 1970. A second treaty on the same subject,
strengthening Parliament’s powers, was signed in Brussels on 22 July 1975 (1.1.2).
The Single European Act of 17 February 1986 enhanced Parliament’s role in certain
legislative areas (cooperation procedure), and made accession and association
treaties subject to its assent.
The Treaty on European Union of 7 February 1992, by establishing the European Union
(EU) and by introducing the codecision procedure in certain areas of legislation and
extending the cooperation procedure to others, marked the beginning of Parliament’s
metamorphosis into the role of co-legislator. It gave Parliament the power of final
approval over the membership of the Commission: this represented an important step
forward in terms of Parliament’s political control over the EU executive (1.1.3).
The Treaty of Amsterdam of 2 October 1997 extended the codecision procedure to
most areas of legislation and reformed it, making Parliament a co-legislator on an
equal footing with the Council. The appointment of the President of the Commission
was made subject to Parliament’s approval, thus increasing its powers of control
over the executive. The Treaty of Nice further extended the scope of the codecision
procedure.
The Treaty of Nice, which amended the TEU, the Treaties establishing the European
Communities (TEC) and certain related acts, was signed on 26 February 2001 and
entered into force on 1 February 2003. The aim of this new treaty was to reform the
institutional structure of the EU so that it could withstand the challenges of future
enlargement. Parliament’s legislative and supervisory powers were increased and
qualified majority voting was extended to more areas in the Council (1.1.4).

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The Treaty on the Functioning of the European Union (TFEU) (1.1.5) of

13 December 2007 constituted another important extension of both the application
of qualified majority voting in the Council (using a new method as of 1 November 2014
– Article 16 TEU) and the application of the codecision procedure (now extended to
some 45 new legislative domains). This ‘ordinary legislative procedure’ became the
most widely used decision-making procedure, covering all important policy areas of
the TFEU (Article 294 – ex Article 250 TEC). Parliament’s role in the preparation of
future treaty amendments also became more significant (Article 48 TEU). Moreover,
as part of the Treaty of Lisbon (and, initially, as part of the unsuccessful draft treaty
establishing a constitution for Europe), the Charter of Fundamental Rights of the
European Union, which was signed by the Presidents of Parliament, the Commission
and the Council at the European Council in Nice on 7 December 2000, became legally
binding (4.1.2).
With the European elections of 23 to 26 May 2019, it became clear that Parliament
had made full use of the provisions of Article 14 TEU, which states that ‘the European
Parliament shall, jointly with the Council, exercise legislative and budgetary functions.
It shall exercise functions of political control .... It shall elect the President of the
Commission’. Furthermore, according to Article 17(7) TEU, the other members of the
Commission are subject as a body to a vote of consent by the European Parliament.
Recent research on Parliament’s contribution to growth indicates that the legislation it
prepares contributes over EUR one trillion annually to the EU’s GDP, by strengthening
the rights of EU residents and businesses[1]. Another significant contribution is
provided by the EU budget (1.4.3)[2]. Evidence and expertise-based legislation is
supported by studies and workshops delivered by five policy departments providing
high-level independent expertise, analysis and policy advice at the request of
committees, delegations, the President, the Bureau and the Secretary-General.
Since the 2014 elections, European political parties (1.3.3) have presented lead
candidates for the office of Commission President, with the aim of increasing voter
participation in the European elections.
Following the signature, on 24 January 2020, of the Agreement on the withdrawal
of the United Kingdom of Great Britain and Northern Ireland from the European
Union and the European Atomic Energy Community, Parliament gave its consent to
the Council’s decision to conclude this withdrawal agreement (Article 50(2) TEU). The
vote by 621 to 49 on 29 January 2020 was also the final time that MEPs from the UK
sat in Parliament, as its withdrawal took effect on 1 February 2020.
On 28 April 2021, Parliament gave its consent (Article 218(6)a TFEU) to the conclusion
of the Trade and Cooperation Agreement between the European Union and the
European Atomic Energy Community, of the one part, and the United Kingdom of
Great Britain and Northern Ireland, of the other part.
The next Parliament elections will take place on 6-9 June 2024.

[1]Maciejewski M., ‘Contribution to Growth: Delivering economic benefits for citizens and businesses’, Publication for the
Committee on Internal Market and Consumer Protection, Policy Department for Economic, Scientific and Quality of Life
Policies, European Parliament, Luxembourg, 2019.
[2]Stehrer R. et al., ‘How EU funds tackle economic divide in the European Union’, Publication for the Committee on Budgets,
Policy Department for Budgetary Affairs, European Parliament, Luxembourg, 2020.

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This fact sheet is prepared by Parliament’s Policy Department for Citizens’ Rights and
Constitutional Affairs.

Udo Bux / Mariusz Maciejewski

04/2024

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1.3.2. THE EUROPEAN PARLIAMENT: POWERS

Parliament asserts its institutional role in European policy-making by exercising its

various functions. Parliament’s participation in the legislative process, its budgetary
and control powers, its involvement in treaty revision and its right to intervene
before the Court of Justice of the European Union enable it to uphold democratic
principles at European level.

LEGAL BASIS
Articles 223 to 234 and 314 of the Treaty on the Functioning of the European Union
(TFEU).

OBJECTIVES
As an institution representing the citizens of Europe, Parliament forms the democratic
basis of the European Union. If the EU is to have democratic legitimacy, Parliament
must be fully involved in the EU’s legislative process and exercise political scrutiny
over the other EU institutions on behalf of the public.

CONSTITUTIONAL-TYPE POWERS AND RATIFICATION POWERS (1.2.4)

Since the Single European Act (SEA), all treaties marking the accession of a new
Member State and all association treaties have been subject to Parliament’s assent.
The SEA also established this procedure for international agreements with important
budgetary implications for the Community (replacing the conciliation procedure
established in 1975). The Maastricht Treaty introduced it for agreements establishing
a specific institutional framework or entailing modifications to an act adopted under
the codecision procedure. Parliament must also give its assent to acts relating to the
electoral procedure (since the Maastricht Treaty). Since the Amsterdam Treaty, its
assent has been required if the Council wants to declare that a clear danger exists
of a Member State committing a serious breach of the EU’s fundamental principles,
before addressing recommendations to or imposing penalties on that Member State.
Conversely, any revision of the Statute for Members of the European Parliament has
to receive the consent of the Council.
Since the entry into force of the Lisbon Treaty, Parliament has been able to take the
initiative for treaty revision and has the final say over whether or not to convene a
convention with a view to preparing a future treaty amendment (Article 48(2) and
(3) of the Treaty on European Union (TEU)).

PARTICIPATION IN THE LEGISLATIVE PROCESS (1.2.3)

Parliament takes part in the adoption of the Union’s legislation to varying degrees,
according to the individual legal basis. It has progressed from a purely advisory role
to codecision on an equal footing with the Council.

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A. Ordinary legislative procedure

From the entry into force of the Treaty of Nice (1.1.4), the codecision procedure
applied to 46 legal bases in the Treaty establishing the European Community (EC
Treaty). This put Parliament, in principle, on an equal footing with the Council. If the
two institutions agreed, the act was adopted at first or second reading; if they did not
agree, it could only be adopted after a successful conciliation.
With the Lisbon Treaty (1.1.5), the codecision procedure was renamed the ordinary
legislative procedure (Article 294 of the TFEU). Following that treaty, more than
40 new policies became subject to this procedure for the first time in the areas of
freedom, security and justice, external trade, environmental policy and the common
agricultural policy (CAP), for example.
B. Consultation
The consultation procedure continues to apply in areas covered by Articles 27, 41
and 48 of the TEU and to taxation, competition, the harmonisation of legislation not
related to the internal market and some aspects of social policy.
C. Cooperation (abolished)
The cooperation procedure (former Article 252 of the EC Treaty) was introduced by
the SEA and extended under the Maastricht Treaty to most areas of legislation where
the Council acts by majority. This procedure obliged the Council to take into account
at second reading amendments by Parliament that had been adopted by an absolute
majority and taken over by the Commission. Its introduction marked the beginning of
real legislative power for Parliament but was abolished after the entry into force of
the Treaty of Lisbon (1.1.5).
D. Consent
The consent procedure, formerly known as the ‘assent procedure’, was introduced by
the SEA in 1986. Following the Maastricht Treaty, the procedure applied to the few
legislative areas in which the Council acts by unanimous decision, limited since the
Amsterdam Treaty to the Structural and Cohesion Funds.
Under the Lisbon Treaty, some new provisions fall under the consent procedure,
such as Articles 7, 14, 17, 27, 48 and 50 of the TEU, Articles 19, 83, 86, 218, 223,
311 and 312 of the TFEU and measures to be adopted by the Council when action by
the EU is considered necessary and the Treaties do not provide the necessary powers
(Article 352 of the TFEU).
E. Right of initiative
The Maastricht Treaty gave Parliament the right of legislative initiative, but it was
limited to asking the Commission to put forward a proposal. This right was maintained
in the Lisbon Treaty (Article 225 of the TFEU), and it is spelled out in more detail in
an interinstitutional agreement between Parliament and the Commission. In addition,
there are a few specific cases where Parliament has been given the direct right of
initiative. This direct right applies to the regulations concerning its own composition,
the election of its Members and the general conditions governing the performance of
the duties of its Members, as well as to the setting up of temporary committees of

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inquiry and to the regulations and general conditions governing the performance of
the Ombudsman.
In a resolution adopted in June 2022, Parliament stated that it ‘strongly believes that
the Treaties should be revised so that Parliament, as the only directly elected EU
institution and hence the institution that represents the voice of the citizens in the EU
decision-making process, is granted a general and direct right to initiate legislation’

BUDGETARY POWERS (1.2.5)

The Lisbon Treaty eliminated the distinction between compulsory and non-
compulsory expenditure and put Parliament on an equal footing with the Council in the
annual budgetary procedure, which now resembles the ordinary legislative procedure.
Parliament remains one of the two arms of the budgetary authority (Article 314 of the
TFEU). It is involved in the budgetary process from the preparation stage, notably in
laying down the general guidelines and the type of spending. It adopts the budget
and monitors its implementation (Article 318 of the TFEU). It gives a discharge on the
implementation of the budget (Article 319 of the TFEU).
Finally, Parliament has to provide its consent to the multiannual financial framework
(MFF) (Article 312 of the TFEU). The MFF for 2014–2020 is the first to be covered
under the rules laid down in the TFEU.

SCRUTINY OVER THE EXECUTIVE

Parliament has several powers of scrutiny. In particular, it discusses the annual
general report submitted to it by the Commission (Article 233 of the TFEU) and
oversees, together with the Council, the Commission’s implementing and delegated
acts (Articles 290 and 291 of the TFEU).
A. Investiture of the Commission
Parliament began informally approving the investiture of the Commission in 1981 by
examining and approving its programme. However, it was only when the Maastricht
Treaty came into force in 1992 that its approval was required before the Member
States could appoint the President and Members of the Commission as a collegiate
body. The Amsterdam Treaty took matters further by requiring Parliament’s specific
approval for the appointment of the Commission President, prior to that of the other
Commissioners. Parliament also introduced hearings of Commissioners-designate
in 1994. According to the Lisbon Treaty, the candidate for Commission President has
to be chosen in accordance with the results of the European elections. Consequently,
in its resolution of 22 November 2012 on the elections to the European Parliament
in 2014, Parliament urged the European political parties to nominate candidates
for the position of President of the Commission in order to reinforce the political
legitimacy of both institutions. Since 2014, a so-called Spitzenkandidaten procedure
has been in place, whereby European political parties, ahead of European elections,
appoint lead candidates for the role of Commission President. Although in the end
discarded in 2019, the process is considered important for the transparency and
political legitimacy of the EU institutions. (1.3.3).

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B. Motion of censure
There has been provision for a motion of censure (also called a ‘vote of no confidence’)
against the Commission ever since the Treaty of Rome. Today, general provisions of
the Parliament’s right to vote on a motion of censure of the Commission are included
in Article 17(8) of the TEU and in Article 234 of the TFEU. Such a motion requires a two-
thirds majority of the votes cast, representing a majority of Parliament’s component
members. A successful vote on a motion of censure leads to the resignation of
the Commission as a body, including the Vice-President of the Commission/High
Representative of the Union for Foreign Affairs and Security Policy with regard to
their duties carried out in the Commission. To date, Parliament has tried several times
unsuccessfully to use the relevant Treaty provisions and their predecessors to remove
a Commission College.
C. Parliamentary questions
Questions with a request for a written answer may be put by any Member to the
President of the European Council, the Council, the Commission or the Vice-President
of the Commission/High Representative of the Union for Foreign Affairs and Security
Policy. According to Article 230 of the TFEU, the Commission must reply orally or in
writing to questions put to it by Parliament or its Members, and the European Council
and the Council must be heard by Parliament in accordance with the conditions laid
down in the Rules of Procedure of the European Council and those of the Council.
Consequently, parliamentary questions take the form of written and oral questions
with or without debate and questions for Question Time.
D. Committees of inquiry
According to Article 226 of the TFEU, Parliament has the power to set up a temporary
committee of inquiry to investigate alleged contraventions or maladministration in
the implementation of EU law. The same article provides that the detailed provisions
governing the exercise of the right of inquiry are to be determined by Parliament
itself, acting by means of regulations on its own initiative after obtaining the consent
of the Council and the Commission. Until such a regulation is adopted, the right of
inquiry is exercised in accordance with a 1995 interinstitutional agreement annexed
to Parliament’s Rules of Procedure. Parliament has repeatedly expressed the need to
improve communication and cooperation between the three institutions in order to
be able to fulfil its mandate based on Article 226 of the TFEU. In 2014, it adopted
a position on a proposal for a regulation on the detailed provisions governing the
exercise of the European Parliament’s right of inquiry. However, the negotiations
between the three institutions on the proposal have constantly been in a deadlock.
Consequently, in April 2019, Parliament adopted a resolution in which it expressed
its deepest disagreement with the attitude of the Council and the Commission,
which, after more than four years of informal meetings, continue to prevent a formal
meeting to discuss possible solutions to the problems identified. In its resolution,
Parliament considers that the Council and the Commission have failed to comply with
the principle of interinstitutional cooperation and invites them to resume negotiations
on the matter with the newly elected Parliament.

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E. Scrutiny over the common foreign and security policy

Parliament is entitled to be kept informed in this area and may address questions
or recommendations to the Council. It must be consulted on the main aspects and
basic choices of the common foreign and security policy (CFSP) (Article 36 of the
TEU). The implementation of the interinstitutional agreement on budgetary discipline,
on cooperation in budgetary matters and on sound financial management has also
improved CFSP consultation procedures as far as financial aspects are concerned.
The creation of the role of High Representative of the Union for Foreign Affairs and
Security Policy has enhanced Parliament’s influence, as the High Representative is also
a Vice-President of the Commission.

APPEALS TO THE COURT OF JUSTICE OF THE EUROPEAN UNION

Parliament has the right to institute proceedings before the Court of Justice of the
European Union (CJEU) in cases of violation of the Treaty by another institution.
It has the right to intervene, i.e. to support one of the parties to the proceedings, in
cases before the CJEU. In a landmark case, it exercised this right in the Isoglucose
judgment (Cases 138 and 139/79 of 29 October 1980), where the CJEU declared
a Council regulation invalid because the Council was in breach of its obligation to
consult Parliament. In an action for failure to act (Article 265 of the TFEU), Parliament
may institute proceedings against an institution before the CJEU for violation of the
Treaty, as for instance in Case 13/83, in which the CJEU ruled against the Council for
failing to take measures relating to the common transport policy.
With the Treaty of Amsterdam, Parliament acquired the power to bring an action to
annul an act of another institution, but only for the purpose of protecting its own
prerogatives. Since the Treaty of Nice, Parliament has no longer had to demonstrate
a specific interest, and is therefore now able to institute proceedings in the same
way as the Council, the Commission and the Member States. Parliament may be the
defending party in an action against an act adopted under the codecision procedure
or when one of its acts is intended to produce legal effects vis-à-vis third parties.
Article 263 of the TFEU thus upholds the CJEU’s rulings in Cases 320/81, 294/83
and 70/88.
Finally, Parliament is able to seek a prior opinion from the CJEU on the compatibility
of an international agreement with the Treaty (Article 218 of the TFEU).

PETITIONS (4.1.4)
When EU citizens exercise their right of petition, they address their petitions to the
President of the European Parliament (Article 227 of the TFEU).

EUROPEAN CITIZENS’ INITIATIVE (4.1.5)

Parliament organises a hearing with the proponents of successfully registered ECIs
under the auspices of the Committee on Petitions. On 17 April 2019, Parliament and
the Council formally adopted Regulation (EU) 2019/788 on the European citizens’
initiative, which came into force on 1 January 2020.

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APPOINTING THE OMBUDSMAN

The Treaty of Lisbon provides that Parliament elects the European Ombudsman
(Article 228 of the TFEU) (1.3.16).

Eeva Pavy
04/2024

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1.3.3. THE EUROPEAN PARLIAMENT:

ORGANISATION AND OPERATION

The organisation and operation of the European Parliament are governed by its Rules
of Procedure. The political bodies, committees, delegations and political groups
guide Parliament’s activities.

LEGAL BASIS
— Article 14 of the Treaty on European Union (TEU) and Articles 223, 224, 226, 229,
231 and 232 of the Treaty on the Functioning of the European Union (TFEU);
— Rules of Procedure of the European Parliament.

MEMBERSHIP AND COMPOSITION

The general rules for the composition of the European Parliament are laid down
in Article 14(2) TEU, which stipulates that the European Council shall adopt by
unanimity, on the initiative of Parliament and with its consent, a decision establishing
composition. It also states that Parliament is to be composed of no more than 751
representatives of the EU’s citizens (750 Members plus the President). In addition, the
representation of citizens is ‘degressively proportional’, with a minimum threshold of
six members per Member State. No Member State can have more than 96 seats.
The concept of degressive proportionality means that although the total number
of seats is allocated on the basis of Member State population size, more populous
Member States agree to be under-represented in order to favour a greater
representation of less populous Member States: the larger the country, the smaller
the number of seats relative to its population. This concept has been further defined
in the successive European Council decisions taken under Article 14(2) TEU since the
entry into force of the Treaty of Lisbon.
The next elections of the European Parliament will be held from 6 to 9 June 2024. On
22 September 2023, following Parliament’s legislative resolution of 15 June 2023 on
the composition of the European Parliament, the European Council adopted a decision
establishing the composition of Parliament, increasing the total number of seats in
Parliament from 705 to 720. The number of MEPs to be elected per Member State will
be as follows:

Belgium 22
Bulgaria 17
Czech Republic 21
Denmark 15
Germany 96
Estonia 7
Ireland 14
Greece 21

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Spain 61
France 81
Croatia 12
Italy 76
Cyprus 6
Latvia 9
Lithuania 11
Luxembourg 6
Hungary 21
Malta 6
The Netherlands 31
Austria 20
Poland 53
Portugal 21
Romania 33
Slovenia 9
Slovakia 15
Finland 15
Sweden 21

After every election, Parliament has to meet, without needing to be convened, on the
first Tuesday after expiry of an interval of one month (Act of 20 September 1976). In
accordance with Article 229(1) TFEU, Parliament must also meet, without needing to
be convened, on the second Tuesday in March each year.

ORGANISATION
A. The President
Under the Rules of Procedure, the President of Parliament is elected from among
its Members for a renewable term of two and a half years (Rule 19). The President
represents Parliament vis-à-vis the outside world and in its relations with the other
EU institutions. The President oversees the debates in plenary and ensures that
Parliament’s Rules of Procedure are adhered to. At the beginning of every European
Council meeting, the President of the European Parliament sets out Parliament’s point
of view and its concerns as regards the items on the agenda and other subjects. After
the EU budget has been adopted by Parliament, the President signs it, rendering it
operational. The Presidents of both Parliament and the Council of the European Union
sign all legislative acts adopted under the ordinary legislative procedure. One of the
14 Vice-Presidents (Rule 23) can replace the President.
B. The plenary
The plenary is the European Parliament sensu stricto and its sittings are chaired
by the President. It meets in Strasbourg every month (except August) for a ‘part-
session’ lasting four days from Monday to Thursday. Additional part-sessions are
held in Brussels. The part-session is divided into daily sittings (Rule 153). The places
assigned to Members in the Chamber are decided by political affiliation, from left to

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right, by agreement with the group Chairs. The President opens the sitting, sometimes
with a tribute or a speech on a topical issue. The President is assisted in this task by
the 14 Vice-Presidents, who may take over the Chair. The Commission and the Council
of the European Union take part in the sittings in order to facilitate cooperation
between the institutions in the decision-making process. If Parliament so requests, the
representatives of the two institutions may also be called upon to make declarations
or to give an account of their activities.
C. Political bodies
Parliament’s political bodies comprise the Bureau (Rule 24 – the President and
14 Vice-Presidents), the Conference of Presidents (Rule 26 – the President and
the political group chairs), the five Quaestors (Rule 28 – responsible for Members’
administrative and financial business), the Conference of Committee Chairs (Rule 29)
and the Conference of Delegation Chairs (Rule 30). The term of office of the President,
the Vice-Presidents and the Quaestors, as well as of the committee and delegation
chairs, is two and a half years (Rule 19).
D. Committees and delegations
Members sit on 20 committees, four subcommittees and 44 delegations
(interparliamentary delegations and delegations to joint parliamentary committees,
parliamentary cooperation committees, and multilateral parliamentary assemblies)[1].
Parliament also sends a delegation to the Joint Assembly set up under the agreement
between the African, Caribbean and Pacific states and the EU[2]. Parliament may
also establish special committees (Rule 207) or committees of inquiry (Article 226
TFEU and Rule 208). On 10 April 2024, Parliament adopted a new Rule 207a on
temporary legislative committees, to provide a better allocation of tasks. The new
rule sets out that, when ‘a matter falls within the competence of more than three
committees, without the competence of any committee prevailing, the Conference of
Presidents may as a last resort, on the basis of a recommendation by the Conference
of Committee Chairs, propose to Parliament the setting up of a temporary legislative
committee to deal with a specific proposal for a legally binding act or a pre-legislative
strategic document’.
On the basis of Rule 213, each committee or delegation elects its own Bureau,
consisting of a Chair and up to four Vice-Chairs.
E. Political groups
Members do not sit in national delegations, but according to their political affinities in
transnational groups. Under the Rules of Procedure, a political group must comprise
Members elected from at least one quarter of the Member States and must consist
of at least 23 Members (Rule 33). The political groups hold regular meetings during
the week before the part-session and in part-session weeks, as well as seminars to
determine the main principles of their activity. Certain political groups correspond to
supranational political parties operating at EU level.

[1]Numbers of members per committee are laid down in paragraph 1 of the European Parliament decision of 15 January 2020
on the numerical strength of the committees (OJ C 270, 7.7.2021, p. 117).
[2]See the Samoa Agreement, Article 90.

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F. European political parties and foundations

Parliament recommends the creation of an environment that is conducive to the
development of truly European political parties and foundations, including the
adoption of framework legislation. Article 224 TFEU provides a legal basis for the
adoption, in accordance with the ordinary legislative procedure, of a statute for
European-level political parties and of rules on their funding. In 2003, a system for
the funding of European political parties was established, which allowed political
foundations to be set up at EU level[3]. As a response to certain abusive practices,
these rules were amended by Regulation (EU, Euratom) 2018/673 of 3 May 2018, with a
view to strengthening the European dimension of European political parties, ensuring
a fairer distribution of funds and improving enforcement.
The European political parties currently in existence are: the European People’s Party,
the Party of European Socialists, the Alliance of Liberals and Democrats for Europe
Party, the European Green Party, the European Conservatives and Reformists Party,
the Party of the European Left, the Identity and Democracy Party, the European
Democratic Party, the European Free Alliance and the European Christian Political
Movement. Supranational parties work in close cooperation with the corresponding
political groups in the European Parliament.
Some of the most important European political foundations include: the Wilfried
Martens Centre for European Studies, the Foundation for European Progressive
Studies, the European Liberal Forum, the Green European Foundation, the Institute
of European Democrats, Transform Europe, and New Direction – The Foundation for
European Reform.
On 22 November 2012, Parliament adopted a resolution urging the European
political parties to nominate candidates for the Presidency of the Commission,
with a view to strengthening both Parliament’s and the Commission’s political
legitimacy. These arrangements were implemented ahead of the 2014 elections, when
lead candidates ran for the very first time. Following those elections, one of the
lead candidates, Jean-Claude Juncker, was elected as Commission President by
Parliament on 22 October 2014. In its decision of 7 February 2018 on the revision
of the Framework Agreement on relations between Parliament and the Commission,
Parliament stated that it would be ready to reject any candidate for the Commission
Presidency who was not nominated as a lead candidate of a European political
party (Spitzenkandidat) ahead of the 2019 European elections. Although in the
end it was discarded for the 2019 elections, the lead candidate process has been
regarded as creating a broader platform for debate among candidates, bringing both
increased transparency and political legitimacy to the role of Commission President
and enhancing the involvement and awareness of EU citizens in the process. On
3 May 2022, Parliament adopted its position at first reading on the reform of electoral
law in which it considered that the lead candidate process could be formalised by a
political agreement between the European political entities and by an Interinstitutional
Agreement between Parliament and the European Council. It also called on European
political parties, European associations of voters and European electoral entities to

[3]Regulation (EU, Euratom) No 1141/2014 of the European Parliament and of the Council of 22 October 2014 on the statute
and funding of European political parties and European political foundations (OJ L 317, 4.11.2014, p. 1).

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nominate their candidates for the position of President of the Commission at least 12
weeks before the election day and said that it expected candidates to be placed in
the first position of the corresponding list of the Union-wide constituency.
In 2018, in its communication on institutional options for making the European Union’s
work more efficient, the Commission put forward the idea of transnational lists
as a step towards improving the legitimacy of the EU institutions in the eyes of
the citizens. Creating a Europe-wide constituency could strengthen the European
dimension of the European elections, as it would give citizens the opportunity
to connect with candidates across Europe. Parliament, however, considered that
the time was not yet right for the creation of a transnational constituency for
the 2019 European elections, but left the door open for future debate. In its above-
mentioned position on the reform of electoral law, Parliament suggested ‘introducing
binding geographical representation in the lists for the Union-wide constituency’ and
encouraged ‘European political parties, European associations of voters and other
European electoral entities to appoint candidates in the Union-wide lists coming from
all Member States’. This electoral reform should see the creation of 28 transnational
seats for the EU-wide constituency on top of the current 705 seats, with full respect
for geographical and gender balance.
G. Parliament’s Secretariat
Parliament’s Secretariat is headed by the Secretary-General, who is appointed by
the Bureau (Rule 234). The Secretariat’s composition and organisation are also
determined by the Bureau: it currently comprises 13 Directorates-General and the
Legal Service. Its task is to coordinate legislative work and organise the plenary sittings
and meetings. It also provides technical, legal and expert assistance to parliamentary
bodies and MEPs to support them in the exercise of their mandates. The Secretariat
provides interpretation and translation for all meetings and formal documents.

OPERATION
Under the Treaties, Parliament organises its work independently. It adopts its Rules of
Procedure, acting by a majority of its component Members (Article 232 TFEU). Except
where the Treaties provide otherwise, Parliament acts by a majority of votes cast
(Article 231 TFEU). It decides the agenda for its part-sessions, which primarily cover
the adoption of reports prepared by its committees, questions to the Commission and
the Council of the European Union, topical and urgent debates, and statements by
the Presidency. Committee meetings and plenary sittings are held in public and are
web streamed.

SEAT AND PLACES OF WORK

From 7 July 1981 onwards, Parliament has adopted several resolutions on its seat,
calling on the governments of the Member States to comply with the obligation
incumbent upon them under the Treaties to establish a single seat for the institutions.
Since they failed to do so for a long time, Parliament took a series of decisions
concerning its organisation and its places of work (i.e. Luxembourg, Strasbourg and
Brussels). At the Edinburgh European Council of 11 and 12 December 1992, the

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Member States’ governments reached an agreement on the seats of the institutions,

whereby:
— Parliament should have its seat in Strasbourg, where the 12 monthly part-sessions
should be held, including the session at which the decision on the annual EU
budget is taken;
— Additional part-sessions should be held in Brussels;
— The parliamentary committees should meet in Brussels;
— Parliament’s secretariat and back-up departments should remain in Luxembourg.
This decision was criticised by Parliament. However, the Court of Justice of the
European Union (judgment of 1 October 1997 – C-345/95) confirmed that the seat
of Parliament was determined in accordance with what is now Article 341 TFEU. The
substance of this decision was included in the Treaty of Amsterdam in a protocol
annexed to the Treaties.
Although Parliament criticised these decisions, it has been obliged to draw up its
annual calendar accordingly on a proposal by its Conference of Presidents. In general,
in the course of a year, Parliament holds 12 four-day part-sessions in Strasbourg
and six two-day part-sessions in Brussels. Several initiatives have been launched
by Members to avoid meeting in Strasbourg. For 2012, for example, a calendar was
adopted which included two two-day part-sessions during the same calendar week
in October in Strasbourg, reducing the overall meeting time in Strasbourg by four
days. Following a complaint by France, however, the Court of Justice of the European
Union ruled that two full part-sessions are required (Case C-237/11) to comply with
the decisions taken.
Pursuant to Article 229 TFEU, Parliament may hold extraordinary part-sessions, at
the request of a majority of its component Members or at the request of the Council
of the European Union or the Commission. On 18 December 2006, Parliament held,
for the first time, a supplementary plenary sitting in Brussels directly after the
European Council of 14 and 15 December 2006. This practice of immediate follow-up
of European Council meetings has been consolidated since then.
Since the COVID-19 pandemic, Parliament also enables Members to participate in
plenary sessions remotely and use remote voting procedures.

MEMBERSHIP OF PARLIAMENT BY GROUP AND MEMBER STATE

A table providing an overview of the political groups and their composition can be
found at Parliament’s dedicated webpage.

Eeva Pavy
04/2024

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1.3.4. THE EUROPEAN PARLIAMENT:

ELECTORAL PROCEDURES

The procedures for electing the European Parliament are governed both by
European legislation laying down rules common to all Member States and by specific
national provisions, which vary from one state to another. The common provisions
lay down the principle of proportional representation, rules on thresholds and
certain incompatibilities with the Member of the European Parliament mandate.
Many other important matters, such as the exact electoral system used and the
number of constituencies, are governed by national laws.

LEGAL BASIS
— Article 14 of the Treaty on European Union (TEU);
— Articles 20, 22 and 223 of the Treaty on the Functioning of the European Union
(TFEU) and Article 39 of the Charter of Fundamental Rights;
— Act of 20 September 1976 concerning the election of the representatives of the
Assembly by direct universal suffrage, last amended by Council Decision (EU,
Euratom) 2018/994 of 13 July 2018.

COMMON RULES
A. Principles
The founding Treaties (1.1.1) stated that Members of the European Parliament (MEPs)
would initially be appointed by the national parliaments, but made provision for
election by direct universal suffrage. This provision was implemented by the Council
before the first direct elections of 1979 through the Act of 20 September 1976
concerning the election of the representatives of the European Parliament by direct
universal suffrage (1976 Electoral Act). It profoundly changed the institutional position
of the European Parliament and was the founding document of a more democratic
European Union.
In 1992, the Maastricht Treaty (1.1.3) provided that elections had to be held
in accordance with a uniform procedure and that the European Parliament was
to draw up a proposal to this effect, for unanimous adoption by the Council.
However, since the Council was unable to agree on any of the proposals, the
Treaty of Amsterdam introduced the possibility of adopting ‘common principles’.
Council Decision 2002/772/EC, Euratom of 25 June and 23 September 2002
modified the 1976 Electoral Act accordingly, introducing the principle of proportional
representation and a number of incompatibilities between national and European
mandates.
The last amendments to the 1976 Electoral Act were adopted by Council Decision
(EU, Euratom) 2018/994 of 13 July 2018, which includes provisions on the possibility
of different voting methods (advance voting, electronic, internet and postal voting);

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on thresholds; on the protection of personal data; on the penalisation of ‘double

voting’ by national legislation; on voting in third countries; and on the possibility of the
visibility of European political parties on ballot papers.
With the Treaty of Lisbon (1.1.5), the right to vote and to stand as a candidate acquired
fundamental right status (Article 39 of the Charter of Fundamental Rights of the
European Union).
B. Application: common provisions in force
1. Right of non-nationals to vote and to stand as candidates
Under Article 22(2) TFEU, ‘every citizen of the Union residing in a Member State
of which he is not a national shall have the right to vote and to stand as a
candidate in elections to the European Parliament in the Member State in which he
resides’. The arrangements for implementing this right were adopted under Council
Directive 93/109/EC, as last amended by Council Directive 2013/1/EU, Article 6 of
which lays down that ‘any citizen of the Union who resides in a Member State of
which he is not a national and who, through an individual judicial decision or an
administrative decision provided that the latter can be subject to judicial remedies, has
been deprived of his right to stand as a candidate under either the law of the Member
State of residence or the law of his home Member State, shall be precluded from
exercising that right in the Member State of residence in elections to the European
Parliament’.
2. Electoral system
Under the amended 1976 Electoral Act, European elections must be based on
proportional representation and use either the list system or the single transferable
vote system. Member States may also authorise voting based on a preferential list
system.
In addition to the voluntary minimum threshold for the allocation of seats of up
to 5% of valid votes cast at national level, the recent amendments to the 1976
Electoral Act, adopted by Council Decision (EU, Euratom) 2018/994, establish an
obligatory minimum threshold of between 2% and 5% for constituencies (including
single-constituency Member States) with more than 35 seats in Member States where
the list system is used. Member States will have to comply with this requirement in
time for the 2024 elections at the latest.
Pursuant to that decision, Member States may also provide for advance voting, postal
voting and electronic and internet voting. Where they do so, they must ensure, in
particular, the reliability of the result, the secrecy of the vote and the protection of
personal data.
3. Incompatibilities
Under Article 7 of the 1976 Electoral Act, as amended by Council Decision 2002/772/
EC, Euratom, the office of Member of the European Parliament is incompatible with
that of member of the government of a Member State, member of the Commission,
judge, advocate-general or registrar of the Court of Justice, member of the Court
of Auditors, member of the European Economic and Social Committee, member
of committees or other bodies set up pursuant to the Treaties for the purpose of
managing the Union’s funds or carrying out a permanent direct administrative task,

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member of the Board of Directors, Management Committee or staff of the European

Investment Bank, and active official or servant of the institutions of the European
Union or of the specialised bodies attached to them. Further incompatibilities remain
for members of the European Committee of the Regions (added in 1997); for members
of the Board of Directors of the European Central Bank, the Ombudsman of the
European Union and, most importantly, members of a national parliament (added
in 2002).

ARRANGEMENTS SUBJECT TO NATIONAL PROVISIONS

In addition to these common rules, the electoral arrangements are governed by
national provisions, which can vary a great deal; the electoral system can therefore be
considered a polymorphic electoral system.
A. Electoral system and thresholds
All Member States must use a system based on proportional representation. In
addition to the voluntary threshold for the allocation of seats of up to 5% at national
level, Council Decision (EU, Euratom) 2018/994 established an obligatory minimum
threshold of between 2% and 5% for constituencies (including single-constituency
Member States) with more than 35 seats. This requirement must be met in time for
the 2024 European elections at the latest.
Currently, the following Member States apply thresholds: France, Belgium, Lithuania,
Poland, Slovakia, Czechia, Romania, Croatia, Latvia and Hungary (5%); Austria, Italy
and Sweden (4%); Greece (3%); and Cyprus (1.8%). The other Member States apply
no threshold, although Germany tried to do so, but in two decisions of 2011 and 2014,
the German Constitutional Court declared the country’s existing thresholds for EU
elections (which were first 5%, then 3%) to be unconstitutional.
B. Constituency boundaries
In European elections, most of the Member States function as single constituencies.
However, four Member States (Belgium, Ireland, Italy and Poland) have divided their
national territory into a number of regional constituencies.
C. Entitlement to vote
The voting age is 18 in most Member States except Austria, Belgium, Germany and
Malta, where it is 16, and Greece, where it is 17.
Voting is compulsory in four Member States (Belgium, Bulgaria, Luxembourg and
Greece): the obligation to vote applies to both nationals and registered non-national
EU citizens.
1. Voting by non-nationals in their host country
Citizens of the Union residing in a Member State of which they are not nationals have
the right to vote in elections to the European Parliament in their state of residence,
under the same conditions as nationals (Article 22 TFEU). However, the concept of
residence still varies from one Member State to another. Some countries require
voters to have their domicile or usual residence within the electoral territory (e.g.
Estonia, France, Germany, Poland, Romania and Slovenia), to be ordinarily resident
there (e.g. Cyprus, Denmark, Greece, Ireland, Luxembourg, Slovakia and Sweden) or

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to be listed in the population register (e.g. Belgium and Czechia). To be eligible to

vote in some countries (e.g. Cyprus), EU citizens must also satisfy a requirement for a
minimum period of residence. In all Member States, nationals from other EU countries
are required to register to vote before election day. Deadlines for registration vary
from one Member State to another.
2. Voting by non-resident nationals in their country of origin
Almost all Member States allow the possibility of voting from abroad in European
elections. In some Member States, voters are required to register with their national
electoral authorities in order to be eligible to vote from abroad by post or at an
embassy or consulate. In other Member States, postal votes may take place at
embassies or consulates. In some Member States, the right to vote abroad is only
granted to citizens living in another Member State (e.g. Bulgaria and Italy). In addition,
most Member States make special arrangements for diplomats and military personnel
serving abroad.
The fact that some non-nationals are able to vote both in their host country and
as nationals in their country of origin could give rise to abuse, notably double
voting, which is a criminal offence in some Member States. In this regard, the
recent amendments to the 1976 Electoral Act, adopted by Council Decision (EU,
Euratom) 2018/994, require Member States to ensure that double voting in elections
to the European Parliament is subject to effective, proportionate and dissuasive
penalties.
D. Right to stand for election
The right to stand as a candidate in elections to the European Parliament in any other
Member State of residence is also an application of the principle of non-discrimination
between nationals and non-nationals and a corollary of the right to move and reside
freely within the European Union. Any person who is a citizen of the Union and not
a national of their Member State of residence but satisfies the same conditions in
respect of the right to stand as a candidate as that state imposes by law on its own
nationals has the right to stand as a candidate in elections to the European Parliament
in the Member State of residence unless deprived of those rights (Article 3 of Council
Directive 93/109/EC).
Apart from the requirement of citizenship of a Member State, which is common
to all the Member States, conditions vary from one country to another. No person
may stand as a candidate in more than one Member State in the same election
(Article 4 of Council Directive 93/109/EC). The minimum age to stand for election
is 18 in most Member States, the exceptions being Belgium, Bulgaria, Cyprus, Czechia,
Estonia, Ireland, Latvia, Lithuania, Poland and Slovakia (21), Romania (23), and Italy
and Greece (25).
E. Nominations
In some Member States, only political parties and political organisations may submit
nominations. In other Member States, nominations may be submitted if they are
endorsed by the required number of signatures or electors, and in some cases a
deposit is also required.

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European Council Decision (EU) 2018/937 of 28 June 2018 establishing the

composition of the European Parliament lays down how the seats in the European
Parliament provided for in Article 14(2) TEU are to be allocated, applying the principle
of ‘degressive proportionality’ (1.3.3).
F. Election dates
Pursuant to Articles 10 and 11 of the 1976 Electoral Act, as amended, elections to
the European Parliament are held within the same period starting on a Thursday
morning and ending on the following Sunday; the exact date and times are set by
each Member State. In 1976, it was the Council, acting unanimously after consulting
the European Parliament, that determined the electoral period for the first elections
in 1979. Subsequent elections since 1979 have taken place in the corresponding period
during the last year of the five-year period referred to in Article 5 of the Electoral Act
(1.3.1).
Concerning the 2014 elections, the Council, by its decision of 14 June 2013, moved the
dates, originally set for June, to 22-25 May, so as to avoid a clash with the Whitsun
holidays, applying the following provision of Article 11: ‘Should it prove impossible to
hold the elections … during that period, the Council acting unanimously shall, after
consulting the European Parliament, determine, at least one year before the end of the
five-year term referred to in Article 5, another electoral period which shall not be more
than two months before or one month after the period fixed pursuant to the preceding
subparagraph’. Subsequent elections are to take place in the corresponding period in
the final year of the five-year period (Article 11 of the 1976 Act). Accordingly, the 2019
elections took place between 23 and 26 May. The 2024 European Parliament elections
took place between 6 and 9 June.
G. Voters’ options to alter the order of candidates on lists
In most Member States, voters may cast preferential votes to change the order of the
names on the list. However, in six Member States (Germany, Spain, France, Portugal,
Hungary and Romania) the lists are closed (no preferential vote). In Malta and Ireland,
voters list the candidates in order of preference (single transferable vote).
H. Filling seats vacated during the electoral term
In some Member States, seats falling vacant are allocated to the first unelected
candidates on the same list (possibly after adjustment to reflect the votes obtained
by the candidates). In other Member States, vacant seats are allocated to substitutes
and if there are no substitutes, the order of candidates on the lists is the decisive
criterion. In some other Member States, MEPs have the right to return to the European
Parliament once the reason for their departure has ceased to apply.

ROLE OF THE EUROPEAN PARLIAMENT

Since the 1960s, the European Parliament has repeatedly voiced its opinion on issues
of electoral law and has put forward proposals in accordance with Article 138 of
the EC Treaty (now Article 223 TFEU). The lack of a genuinely uniform procedure
for election to the European Parliament shows how difficult it is to harmonise
different national traditions. The option provided for in the Treaty of Amsterdam
of adopting common principles has only partially enabled these difficulties to be

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overcome. The ambition set out in Article 223 TFEU of adopting a uniform procedure,
requiring the consent of the European Parliament, has yet to be fulfilled. Parliament’s
continuing efforts to modernise and ‘Europeanise’ the common electoral procedure
led in 1997 to a proposal for a uniform electoral procedure; its substance was
incorporated into the 2002 Council decision. On 11 November 2015, the European
Parliament adopted a resolution on the reform of the electoral law of the European
Union. The legislative initiative from the Constitutional Affairs Committee proposed
amendments to the 1976 Electoral Act with a view to making the European elections
more democratic and to increasing public participation in the election process.
Parliament’s proposed amendments were partly accepted and incorporated into
Council Decision (EU, Euratom) 2018/994 of 13 July 2018. However, the Council could
not agree on Parliament’s proposal that a joint constituency be established and lead
candidates appointed for the post of Commission President.
Following its resolution of 7 February 2018 on the composition of the European
Parliament, Parliament voted in favour of reducing the number of its seats from 751 to
705 after the UK’s departure from the EU and of re-distributing some of the seats to
be freed up by Brexit among those EU countries that are slightly under-represented
(1.3.3). On 13 September 2023, the European Parliament adopted a resolution giving
its consent to the European Council’s draft decision increasing the number of seats
in the European Parliament for the 2024 elections from 705 to 720.
On 22 November 2012, the European Parliament adopted a resolution urging the
European political parties to nominate candidates for the position of President of
the Commission during the 2014 elections, so as to reinforce the political legitimacy
of both Parliament and the Commission. These arrangements were implemented
ahead of the 2014 elections and, for the first time, lead candidates ran in the 2014
elections. Finally, as a result of the 2014 elections, one of those candidates, Jean-
Claude Juncker, was elected as Commission President on 22 October 2014 by
the European Parliament. In its decision of 7 February 2018 on the revision of
the Framework Agreement on relations between the European Parliament and the
European Commission, Parliament stated that it was ready to reject any candidate for
President of the Commission not nominated as a lead candidate (‘Spitzenkandidat’)
of a European political party ahead of the 2019 European elections; however, after
the 2019 elections, Ursula von der Leyen, who had not been a Spitzenkandidat, was
elected President of the Commission. On 22 November 2023, Parliament’s plenary
voted on proposals to amend the Treaties, including an overhaul of the way that the
Commission is elected.
In 2003, a system for the funding of European political parties was established which
also allows for the establishment of political foundations (1.3.3) at EU level. Regulation
(EC) No 2004/2003 was repealed and replaced by Regulation (EU, Euratom)
No 1141/2014 of the European Parliament and of the Council of 22 October 2014 on the
statute and funding of European political parties and European political foundations.
The 2014 regulation was amended following Parliament’s resolution of 15 June 2017
on the funding of political parties and political foundations at European level. In the
resolution, shortcomings were highlighted regarding the level of co-financing and the
possibility for MEPs’ multi-party membership, in an effort to ensure that public money
is used properly in the funding of European political parties and foundations through

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Regulation (EU, Euratom) 2018/673 of the European Parliament and of the Council of
3 May 2018.
Recent events have demonstrated the potential risks to electoral processes and
democracy that can arise from online communication (manipulating personal data in
an electoral context). To prevent unlawful use of personal data, new amendments
to the 2014 Regulation on the statute and funding of European political parties
and European political foundations were subsequently adopted (Regulation (EU,
Euratom) 2019/493 of the European Parliament and of the Council of 25 March 2019
amending Regulation (EU, Euratom) No 1141/2014 as regards a verification procedure
related to infringements of rules on the protection of personal data in the context of
elections to the European Parliament). The new rules agreed on by Parliament and
the Council are designed to protect the electoral process from online disinformation
campaigns that misuse voters’ personal data and they allow for financial sanctions to
be imposed on European political parties and foundations that deliberately influence,
or attempt to influence, the outcome of the European elections by taking advantage
of breaches of data protection rules.
In addition, following Parliament’s resolution of 15 June 2017 on online platforms and
the digital single market, where it called on the Commission to look into the possibility
of a legislative intervention to limit the dissemination of fake content, in April 2018
the Commission issued a communication entitled ‘Tackling online disinformation: a
European approach’ and proposed an EU-wide Code of Practice, which was signed by
three online platforms in September 2018. The Commission’s December 2018 action
plan against disinformation, among other measures, urges the online platforms to
swiftly and effectively implement the commitments and to focus on actions that
are urgent for the European elections, including deleting fake accounts, labelling
messaging activities by ‘bots’ and cooperating with fact-checkers and researchers
to detect disinformation and make fact-checked content more visible. In the run-
up to the May 2019 European elections, the Commission asked the three platforms
signatory to the Code of Practice to report on a monthly basis on their actions
undertaken to improve the scrutiny of ad placements, to ensure transparency of
political and issue-based advertising and to tackle fake accounts and the malicious
use of bots.
In its resolution of 26 November 2020 on stocktaking of European elections,
Parliament recommended that the following be examined with a view to improving
the European electoral process, in particular during the Conference on the Future of
Europe:
— New remote voting methods for citizens during European elections in specific or
exceptional circumstances;
— Common election admission rules for candidates and common campaign and
funding rules;
— Harmonised standards for passive and active voting rights across Member States,
including a reflection on decreasing the minimum age of voters in all Member
States to 16;

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— Provisions on periods of absence for Members, for example for maternity leave,
parental leave or severe illness.
Parliament called on the Member States to ensure that all their nationals who enjoy
the right to vote, including EU citizens living outside their country of origin, homeless
people and prisoners who are granted this right under national law, can exercise it.
Following the report of 15 June 2023 by the Committee of Inquiry to investigate the
use of Pegasus and equivalent surveillance spyware (PEGA Committee), Parliament
adopted its recommendation calling on the Commission to set up a special task force,
involving the national electoral commissions, dedicated to protection of the 2024
European elections across the Union. However, this did not receive a response from
the Commission.

REFORM OF THE EUROPEAN ELECTORAL ACT

With its position of 3 May 2022 on the proposal for a Council regulation on the
election of the Members of the European Parliament by direct universal suffrage,
Parliament launched a reform of the European Electoral Act, seeking to transform
the 27 separate elections and their diverging rules into a single European election with
common minimum standards. Under Parliament’s proposed system, each voter would
have two votes: one to elect MEPs in national constituencies, and one in an EU-wide
constituency of 28 additional seats. To ensure balanced geographical representation
within these lists, the Member States would be divided into three groups depending
on the size of their population. The lists would be filled proportionately with
candidates taken from those groups. EU-wide lists of candidates would be submitted
by European electoral entities, such as coalitions of national political parties and/or
national associations of voters or European political parties.
Other proposals include:
— 9 May as the common European voting day;
— The right to stand for election for all Europeans aged 18 or over;
— A mandatory electoral threshold of at least 3.5% for large constituencies of 60
seats or more;
— Equal access to the elections for all citizens, including those with disabilities, and
the option to vote by post;
— Mandatory gender equality through ‘zipped lists’ or quotas;
— The right of citizens to vote for the President of the Commission in a lead
candidate (Spitzenkandidaten) system through the EU-wide lists.
A new European electoral authority would be set up to oversee the process and ensure
compliance with the new rules.
As established in Article 223 TFEU, Parliament’s legislative initiative would need to
be unanimously approved by the Council. It would then come back to Parliament so
that MEPs could give their consent, before being approved by all Member States in
accordance with their respective constitutional requirements. Negotiations with the
Council would commence once the Member States adopted their positions.

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The draft legislative act is now being analysed by the Council in its General Affairs
configuration. It held a first policy debate on the proposal on 18 October 2022. The
reservations identified by some Member States relate to the proposals for an EU-wide
constituency based on transnational lists and to the elements of the proposal that
imply a harmonisation of the electoral system used in European elections.

Pablo Abril Marti / Mariusz Maciejewski

07/2024

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1.3.5. EUROPEAN PARLIAMENT: RELATIONS

WITH THE NATIONAL PARLIAMENTS

Moves towards closer European integration have altered the role of the national
parliaments. A number of instruments for cooperation between the European
Parliament and the national parliaments have been introduced with a view to
guaranteeing effective democratic scrutiny of European legislation at all levels. This
trend has been reinforced by provisions introduced by the Lisbon Treaty.

LEGAL BASIS
Article 12 of the Treaty on European Union (TEU), Protocol No 1 on the role of
national parliaments in the European Union and Protocol No 2 on the application of
the principles of subsidiarity and proportionality.

OBJECTIVES
A. Rationale for cooperation
The very process of European integration involves transferring responsibilities
hitherto exercised by national governments to joint institutions with decision-making
powers, thus diminishing the role of the national parliaments (NPs) as legislators,
budgetary authorities and bodies responsible for scrutinising the executive. While
several of the responsibilities transferred from national to EU level initially rested with
the Council, the European Parliament has progressively acquired a full parliamentary
role.
— The NPs have come to see more effective scrutiny of their governments’ EU
activities and closer relations with Parliament as a way of increasing their
influence on EU policy-making and at the same time ensuring that the EU is built
on democratic principles.
— For its part, Parliament has generally taken the view that close relations with the
NPs would help to strengthen its legitimacy and bring the EU closer to its citizens.
B. The evolving context of cooperation
The role of the NPs initially diminished as European integration progressed: the EU’s
powers have increased and its areas of competence have broadened, while majority
voting has become the rule in Council and Parliament’s legislative powers have also
increased.
Until 1979, Parliament and the NPs were linked organically, because MEPs were
appointed from within the NPs. Direct elections to Parliament broke those ties, and for
some 10 years relations dwindled almost to nothing. The need to restore them became
apparent after 1989: talks were held and a start was made on establishing new ties
to replace the original organic ones. The Maastricht Treaty helped by devoting two
declarations (No 13 and No 14) to the subject, which provided in particular for:

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— Proper acknowledgement of the NPs’ role in the functioning of the European

Union (their respective governments must inform them ‘in good time’ of EU
legislative proposals and joint conferences must be held where necessary);
— Closer cooperation between Parliament and the NPs, in the form of more
systematic liaison, exchanges of information, regular meetings and, possibly, the
granting of reciprocal facilities.
Additionally, NPs progressively acquired powers of scrutiny over their governments’
EU activities as a result of constitutional reforms, government undertakings, changes
to their own operating methods and interpretations of national constitutional rules
issued by some Member States’ constitutional courts. Their committees specialising
in EU affairs have played a major role in these developments, in cooperation with
Parliament.
The Protocol on the role of the NPs annexed to the Treaty of Amsterdam encouraged
greater involvement on the part of the NPs in EU activities and required consultation
documents and proposals to be forwarded promptly so that the NPs could consider
them before the Council took a decision. The NPs played an important role in the
discussions held in the Convention on the Future of Europe (1.1.4), and they were
also the subject of one of the Convention’s 11 working groups. In May 2006, the
Commission agreed to forward all new proposals and consultation papers to the NPs.
With the advent of the Lisbon Treaty, this ‘political dialogue’ has become a legal
requirement for the Commission. The Treaty on the Functioning of the European
Union gives the NPs the right to receive a broader range of information from the EU
institutions, which are required to forward all draft legislative acts and notify the NPs
of applications for accession to the EU. The Lisbon Treaty further enhanced the role of
the NPs by involving them in the procedures for revising the Treaties as well as in the
evaluation mechanisms for the implementation of EU policies in the areas of freedom,
security and justice. It also formalised interparliamentary cooperation between NPs
and Parliament in accordance with the Protocol on the role of national parliaments in
the EU.
In addition, the Lisbon Treaty stepped up the role of the NPs in the EU legislative
process considerably by introducing an early warning mechanism (EWM), i.e. a system
which enables the NPs to check that legislative proposals are consistent with the
subsidiarity principle (Protocol No 1 on the role of national parliaments in the European
Union and Protocol No 2 on the application of the principles of subsidiarity and
proportionality). Within eight weeks from the date of transmission of a legislative
proposal, NPs may send a reasoned opinion to the Presidents of the European
Parliament, the Council and the Commission stating why they consider that the draft
in question does not comply with the subsidiarity principle. Legislative proposals
can be blocked if there is a consensus among a majority of chambers. However, the
final decision rests with the legislative authority (the European Parliament and the
Council) (1.2.2). This mechanism has been triggered three times since the Lisbon
Treaty entered into force: in May 2012 in relation to a proposal for a Council regulation
on the exercise of the right to take collective action within the context of the freedom
of establishment and the freedom to provide services (‘Monti II’)[1] in October 2013 in

[1]COM(2012)0130.

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relation to a proposal for a Council regulation on the establishment of the European

Public Prosecutor’s Office[2], and in May 2016 in relation to a proposal for a review
of the Posted Workers Directive[3]. NPs can raise concerns over subsidiarity and
trigger the orange and yellow cards when the necessary thresholds are reached. This
subsidiarity check is an exclusive competence of NPs. The role of regional Parliaments
in this procedure can be found in Article 6 of Protocol 2 that reads as follows: ’It
will be for each national Parliament or each chamber of a national Parliament to
consult, where appropriate, regional parliaments with legislative powers.’ Therefore,
direct submissions received from regional Parliaments are not considered, according
to the Treaties, as national Parliaments’ submissions concerning subsidiarity. Their
views should be channelled via the NP. However, when the European Parliament
receives a submission from a regional Parliament, this is transmitted for information
to the relevant services, including the committee responsible for the content, to the
Committee on Regional Development, as the committee responsible for relations
with regional authorities, and to the research and documentation services. The Treaty
also contains new articles clarifying the role of the NPs in the EU institutional set-up
(Articles 10 and 12 TEU).
Since the start of the sovereign debt crisis in the EU in March 2010, the role of the
Eurozone NPs in ratifying or revising rescue packages has highlighted the importance
of close cooperation and continuous exchanges of information between the NPs and
Parliament. Article 13 of the Treaty on Stability, Coordination and Governance in the
Economic and Monetary Union, which entered into force in January 2013, provides
for specific cooperation between the NPs and Parliament in exercising parliamentary
oversight in the areas of economic and financial governance.

ACHIEVEMENTS: COOPERATION INSTRUMENTS

A. Conferences of speakers of the parliamentary assemblies of the European
Union
Following meetings in 1963 and 1973, the conferences were formally introduced
in 1981. Comprising the presidents of the NPs and Parliament, they were initially held
every two years. They are prepared at meetings of the secretaries-general and provide
a forum for detailed discussion of issues relevant to cooperation between the NPs and
Parliament. In recent years, the presidents have met every year. Since 1995, Parliament
has maintained close relations with the parliaments of the associate and applicant
countries. The presidents of Parliament and these countries’ parliaments have met
regularly to discuss accession strategies and other topical matters.
B. The ECPRD
The ‘grand conference’ held in Vienna in 1977 set up the European Centre for
Parliamentary Research and Documentation (ECPRD). The Centre is a network of
documentation and research services that cooperate closely in order to facilitate
access to information (including national and European databases) and coordinate
research so as to avoid duplication of work. It centralises research and circulates
findings and has created a website to improve exchanges of information. Its directory

[2]COM(2013)0534.
[3]COM(2016)0128.

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helps the member parliaments’ research departments liaise with one another. The
Centre is jointly administered by Parliament and the Parliamentary Assembly of the
Council of Europe. It comprises parliaments from the Member States of the EU and
of the Council of Europe, and its services may also be used by parliaments of states
which have observer status in the Parliamentary Assembly.
C. Conference of Parliaments of the Community
This idea was given practical form in Rome in 1990, under the name ‘European assizes’.
Their topic was ‘the future of the Community; the implications, for the Community
and the Member States, of the proposals concerning Economic and Monetary Union
and Political Union and, more particularly, the role of the national parliaments and of
the European Parliament’ and there were 258 participants, 173 from the NPs and 85
from Parliament. There has not been another such meeting since.
D. Conference of Parliamentary Committees for Union Affairs of the Parliaments
of the European Union — COSAC
Originally proposed by the President of the French National Assembly, the
Conference has met every six months since 1989, bringing together the NPs’ EU
affairs committees as well as Members of the European Parliament. At its meetings,
each parliament is represented by six Members. Convened by the parliament of
the country holding the presidency of the EU and prepared jointly by Parliament
and the parliaments of the presidency ‘troika’, each conference discusses major
topics relevant to European integration. COSAC is not a decision-making but rather
a parliamentary consultation and coordination body that adopts its decisions by
consensus. The Protocol on the role of the NPs in the European Union specifically
states that COSAC may submit any contribution it deems appropriate to the EU
institutions. COSAC contributions are in no way binding on the NPs, however, and are
without prejudice to their position.
COSAC meetings bring together NP delegations that form panels of interest
concerning European affairs, allowing members of NPs to interact with
representatives of the EU institutions. For instance, the COSAC meeting held in
Brussels in March 2024 and hosted by the Belgian Presidency of the Council included
panels dedicated to gender policy, strategic autonomy and the state of the rule of
law and democracy in the EU. The latter included an exchange of questions and
answers between Members and the Court of Justice of the European Union President,
Mr Koen Lenaerts, who emphasised the special responsibility to protect free elections,
freedom of the press and solidarity between the Member States.
E. Joint Parliamentary Meetings
Drawing on the experience of the European Convention, parliamentarians from both
Parliament and the NPs felt that it would make sense to establish a permanent
forum for political cooperation to deal with specific topics. Since 2005, therefore,
MEPs and national MPs have held joint parliamentary meetings to deal with important
issues affecting parliaments in the context of the process of EU policy-making and
institution-building.

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F. Other cooperation instruments

Most of Parliament’s standing committees consult their national counterparts through
bi- or multilateral meetings and visits by chairs and rapporteurs.
Contacts between Parliament’s political groups and the NPs’ equivalents have
developed to differing degrees, depending on the country or political party involved.
Administrative cooperation is developing in the form of traineeships at Parliament
and exchanges of officials. Most NP representatives’ offices are located in the
same Parliament building as the Directorate for Relations with National Parliaments.
Reciprocal information-sharing on parliamentary work, especially on legislation, is
becoming increasingly important and draws on modern information technology,
such as the internet-based IPEX network, which is backed up by an electronic
data exchange and communication platform: the Platform for EU Interparliamentary
Exchange.

ROLE OF THE EUROPEAN PARLIAMENT

On 19 April 2018, Parliament adopted a resolution on the implementation of the
Treaty provisions concerning national parliaments[4], in which it points out that NPs
are improving and contributing actively to the good constitutional functioning of
the European Union, thus providing for more pluralism and democratic legitimacy. It
also acknowledges that national governments’ accountability to national parliaments
remains the ‘keystone of the role of national parliamentary chambers in the European
Union’. While recalling that the EWM has seldom been used since the entry into force
of the Treaty of Lisbon, Parliament believes that it could be reformed within the
current Treaty framework. In this respect, it calls on the Commission to implement
‘a technical notification period’ in order to grant additional time between the date
on which draft legislative acts are received by NPs and the date on which the eight-
week period begins. Additionally, Parliament supports the possibility for NPs to
submit constructive proposals to the Commission in order to influence positively the
European debate and the Commission’s power of initiative. Finally, it puts forward a
number of suggestions aiming at reinforcing the existing instruments of cooperation
between Parliament and NPs.
On 17 January 2024, Parliament passed a new resolution concerning the
implementation of the Treaty provisions on NPs[5]. In it, Parliament called on the
Member States to ensure that NPs have enough resources to fulfil their constitutional
roles of oversight and recommended that NPs use the IPEX platform more effectively
and involve their regional parliaments in bringing the EWM into operation. Parliament
also called for an extension of the current eight-week window for NPs to present
reasoned opinions, due to it inherently limiting the timely monitoring of compliance
with the principle of subsidiarity. Further, it called for a ‘green card’ system whereby
at least one third of NPs can submit initiatives which would ‘positively influence’ the
European debate.

[4]European Parliament resolution of 19 April 2018 on the implementation of the Treaty provisions concerning national
parliaments, OJ C 390, 18.11.2019, p. 121.
[5]European Parliament resolution of 17 January 2024 on the implementation of the Treaty provisions on national parliaments,
Texts adopted, P9_TA (2024)0023.

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Every year, Parliament’s Directorate for Relations with National Parliaments publishes
an annual report on the relations between the European Parliament and EU national
parliaments. The report gives an overview of all activities and developments
in interparliamentary cooperation with national parliaments, which involves 39
national parliaments and chambers across the 27 Member States and the European
Parliament. According to the Annual Report 2022, the major topics discussed in the
interparliamentary meetings in the course of that year were EU security and external
action in response to the war in Ukraine, the post-COVID-19 pandemic recovery,
the state of the rule of law in the Member States, NextGenerationEU and economic
recovery plans, and the outcome of the Conference on the Future of Europe.

Eeva Pavy / Alexandru-George Moș

05/2024

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1.3.6. THE EUROPEAN COUNCIL

The European Council, formed by the heads of state or government of the Member
States, provides the necessary impetus for the development of the European Union
and sets out the general political guidelines. The Commission President is also
a non-voting member. The President of the European Parliament addresses the
European Council at the beginning of its meetings. The Lisbon Treaty established
the European Council as an institution of the Union and endowed it with a long-term
presidency.

LEGAL BASIS
Articles 13, 15, 26, 27 and 42(2) of the Treaty on European Union (TEU).

HISTORY
The European Council is now the summit conference of heads of state or government
of the EU Member States. The first of these ‘European summits’ took place in Paris
in 1961 and they have become more frequent since 1969.
In the Paris European summit of February 1974, it was decided that these meetings
of heads of state or government should henceforth be held on a regular basis under
the name of ‘European Council’, which would be able to adopt a general approach
to the problems of European integration and ensure that EU activities were properly
coordinated.
The Single European Act (1986) included the European Council in the body of the
Community Treaties for the first time, defining its composition and providing for
biannual meetings.
The Treaty of Maastricht (1992) formalised its role in the EU’s institutional process.
The Treaty of Lisbon (formally known as the Treaty on European Union, 2009) made
the European Council a full institution of the EU (Article 13) and defined its tasks,
which are to ‘provide the Union with the necessary impetus for its development and
define the general political directions and priorities thereof’ (Article 15). The European
Council and the Council of the European Union (hereinafter ‘the Council’) have agreed
to share section II of the EU budget (Article 43(b) of the Financial Regulation), which is
why the general budget only has 10 sections and not 11, although the European Council
and the Council are separate institutions.

ORGANISATION
Convened by its president, the European Council brings together the heads of state
or government of the 27 Member States and the President of the Commission
(Article 15(2) TEU). The High Representative of the Union for Foreign Affairs and
Security Policy takes part in its work. The President of the European Parliament is

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usually invited to speak at the beginning of the meeting (Article 235(2) of the Treaty
on the Functioning of the European Union (TFEU)).
The president is elected by the European Council itself for a two-and-a-half-year term
that may be renewed once and represents the EU to the outside world. The President’s
role is set out in Article 15 TEU. The current President Charles Michel started his first
term on 1 December 2019 and was re-elected in March 2022 for a second term from
1 June 2022 to 30 November 2024.
The European Council usually decides on issues by consensus, but a number of
important appointments are made by qualified majority (in particular that of its
own president, the choice of candidate for the post of President of the European
Commission, and the appointment of the High Representative of the Union for Foreign
Affairs and Security Policy and the President of the European Central Bank).
The European Council normally meets at least four times a year. Since 2008, it has met
more often, in particular during the financial crisis and the subsequent euro area debt
crisis. Lately, migration flows to the EU and internal security issues have also greatly
occupied the European Council.
In 2016, the heads of state and government started to meet in an ‘EU-27’ format,
without the United Kingdom (UK). These meetings were at first informal, prior to the
UK’s formal notification of withdrawal from the EU under Article 50 TEU in March 2017.
After the notification, several formal ‘European Council (Article 50)’ meetings of the
EU-27 took place alongside regular meetings.
In addition, the European Council members meet in the format of ‘intergovernmental
conferences’ (IGCs): these conferences of representatives of the governments of the
Member States are convened to discuss and agree on EU treaty changes. Before the
Lisbon Treaty came into force in 2009, this was the only procedure for treaty revision.
It is now called the ‘ordinary revision procedure’. The IGC, convened by the President
of the European Council, decides on treaty changes unanimously.

ROLE
A. Place in the EU’s institutional system
Under Article 13 TEU, the European Council forms part of the ‘single institutional
framework’ of the Union. However, its role is to provide a general political impetus
rather than act as a decision-making body in the legal sense. It takes decisions with
legal consequences for the EU only in exceptional cases (see point C (2) below), but
has acquired a number of institutional decision-taking powers. The European Council
is now authorised to adopt binding acts, which may be challenged before the Court
of Justice of the European Union, including for failure to act (Article 265 TFEU).
Article 7(2) TEU gives the European Council the power to initiate the procedure
suspending the rights of a Member State as a result of a serious breach of the EU’s
principles, subject to the consent of Parliament.
B. Relations with the other institutions
The European Council takes decisions with complete independence and in most cases
does not require a Commission initiative or the involvement of Parliament.

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However, the Lisbon Treaty maintains an organisational link with the Commission,
since its president is a non-voting member of the European Council, and the High
Representative of the Union for Foreign Affairs and Security Policy attends the
debates. Moreover, the European Council often asks the Commission to submit
reports in preparation for its meetings. Article 15(6)(d) TEU requires the President of
the European Council to submit a report to Parliament after each of its meetings. The
President of the European Council also meets the President of Parliament, as well as
leaders of political groups, on a monthly basis. In February 2011, the president at the
time agreed to answer written questions from MEPs concerning his political activities.
However, Parliament is also able to exercise some informal influence through the
presence of its President at European Council meetings and pre-European Council
meetings of the party leaders in their respective European political families, as well as
through the resolutions it adopts on items on the agenda for meetings, on the outcome
of meetings and on the formal reports submitted by the European Council.
With the Lisbon Treaty, the new office of High Representative of the Union for Foreign
Affairs and Security Policy became an additional actor proposing and implementing
foreign policy on behalf of the European Council. The President of the European
Council is responsible for the external representation of the EU on issues concerning
its common foreign and security policy, without prejudice to the powers of the High
Representative of the Union for Foreign Affairs and Security Policy.
C. Powers
1. Institutional
The European Council provides the EU with ‘the necessary impetus for its
development’ and defines its ‘general political directions and priorities’ (Article 15(1)
TEU). It also decides by qualified majority on the formation of the Council and the
calendar of the rotating presidencies.
2. Foreign and security policy matters (5.1.1) and (5.1.2)
The European Council defines the principles of, and general guidelines for, the
common foreign and security policy (CFSP), and decides on common strategies for its
implementation (Article 26 TEU). It decides unanimously whether to recommend to
the Member States to move towards a progressive framing of a common EU defence
policy, under Article 42(2) TEU.
If a Member State intends to oppose the adoption of a decision for important reasons
of national policy, the Council may decide by qualified majority to refer the matter
to the European Council for a unanimous decision (Article 31(2) TEU). The same
procedure may apply if Member States decide to establish enhanced cooperation in
this field (Article 20 TEU).
The Conference on the Future of Europe’s adopted citizens’ recommendation No 21
requests that the EU improve its ability to make speedy and effective decisions,
notably through switching from unanimity to qualified majority voting in the field of
CFSP, and through strengthening the role of the High Representative of the Union
for Foreign Affairs and Security Policy. In its resolution of 9 June 2022 on the call
for a Convention for the revision of the Treaties, Parliament submitted proposals
for treaty amendments to the Council, under the ordinary revision procedure laid

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down in Article 48 TEU. One key proposal was to allow decisions in the Council
by qualified majority voting instead of unanimity in relevant areas, such as the
adoption of sanctions and in the event of an emergency. Parliament’s Committee on
Constitutional Affairs is also preparing a report on the implementation of passerelle
clauses in the EU Treaties (i.e. clauses that allow the alteration of a legislative
procedure without a formal amendment of the treaties), proposing that passerelle
clauses be activated in some priority policy areas, such as common foreign and
security policy.
3. Economic governance and multiannual financial framework (MFF) (1.4.3)
Since 2009, the sovereign debt crisis has made the European Council and the euro
summits the prime actors in tackling the fallout from the global banking crisis.
Several Member States have received financial aid packages through ad hoc or
temporary agreements decided by the heads of state or government and later ratified
in the Member States. Since 2012, financial aid has been channelled through the
permanent European Stability Mechanism (ESM). Member State governments, with
the active participation of the Commission, Parliament and the European Central
Bank, have drawn up an international treaty – the Treaty on Stability, Coordination and
Governance (also called the ‘Fiscal Compact’) – permitting stricter control of Member
States’ budgetary and socio-economic policies. This increasingly raises questions
about the role of the Commission and Parliament in the economic governance of the
euro area.
The European Council also plays an important role in the European Semester.
At its spring meetings, it issues policy orientations on macroeconomic, fiscal and
structural reform and growth-enhancing policies. At its June meetings, it endorses
recommendations resulting from the assessment of the National Reform Programmes
drawn up by the Commission and discussed in the Council.
It is also involved in the negotiation of the multiannual financial framework (MFF),
where it plays a pivotal role in reaching a political agreement on the key political issues
in the MFF regulation, such as expenditure limits, spending programmes and financing
(resources).
4. Police and judicial cooperation in criminal matters (4.2.6 and 4.2.7)
At the request of a member of the Council, the European Council decides whether to
establish enhanced cooperation in an area related to this field (Article 20 TEU). The
Lisbon Treaty introduced several new bridging clauses enabling the European Council
to change the decision-making formula in the Council from unanimity to majority
voting (1.2.4).

ACHIEVEMENTS
The European Council has set a five-year strategic agenda (2019–2024) identifying
priority areas for longer-term EU action and focus. In addition to the strategic agenda,
its shorter-term work programmes, the so-called Leaders’ Agendas, set out topics for
forthcoming European Council meetings and international summits. For example, the
indicative Leaders’ Agenda published in February 2023 set out the indicative priorities
for the period from January to July 2023, which included, in particular, continued

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EU support to Ukraine in response to Russia’s war of aggression, the economy and

boosting long-term competitiveness in the EU and EU’s strategic autonomy, including
for security and energy.
The adoption of the Strategic Agenda 2024–2029 is planned for June 2024. In order to
launch discussions in advance, President Michel sent a letter ahead of the June 2023
European Council. He suggested four major areas for the forthcoming agenda:
consolidating the EU’s economic and social base (the green and digital transitions,
competitiveness, innovation, health); tackling the energy challenge; strengthening
the EU’s security and defence capabilities; and deepening engagement with the rest
of the world. In addition, he suggested strengthening the EU’s overall approach on
migration.
A. Multiannual financial framework
In order to help the EU to rebuild after the pandemic and support investment in the
green and digital transitions, the European Council leaders agreed, in their special
meeting of 17-21 July 2020, on a comprehensive package of EUR 1 824.3 billion
combining both the multiannual financial framework (MFF) and an extraordinary
recovery effort under the Next Generation EU (NGEU) instrument.
In its meeting of 1 February 2024, the European Council reached agreement on the
revision of the 2021-2027 MFF. Consequently, the Council of the EU approved three
legislative acts aimed at strengthening the long-term budget and tackling emerging
challenges. The adopted package comprises amendments to the financial framework
and the establishment of the Ukraine Facility and the Strategic Technologies for
Europe Platform (STEP).
B. Foreign and security policy
Since the beginning of the 1990s, foreign and security policy has been an important
item at the European Council’s summit meetings. Decisions taken in this area have
included:
— International security and the fight against terrorism;
— European neighbourhood policy and relations with Russia;
— Relations with the Mediterranean countries and the Middle East.
Meeting in Helsinki on 10 and 11 December 1999, the European Council decided
to reinforce the CFSP by developing military and non-military crisis management
capabilities.
In its meeting of 22 and 23 June 2017, the European Council agreed on the need to
launch permanent structured cooperation (PESCO) to strengthen Europe’s security
and defence. PESCO was established by the Council decision of 11 December 2017.
All EU Member States take part in PESCO, except for Denmark and Malta. In total,
46 projects are currently in place under PESCO.
In its above mentioned special meeting of 17 to 21 July 2020, the European Council
agreed that a European Peace Facility would be established as an off-budget
instrument to finance actions in the field of security and defence. The financial ceiling
for the Facility for the period 2021–2027 was set at EUR 5 billion, to be financed as an

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off-budget item outside the MFF through contributions from Member States based
on a gross national income (GNI) distribution key.
In its special meeting of 30 and 31 May 2022, the European Council condemned
Russia’s war of aggression against Ukraine and agreed on the sixth package of
sanctions, covering crude oil and petroleum products delivered from Russia to
Member States. A temporary exception for crude oil delivered by pipeline was
introduced. Leaders urged the Council of the European Union to finalise and adopt
the new sanctions without delay.
According to the conclusions of the European Council meeting of 23 March 2023,
the ‘European Union stands firmly and fully with Ukraine and will continue to provide
strong political, economic, military, financial and humanitarian support to Ukraine and
its people for as long as it takes.’
C. Enlargement (5.5.1)
The European Council has set the terms for each round of EU enlargement.
At Copenhagen in 1993, it laid the foundations for a further wave of accession
(Copenhagen criteria). Meetings in subsequent years further specified the criteria for
admission and the institutional reforms required beforehand.
The Copenhagen European Council (12 and 13 December 2002) decided on the
accession on 1 May 2004 of Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania,
Malta, Poland, Slovakia and Slovenia. Romania and Bulgaria joined the Union on
1 January 2007.
Meeting in Luxembourg on 3 October 2005, the Council approved a framework for
negotiations with Croatia and Türkiye on their accession to the EU. The Accession
Treaty with Croatia was signed on 9 December 2011, and Croatia acceded on
1 July 2013.
On 14 December 2021, the General Affairs Council adopted its conclusions on the
enlargement, stabilisation and association processes for Montenegro, Serbia, Türkiye,
the Republic of North Macedonia, Albania, Bosnia and Herzegovina and Kosovo, which
took stock of progress made in each of these candidate and potential candidate
countries.
On 23 June 2022, the European Council granted candidate status to Ukraine, following
its membership application of 28 February 2022, and invited the Commission to report
to the Council on the fulfilment of the conditions specified in the Commission’s
opinion on the membership application. Further steps would be decided by the
Council once all these conditions had been fully met.
In the conclusions of its special meeting of 9 February 2023, the European Council
‘acknowledge[d] the considerable efforts that Ukraine has demonstrated in recent
months towards meeting the objectives underpinning its candidate status for EU
membership. It welcome[d] Ukraine’s reform efforts in such difficult times and
encourage[d] Ukraine to continue on this path and to fulfil the conditions specified in
the Commission’s opinion on its membership application in order to advance towards
future EU membership.’
The European Council of 14 and 15 December 2023 decided to open accession
negotiations with Ukraine and the Republic of Moldova and to grant candidate country

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status to Georgia ‘on the understanding that the relevant steps set out in the
Commission recommendation of 8 November 2023 are taken’.
D. The UK’s withdrawal from the European Union
On 23 March 2018, the European Council (Article 50), meeting in an EU-27 format,
adopted the guidelines on the framework for a future relationship with the UK after
Brexit. According to the guidelines, the EU wanted to have the closest possible
partnership with the UK, which would cover trade and economic cooperation, and
security and defence, among other areas.
On 17 October 2019, the European Council, meeting in an EU-27 format, endorsed the
revised withdrawal agreement and approved the revised political declaration that the
EU and UK negotiators had agreed to on the very same day. This deal was intended to
allow the orderly departure of the United Kingdom from the European Union.
On 29 October 2019, following a request from the UK, the European Council adopted a
decision to extend the period referred to in Article 50(3) TEU until 31 January 2020, in
order to allow more time for the withdrawal agreement to be ratified. The Withdrawal
Agreement entered into force on 31 January 2020. It marked the end of the period
under Article 50 TEU and the beginning of a transition period that lasted until
31 December 2020. The UK is now no longer an EU Member State, but a third country.
E. Institutional reforms
The European Council meeting in Tampere (15 and 16 October 1999) decided on the
arrangements for drafting the EU Charter of Fundamental Rights (4.1.2). The Helsinki
European Council (December 1999) convened the intergovernmental conference in
preparation for the Treaty of Nice.
The Laeken European Council (14 and 15 December 2001) decided to convene a
Convention on the Future of Europe, which drew up the ill-fated Constitutional
Treaty (1.1.4). After two and a half years of institutional stalemate, the European
Council of 21 and 22 June 2007 adopted a detailed mandate for an intergovernmental
conference, which led to the signature on 13 December 2007 of the Lisbon Treaty,
which entered into force on 1 December 2009 (1.1.5). On 25 March 2011, the European
Council adopted the decision amending Article 136 and paving the way for the creation
of the ESM in 2012.
On 28 June 2018, the European Council adopted a decision on the composition of the
European Parliament, which enabled Member States to enact the necessary domestic
measures for organising the elections to Parliament for the 2019–2024 term[1].
Recent crises, in particular the COVID-19 pandemic and the war in Ukraine, have
highlighted the need for institutional reforms to enhance the EU’s ability to react to
urgent situations in a timely and effective manner.
In its resolution on the outcome of the Conference on the Future of Europe
adopted on 4 May 2022, Parliament welcomed the Conference’s conclusions and
recommendations, acknowledged that Treaty changes were necessary and asked
its Committee on Constitutional Affairs to prepare proposals to reform the EU
Treaties through a convention in line with Article 48 TEU. On 9 June 2022, Parliament

[1]European Council Decision (EU) 2018/937 of 28 June 2018 establishing the composition of the European Parliament.

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adopted a resolution on the call for a Convention for the revision of the Treaties. One
key proposal is to reform voting procedures and allow decisions in the Council by
qualified majority voting instead of unanimity in relevant areas, such as the adoption
of sanctions and so-called passerelle clauses, and in the event of an emergency.
On 11 July 2023, Parliament adopted a resolution on the implementation of the
passerelle clauses in the EU Treaties. On 22 November 2023, it adopted a resolution
on proposals for the amendment of the Treaties, urging the European Council to
convene a Convention for the revision of the Treaties in order to modernise legislative
procedures.

Eeva Pavy / Pablo Abril Marti

05/2024

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1.3.7. THE COUNCIL OF THE EUROPEAN UNION

Together with Parliament, the Council is the institution that adopts EU legislation
through regulations and directives and prepares decisions and non-binding
recommendations. In its areas of competence, it takes its decisions by a simple
majority, a qualified majority or unanimously, according to the legal basis of the act
requiring its approval.

LEGAL BASIS
In the European Union’s single institutional framework, the Council exercises the
powers conferred on it under Article 16 of the Treaty on European Union (TEU) and
Articles 237 to 243 of the Treaty on the Functioning of the European Union (TFEU).

ROLE
A. Legislation
On the basis of proposals submitted by the Commission, the Council adopts EU
legislation in the form of regulations and directives, either jointly with Parliament in
accordance with Article 294 TFEU (ordinary legislative procedure) or alone, following
consultation of Parliament (1.2.3). The Council also adopts individual decisions and
non-binding recommendations (Article 288 TFEU) and issues resolutions. The Council
and Parliament establish the general rules governing the exercise of the implementing
powers conferred on the Commission or reserved for the Council itself (Article 291(3)
TFEU).
B. Budget
The Council is one of the two arms of the budgetary authority, the other being
Parliament. Together they adopt the European Union’s budget (1.2.5). The Council
also adopts, pursuant to a special legislative procedure and acting unanimously,
decisions laying down the provisions applying to the EU’s own resources system
and the multiannual financial framework (Articles 311 and 312 TFEU). In the latter
case, Parliament must give its consent by a majority of its Members. The most
recent multiannual financial framework (2021–2027) was adopted by Parliament in
November 2020. The Council shares Section II of the European Union’s budget with
the European Council (Article 46(b) of the EU Financial Regulation), though they are
separate institutions.
C. Other powers
1. International agreements
The Council concludes the European Union’s international agreements, which are
negotiated by the Commission and in most cases require Parliament’s consent
(Article 218 TFEU).

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2. Appointments
The Council, acting by qualified majority (since the Treaty of Nice), appoints the
members of the Court of Auditors, the European Economic and Social Committee and
the European Committee of the Regions.
3. Economic policy
The Council coordinates the economic policies of the Member States (Article 121
TFEU) and, without prejudice to the powers of the European Central Bank, takes
political decisions in the monetary field.
Special rules apply to the members of the Eurogroup: Article 137 TFEU provides
that ‘[a]rrangements for meetings between ministers of those Member States whose
currency is the euro are laid down by the Protocol on the Euro Group’. Article 1 of
the Protocol (No 14) to the TFEU sets out that ‘[t]he Ministers of the Member States
whose currency is the euro shall meet informally. Such meetings shall take place, when
necessary, to discuss questions related to the specific responsibilities they share with
regard to the single currency. The Commission shall take part in the meetings. The
European Central Bank shall be invited to take part in such meetings, which shall be
prepared by the representatives of the Ministers with responsibility for finance of
the Member States whose currency is the euro and of the Commission’. According
to Article 2 of the Protocol, ‘[t]he Ministers of the Member States whose currency
is the euro shall elect a president for two and a half years, by a majority of those
Member States’. The finance ministers of the Eurogroup usually meet one day before
the meeting of the Economic and Financial Affairs Council.
The Council also carries out a number of economic governance functions in the
context of the European Semester. At the start of the cycle, in autumn, it considers the
specific recommendations for the euro area on the basis of the annual growth survey,
and then in June and July, it adopts the country-specific recommendations after they
have been endorsed by the European Council.
Article 136 TFEU was amended by European Council Decision 2011/199/EU and
entered into force on 1 May 2013, following ratification by all the Member States.
It provides the legal basis for stability mechanisms such as the European Stability
Mechanism (2.6.8).
4. Common foreign and security policy (5.1.1) and (5.1.2)
The Treaty of Lisbon gave legal personality to the European Union, which replaced
the European Community. The new Treaty also abolished the three-pillar structure.
Justice and home affairs became a fully integrated EU policy area, in which the
ordinary legislative procedure applies in almost all cases. However, in foreign and
security policy the Council still acts under special rules when it adopts common
positions and joint actions or draws up conventions.
The former troika arrangement has been replaced by a new system: chaired on
a permanent basis by the High Representative of the Union for Foreign Affairs
and Security Policy, the Foreign Affairs Council now collaborates closely with the
Commission. It is assisted by the Council’s General Secretariat and by the European
External Action Service.

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ORGANISATION
A. Membership
1. Members
The Council consists of a representative of each Member State at ministerial level, who
‘may commit the government of the Member State in question’ (Article 16(2) TEU).
2. Presidency
With the exception of the Foreign Affairs Council, the Council is chaired by the
representative of the Member State that holds the European Union’s presidency: this
changes every six months, in the order decided by the Council acting unanimously
(Article 16(9) TEU). The presidency of all Council formations except foreign affairs is
held by pre-established groups of three Member States for periods of 18 months, with
each member chairing the Council for six months.
The order of presidencies for the next five years is as follows: Sweden and Spain
in 2023, Belgium and Hungary in 2024, Poland and Denmark in 2025, Cyprus and
Ireland in 2026 and Lithuania and Greece in 2027. The European Council can change
the order (Article 236(b) TFEU).
3. Preparatory bodies
A committee consisting of the permanent representatives of the Member States
prepares the Council’s work and carries out the tasks which the Council assigns to it
(Article 240 TFEU). This committee, known as Coreper, is chaired by a representative
of the Member State chairing the General Affairs Council, i.e. the rotating presidency.
However, the Political and Security Committee, which monitors the international
situation in areas covered by the common foreign and security policy, is chaired by
a representative of the High Representative of the Union for Foreign Affairs and
Security Policy.
Coreper meets every week to prepare the work of the Council and coordinate
activities relating to codecision with Parliament. It is divided into two groups:
Coreper I, comprising the deputy permanent representatives, prepares work in
the more technical areas, including agriculture, employment, education and the
environment; Coreper II addresses matters falling more within the field of ‘high
politics’, in particular foreign, economic and monetary affairs and justice and home
affairs. Coreper is assisted in its preparatory work by some 10 committees and
around 100 specialised working parties.
B. Operation
Depending on the area concerned, the Council takes its decisions by a simple majority,
a qualified majority or unanimously (1.2.3) and (1.2.4). When the Council acts in a
legislative capacity, its meetings are open to the public (Article 16(8) TEU). The
Secretary-General of the Council is appointed by the Council pursuant to Article 240
TFEU. Council meetings are held in Brussels, but also in Luxembourg (sessions in April,
June and October). At present there are 10 Council configurations, three of which
meet regularly (General Affairs, Foreign Affairs, and Economic and Financial Affairs
(Ecofin)).

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1. Simple majority
This means that a decision is deemed to have been made when there are more votes
for than against. Each member of the Council has one vote. Therefore, simple majority
is reached if 14 Council members vote in favour. The simple majority rule is applicable
when the Treaty does not provide otherwise (Article 238(1) TFEU). It is thus the default
decision-making process. In practice, however, it applies only to a small number of
decisions: internal Council rules, the organisation of the Council’s General Secretariat,
and rules governing committees provided for in the Treaty.
2. Qualified majority
a. Mechanism
The Council’s qualified majority rule can be found in the Treaty of Lisbon, in Article 16
(4, first paragraph) TEU. Under this article, a favourable vote is required from at
least 55% of the members of the Council representing at least 65% of the EU’s
population. In practice, this means at least 15 Member States out of 27. In cases where
the proposal does not come from the Commission or the High Representative, the so-
called ‘reinforced qualified majority’ rule applies, under which the required percentage
of Council members voting in favour is 72% (comprising at least 20 Member States out
of 27), again representing at least 65% of the EU’s population.
b. Scope
The Treaty of Lisbon again extended the scope of decision-making by qualified
majority voting (QMV). For 68 legal bases it either introduced or extended QMV,
mostly in conjunction with the introduction of the ordinary legislative procedure
(including many former third-pillar areas). QMV also applies to the appointment of the
President and Members of the Commission and the members of the Court of Auditors,
the European Economic and Social Committee and the European Committee of the
Regions (1.2.3 and 1.2.4).
3. Unanimity
Unanimity is only required by the Treaty for decisions in a few areas, such as taxation
and social policy. This was maintained by the Treaty of Lisbon. Article 48(7) TEU
provides a general passerelle clause applicable to all EU policies which, under certain
conditions, gives the possibility to derogate from the legislative procedures initially
provided for by the Treaties. Consequently, it enables the Council to adopt decisions
on certain issues by a qualified majority instead of unanimity: passerelle clauses
allow for switches from the special legislative procedure to the ordinary legislative
procedure and from voting by unanimity to QMV. However, a passerelle clause can still
only be activated if a decision is adopted unanimously by the Council or the European
Council. Consequently, all Member States must be in agreement before such a clause
can be activated.
In his 2018 State of the Union speech, President Juncker announced a comprehensive
review of passerelle clauses. As a result, the Commission has to date published four
communications, on common foreign and security policy (September 2018), taxation
(January 2019), energy and climate (April 2019) and social policy (2019).

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In general, the Council tends to seek unanimity even when it is not required to
do so. This preference dates back to the 1966 Luxembourg Compromise, which
ended a dispute between France and the other Member States in which France had
refused to move from unanimity to QMV in certain areas. The text of the compromise
reads: ‘Where, in the case of decisions which may be taken by a majority vote on a
proposal from the Commission, very important interests of one or more partners are
at stake, the Members of the Council will endeavour, within a reasonable time, to reach
solutions which can be adopted by all the Members of the Council while respecting
their mutual interests and those of the Community’.
A similar solution was found in 1994 when the Ioannina Compromise was reached
to protect Member States which were close to constituting a blocking minority.
Under this arrangement, if the countries in question stated their intention to oppose
the taking of a decision by the Council by qualified majority, the Council would do
everything in its power to reach a solution acceptable to a large majority of Member
States within a reasonable period of time.
According to Article 48 TEU, any revision of the founding treaties requires unanimity,
which has been considered a major constraint in reforming the Union of 27 Member
States. To overcome the unanimity requirement, Member States have concluded
international agreements outside the EU legal order. This happened for the first time
as a result of the euro crisis, with the adoption, in 2012, of the Treaty on Stability,
Coordination and Governance in the Economic and Monetary Union (the fiscal
compact) and the Treaty establishing the European Stability Mechanism (ESM), as
well as, in 2014, the Intergovernmental Agreement on the Transfer and Mutualisation
of Contributions to the Single Resolution Fund (SRF Agreement). According to
Article 14(3) of the fiscal compact, it applied as from the date of its entry into force
only to those Member States which had ratified it. Requiring ratification by just 12 euro
area countries, it set approval by a minority of Member States as a condition for its
entry into force.
In the context of the Conference on the Future of Europe and the COVID-19
pandemic, Parliament, in its resolution on EU coordinated action to combat the
COVID-19 pandemic and its consequences, proposed ‘greater powers for the Union
to act in the case of cross-border health threats’ and called for the activation of
‘the general passerelle clause to ease decision-making process in all matters which
could help to cope with the challenges of the current health crisis’. In its resolution of
9 June 2022 on the call for a Convention for the revision of the Treaties, Parliament
submitted proposals for treaty amendments to the Council under the ordinary revision
procedure laid down in Article 48 TEU. The suggested amendments would allow
decisions in the Council to be made by qualified majority voting instead of unanimity
in relevant areas, such as the adoption of sanctions and in the event of an emergency.
In her speech at the closing event of the Conference on the Future of Europe
on 9 May 2022, the Commission President, Ursula von der Leyen, reaffirmed
the Commission’s willingness to implement the adopted citizens’ proposals on
overcoming the deadlock of unanimity voting. According to the Commission, ‘it is now
up to us to take the most direct way there, either by using the full limits of what we can
do within the Treaties, or, yes, by changing the Treaties if need be’. On 11 July 2023,

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Parliament adopted a resolution on the implementation of the passerelle clauses in

the EU Treaties, proposing that passerelle clauses be activated in some priority policy
areas, in particular the common foreign and security policy, energy policy and taxation
matters with an environmental dimension.
In December 2023, the Commission President reiterated her Cabinet’s commitment
to reforming the Treaties. However, in a communication from 20 March 2024, the
Commission softened this position by stating that the EU’s governance could be
‘swiftly improved by using to the full the potential of the current Treaties’, referencing
the hurdles to treaty change posed by the requirement of unanimity.

Eeva Pavy / Alexandru-George Moș

05/2024

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1.3.8. THE EUROPEAN COMMISSION

The Commission is the EU institution that has the monopoly on legislative initiative
as well as important executive powers in policies such as competition and external
trade. It is the principal executive body of the European Union and is formed
by a College of members composed of one Commissioner per Member State.
The Commission oversees the application of Union law and respect for the
Treaties by the Member States; it also chairs the committees responsible for the
implementation of EU law. The former ‘comitology’ system has been replaced by
new legal instruments, namely implementing and delegated acts.

LEGAL BASIS
Article 17 of the Treaty on European Union (TEU), Articles 234, 244 to 250, 290
and 291 of the Treaty on the Functioning of the European Union (TFEU), and the Treaty
Establishing a Single Council and a Single Commission of the European Communities
(‘Merger Treaty’).

HISTORY
Initially, each Community had its own executive body: the High Authority for the
European Coal and Steel Community (ECSC) (1951) and a Commission for each of
the two communities set up by the Treaty of Rome in 1957: the EEC and Euratom.
By means of the Merger Treaty of 8 April 1965, both the executive structures of
the ECSC, EEC and Euratom and the budgets of those institutions (with the most
important being the Commission) were merged into a single Commission of the
European Communities (1.1.2). When the ECSC Treaty expired in 2002, 50 years after
its establishment, it was decided that ECSC assets should revert to the Commission,
which would be responsible for winding up outstanding operations, managing the
ECSC’s assets and ensuring the financing of research activities in sectors related to
the coal and steel industry.

COMPOSITION AND LEGAL STATUS

A. Number of members
For a long time the number of Commissioners per Member State had to be no less
than one and no more than two. The Treaty of Lisbon originally stipulated that the
membership of the Commission, from 1 November 2014, was to be equivalent to
two thirds of the number of Member States. At the same time, it introduced an
element of flexibility by allowing the European Council to determine the number of
Commissioners (Article 17(5) TEU). In 2009, the European Council decided that the
Commission would continue to consist of a number of members equal to the number
of Member States.

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B. Method of appointment
The Treaty of Lisbon stipulates that the results of the European elections have to be
taken into account when the European Council, after appropriate consultations (as
set out in Declaration 11 on Article 17(6) and (7) TEU as an annex to the Treaty) and
acting by a qualified majority, proposes a candidate for President of the Commission
to Parliament. This candidate is elected by Parliament by a majority of its component
members (Article 17(7) TEU).
The Council of the European Union (referred to here as ‘the Council’), which consists
of government ministers from each EU country, adopts the list of the other persons
whom it proposes for appointment as members of the Commission, acting by a
qualified majority and by common accord with the President-elect, on the basis of the
suggestions made by Member States.
The President and the other members of the Commission, including the High
Representative of the Union for Foreign Affairs and Security Policy, are subject to a
vote of consent, as a body, by Parliament and are then appointed by the European
Council, which consists of the heads of state or government of the EU’s member
states, acting by a qualified majority.
Since the Treaty of Maastricht, Commissioners terms of office have matched the
European Parliament’s five-year term and are renewable.
C. Accountability
1. Personal accountability (Article 245 TFEU)
Members of the Commission are required:
— To be completely independent in the performance of their duties, in the general
interest of the Union; in particular, they may neither seek nor take instructions
from any government or other external body;
— Not to engage in any other occupation, whether gainful or not.
Commissioners may be compulsorily retired by the Court of Justice, at the request of
the Council or of the Commission itself, if they breach any of the above obligations or
have been guilty of serious misconduct (Article 247 TFEU).
2. Collective accountability
The Commission is collectively accountable to Parliament under Article 234 TFEU. If
Parliament adopts a motion of censure against the Commission, all of its members are
required to resign, including the High Representative of the Union for Foreign Affairs
and Security Policy as far as his or her duties in the Commission are concerned.

ORGANISATION AND OPERATION

The Commission works under the political guidance of its President, who decides on
its internal organisation. The President allocates the sectors of its activity among the
members. This gives each Commissioner responsibility for a specific policy sector
and authority over the administrative departments concerned. After obtaining the
approval of the College, the President appoints the Vice-Presidents from among
its members. The High Representative is automatically a Vice-President of the

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Commission. A member of the Commission must resign if the President so requests,

subject to the approval of the College.
The Commission has a Secretariat-General consisting of 33 directorates-general,
which develop, manage and implement EU policy, law and funding. In addition, there
are also 20 special departments (services and agencies), which deal with ad hoc or
horizontal issues. These include the European Anti-Fraud Office, the Legal Service,
the Historical Archives, the Publications Office, the European Political Strategy
Centre and the Taskforce on Article 50 negotiations with the United Kingdom. There
are also six executive agencies, such as the Research Executive Agency, which
perform tasks delegated to them by the Commission but which have their own
legal personality. Barring a few exceptions, the Commission acts by a majority of its
members (Article 250 TFEU).
The Commission meets every week to discuss politically sensitive issues and adopt the
proposals that need to be agreed by oral procedure, while less sensitive matters are
adopted by written procedure. Measures relating to management or administration
can be adopted through a system of empowerment, whereby the College gives one of
its members the authority to take decisions on its behalf (this is particularly relevant in
areas such as agricultural aid or anti-dumping measures), or through sub-delegation,
where decisions are delegated to an administrative level, usually to Directors-General.

POWERS
A. Power of initiative
As a rule, the Commission has a monopoly on the initiative in EU law-making
(Article 17(2) TEU). It draws up proposed acts to be adopted by the two decision-
making institutions: Parliament and the Council.
1. Full initiative: the power of proposal
a. Legislative initiative
The power of proposal is the complete form of the power of initiative, as it is always
exclusive and constrains the decision-making authority to the extent that it cannot
take a decision unless there is a proposal and its decision has to be based on the
proposal as presented.
The Commission draws up and submits to the Council and Parliament any legislative
proposals (for regulations or directives) needed to implement the treaties (1.2.3).
b. Budgetary initiative
The Commission draws up the draft budget, which it proposes to the Council and
Parliament under Article 314 TFEU (1.2.5). Every year, each institution other than the
Commission draws up estimates, including all its revenue and expenditure, which it
sends to the Commission before 1 July (Article 39(1) of the Financial Regulation). Also,
each body which is set up under the Treaties, which has legal personality and receives a
contribution charged to the budget sends estimates to the Commission by 31 January
each year. The Commission then sends the EU agencies’ statement of estimates to
Parliament and the Council and proposes the amount of the contribution for every EU
body and the number of staff it considers it needs for the following financial year.

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With regard to the EU’s system of own resources, the basic Own Resources Decision
must be adopted unanimously by the Council, upon a proposal from the Commission
(Article 17 TEU) and after consulting Parliament, in accordance with a special
legislative procedure. It is possible to establish new categories of own resources and
abolish existing ones at any time (Article 311(3) TFEU), but such decisions can only be
adopted on the basis of a Commission proposal (Article 17(2) TEU). Also, acting on a
proposal from the Commission and after consulting the European Parliament and the
Court of Auditors, the Council determines the methods and procedure whereby the
budget revenue is made available to the EU budget (Article 322(2) TFEU).
c. Relations with non-member countries
Where the Council has given a mandate, the Commission is responsible for
negotiating international agreements under Articles 207 and 218 TFEU, which are then
submitted to the Council with a view to their conclusion. This includes negotiations
for accession to the European Convention for the Protection of Human Rights and
Fundamental Freedoms (Article 6(2) TEU). As regards foreign and security policy, it
is the High Representative who negotiates agreements. Under Article 50 TEU and
Article 218(3) TFEU, the Commission also submits recommendations on the opening
of negotiations regarding withdrawal from the EU.
2. Limited initiative: the power of recommendation or opinion
a. In the context of Economic and Monetary Union (2.6.2)
The Commission has a role in managing Economic and Monetary Union (EMU). It
submits to the Council:
— Recommendations for the draft broad guidelines for the Member States’
economic policies, and warnings if those policies are likely to be incompatible with
the guidelines (Article 121(4) TFEU);
— Assessment proposals to enable the Council to determine whether a Member
State has an excessive deficit (Article 126(6) TFEU);
— Recommendations on measures to be taken if a non-euro area Member State is in
difficulties as regards its balance of payments, as provided for in Article 143 TFEU;
— Recommendations for the exchange rate between the single currency and other
currencies and for general orientations for exchange-rate policy, as provided for
in Article 219 TFEU;
— An assessment of national policy plans and presentation of country-specific draft
recommendations falling under the European Semester.
b. Under the Common Foreign and Security Policy
In this area, many competences have been transferred from the Commission to the
High Representative of the Union for Foreign Affairs and Security Policy and the
European External Action Service (EEAS). However, the Commission may support the
High Representative (HR) in submitting any decision to the Council concerning the
Common Foreign and Security Policy (Article 30 TEU). The HR is also a Commission
Vice-President.

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B. Power to monitor the implementation of Union law

The Commission is required under the Treaties to ensure that the Treaties themselves,
and any decisions taken to implement them (secondary legislation), are properly
enforced. Therein lies its role as guardian of the Treaties. This role is exercised mainly
through the procedure applied to Member States where they have failed to fulfil an
obligation under the Treaties, as set out in Article 258 TFEU.
C. Implementing powers
1. Conferred by the Treaties
The main powers vested in the Commission are as follows:
— Implementing the budget (Article 17(1) TEU, Article 317 TFEU). Once the budget
has been adopted, from 1 January of the following financial year each Member
State makes the payments due to the EU through monthly contributions to the
EU budget which are deposited in a bank account in the name of the European
Commission at the national ministry of finance or central bank;
— Authorising the Member States to take safeguard measures laid down in the
Treaties, particularly during transitional periods (e.g. Article 201 TFEU);
— Enforcing competition rules, not least by keeping State aid under review, in
accordance with Article 108 TFEU.
In the financial rescue packages dealing with the debt crises of some Member States,
the Commission is responsible for the management of the funds raised through and
guaranteed by the EU budget. It also has the power to alter the voting procedure
in the European Stability Mechanism (ESM), enabling the Board of Governors to act
by a special qualified majority (85%) instead of acting unanimously if it decides (in
agreement with the ECB) that a failure to adopt a decision to grant financial assistance
would threaten the economic and financial sustainability of the euro area (Article 4(4)
of the ESM Treaty) (2.6.8).
2. Delegated by Parliament and the Council
In accordance with Article 291 TFEU, the Commission exercises the powers conferred
on it for the implementation of the legislative acts laid down by Parliament and the
Council.
The Treaty of Lisbon introduced new ‘rules and general principles concerning
mechanisms for control by Member States of the Commission’s exercise of
implementing powers’ (Article 291(3) TFEU and Regulation (EU) No 182/2011). They
replace the previous committee mechanisms with two new arrangements, namely the
advisory procedure and the examination procedure. The right of scrutiny accorded
to Parliament and the Council is formally included, as is a provision for an appeal
procedure in cases of conflict.
3. Delegated acts
The Treaty of Lisbon also introduced a new category of acts, ranking between
legislative and implementing acts. These ‘delegated non-legislative acts’ (Article 290
TFEU) are ‘acts of general application to supplement or amend certain non-essential

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elements of the legislative act’ (also called the ‘basic act’). In principle, Parliament
enjoys the same rights of oversight as the Council.
D. Regulatory and consultative powers
The Treaties seldom give the Commission full regulatory powers. One exception to
that rule is Article 106 TFEU, which empowers the Commission to enforce Union
rules on public undertakings and undertakings operating services of general economic
interest and, where necessary, to address appropriate directives or decisions to
Member States.
The Treaties provide the Commission with the power to make recommendations or
deliver reports and opinions in many instances. They also provide for it to be consulted
on certain decisions, such as on the admission of new Member States to the Union
(Article 49 TEU). The Commission is also consulted, in particular, about changes in
the statutes of other institutions and bodies, such as the Statute for Members of the
European Parliament, of the European Ombudsman and of the Court of Justice.

ROLE OF THE EUROPEAN PARLIAMENT

The Commission is the principal interlocutor of Parliament in legislative and budgetary
matters. Parliamentary scrutiny of the Commission’s work programme and its
execution is increasingly important for ensuring better democratic legitimacy in EU
governance. The annual draft budget is a proposal containing the draft budget to be
submitted to Parliament and to the Council by 1 September of the year preceding that
in which the budget is to be implemented (year n -1). The Commission also forwards
that proposal, for information, to the national parliaments. In addition, the Commission
draws up its own statement of estimates, which it also sends separately to Parliament
and the Council for approval. In accordance with Article 319 TFEU, Parliament has the
right to grant discharge to the Commission.
The Own Resources Decision is taken in accordance with a special legislative
procedure (Article 289(2) TFEU), upon a proposal from the Commission (Article 311(2)
TFEU) and after consulting Parliament. Whereas the basic Own Resources Decision
is adopted under this consultation procedure, the corresponding implementing
measures (in accordance with Article 291(2) TFEU) are adopted by the Council
after obtaining the consent of Parliament, on the basis of a Commission proposal
(Article 311(3) TFEU).
The European Commission should maintain continuous dialogue with the European
Parliament throughout its entire term, starting with the hearings of Commissioners-
designate and continuing with the specific commitments undertaken during these
hearings, the mid-term tracking of those commitments and systematic structured
dialogue with specific Parliamentary committees.
Under the Treaty of Maastricht, enhanced by the Lisbon Treaty, the European
Parliament has a right of legislative initiative that allows it to ask the Commission
to submit a proposal. The European Parliament may also introduce reporting
requirements in its legislation, obliging the European Commission to present
implementation reports.

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The European Commission sometimes fails to comply with the European Parliament’s
requests for proposals (such as in the case of the European Parliament’s
recommendation of 15 June 2023 to the Council and the Commission following the
investigation of alleged contraventions and maladministration in the application of
Union law in relation to the use of Pegasus and equivalent surveillance spyware) or
delays the presentation of important implementation reports (e.g. the first report on
application and functioning of the Law Enforcement Directive[1]).
After the Schrems II case led to the invalidation of Commission Implementing Decision
(EU) 2016/1250 on the adequacy of the protection provided by the EU-US agreement
on exchange of data, due to concerns that EU citizens were not protected in
transatlantic data exchanges, Parliament criticised the fact that the Commission had
put relations with the United States ahead of the interests of EU citizens, and that
the Commission had thereby left the task of defending EU law to individual citizens[2].
Despite this criticism, and a further Parliament resolution concluding that the EU-US
Data Privacy Framework fails to create essential equivalence in the level of protection,
on 10 July 2023 the Commission adopted its third decision on the adequate level of
protection of personal data under the EU-US Data Privacy Framework.
This fact sheet was prepared by the European Parliament’s Policy Department for
Citizens’ Rights and Constitutional Affairs.

Pablo Abril Marti / Mariusz Maciejewski

04/2024

[1]Vogiatzoglou P. et al., ‘Assessment of the implementation of the Law Enforcement Directive’, Policy Department for
Citizens’ Rights and Constitutional Affairs, European Parliament, December 2022
[2]European Parliament resolution of 20 May 2021 on the ruling of the CJEU of 16 July 2020 – Data Protection Commissioner v
Facebook Ireland Limited and Maximillian Schrems (‘Schrems II’), Case C-311/18.

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1.3.9. THE COURT OF JUSTICE

OF THE EUROPEAN UNION

The Court of Justice of the European Union (CJEU) is one of the EU’s seven
institutions. It consists of two courts of law: the Court of Justice proper and the
General Court. It is responsible for the jurisdiction of the European Union. The courts
ensure the correct interpretation and application of primary and secondary EU law
in the EU. They review the legality of acts of the EU institutions and decide whether
Member States have fulfilled their obligations under primary and secondary law.
The Court of Justice also provides interpretations of EU law when so requested by
national judges.

COURT OF JUSTICE
A. Legal basis
— Article 19 of the Treaty on European Union (TEU), Articles 251 to 281 of the Treaty
on the Functioning of the European Union (TFEU), Article 136 of the Euratom
Treaty, and Protocol No 3 annexed to the Treaties on the Statute of the Court of
Justice of the European Union (‘the Statute’);
— Regulation (EU, Euratom) 2019/629 of the European Parliament and of the
Council of 17 April 2019 amending Protocol No 3 on the Statute of the Court of
Justice of the European Union;
— EU Budget (Section 4).
B. Composition and Statute
1. Membership
a. Number of members (Article 19 TEU and Article 252 TFEU)
One judge per Member State (27). The Court is assisted by 11 advocates-general. The
judges of the Court of Justice elect, from among themselves, a President and a Vice-
President for a renewable term of three years.
b. Requirements (Article 19 TEU and Article 253 TFEU)
— Judges and advocates-general must possess the qualifications required for
appointment to the highest judicial offices in their respective countries or be
recognised legal experts;
— Their independence must be beyond doubt.
c. Appointment procedure (Article 253 TFEU)
As the end of terms of office of judges and advocates-general approaches, the
representatives of Member State governments proceed to the appointment of judges
or advocates-general to the Court of Justice by common accord after consultation
with a panel responsible for giving an opinion on prospective candidates’ suitability
(Article 255 TFEU).

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2. Characteristics of the office

a. Duration (Article 253 TFEU and the Statute)
Six years. Partial replacement every three years, half of the judges and of the
advocates-general are replaced alternately. Retiring judges and advocates-general
may be reappointed.
b. Privileges and immunities (the Statute)
Judges and advocates-general are immune from legal proceedings. After they have
ceased to hold office, they continue to enjoy immunity in respect of acts they
performed in their official capacity. They may be removed from office only by a
unanimous decision of the Court.
c. Obligations (the Statute)
Judges and advocates-general:
— Take an oath (swearing independence, impartiality and preservation of secrecy)
before taking up their duties;
— May not hold any political or administrative office or engage in any other
occupation;
— Give an undertaking that they will respect the obligations arising from their office.
C. Organisation and operation (Article 253 TFEU and the Statute)
1. Institutional set-up
The Statute must be laid down in a separate Protocol, annexed to the Treaties
(Article 281 TFEU). The Court elects its President and a Vice-President from among
its members for a renewable term of three years (Article 9a of Protocol No 3). The
President directs the work of the Court and presides at hearings and deliberations of
the full Court or the Grand Chamber. The Court appoints its Registrar. The Registrar is
the institution’s Secretary-General and manages its departments under the authority
of the President of the Court.
2. Operation
The Court establishes its Rules of Procedure, which require the approval of the
Council, acting by a qualified majority. The Court may sit as a full Court with 27 judges,
in a Grand Chamber of 15 judges or in chambers of three or five judges. The institution
is financed from the EU budget, where it has its own dedicated section (Section 4).
D. Achievements
The Court of Justice has shown itself to be a driving force of the European integration
process.
1. General practice
Its judgment of 15 July 1964 in the Costa v ENEL case was fundamental in defining
Community law as an independent system taking precedence over national legal
provisions, establishing the principle of the primacy of EU law[1]. Similarly, its judgment

[1]Ziller J., La primauté du droit de l’Union européenne, European Parliament Directorate-General for Internal Policies, Policy
Department for Citizens’ Rights and Constitutional Affairs, European Parliament, May 2022.

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of 5 February 1963 in the Van Gend & Loos case established the principle that
Community law was directly applicable in the courts of the Member States. Other
significant judgments concerning the protection of human rights include the judgment
of 14 May 1974 in the Nold case, in which the Court stated that fundamental human
rights are an integral part of the general principles of law that it upholds (4.1.2).
2. In specific matters
— Right of establishment: judgment of 8 April 1976 in the Royer case, in which the
Court upheld the right of a national of a Member State to stay in any other Member
State independently of any residence permit issued by the host country;
— Free movement of goods: judgment of 20 February 1979 in the Cassis de
Dijon case, in which the Court ruled that any product legally manufactured and
marketed in a Member State must in principle be allowed on the market of any
other Member State;
— The external jurisdiction of the Community: the European Agreement on Road
Transport judgment of 31 March 1971, in the Commission/Council case, which
recognised the Community’s right to conclude international agreements in
spheres where Community regulations apply;
— Recent judgments establishing an obligation on Member States to pay damages
when they have failed to transpose directives into national law or failed to do so
in good time;
— Various judgments relating to social security and competition;
— Rulings on breaches of EU law by the Member States, which are vital for the
smooth running of the common market;
— Data protection: rulings on the ‘Safe Harbour’ agreement in Schrems I (2015)
and on the EU-US Privacy Shield in Schrems II (2020), which invalidated the
Commission’s adequacy decisions on the United States so as to protect the
fundamental principles of European law and ensure a strong set of data
protection requirements.
One of the great merits of the Court has been its statement of the principle that
the Treaties must not be interpreted rigidly but must be viewed in the light of the
state of integration and of the objectives of the Treaties themselves. This principle has
allowed the EU to legislate in areas where there are no specific Treaty provisions, such
as the fight against pollution (in a judgment of 13 September 2005 (Case C-176/03),
the Court in fact authorised the EU to take measures relating to criminal law where
‘necessary’ in order to achieve the objective pursued as regards environmental
protection).
In 2022, 806 cases were brought before the Court of Justice, of which 546 concerned
preliminary ruling proceedings, 37 direct actions and 209 appeals against decisions
of the General Court. 808 cases were resolved, including 564 preliminary ruling
proceedings, 36 direct actions and 196 appeals against decisions of the General Court.
The Member States from which the most requests originated were Germany (98),

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Italy (63), Bulgaria (43) and Spain (41). The average duration of proceedings was 16.4
months[2]. 1 111 cases were pending as of 31 December 2022.

GENERAL COURT
A. Legal basis
Articles 254 to 257 TFEU, Article 40 of the Euratom Treaty, and Title IV of Protocol No 3
annexed to the Treaties on the Statute of the Court of Justice of the European Union.
B. Duration and Statute (Article 254 TFEU)
1. Membership
a. Number (Article 19 TEU and Article 254 TFEU)
Article 254 TFEU provides that the number of judges shall be determined by the
Statute. Article 48 of Protocol No 3 on this Statute, amended by Regulation (EU,
Euratom) 2016/1192 of 6 July 2016, provides that the General Court shall consist of
two judges per Member State (currently 54). Judges are appointed by common accord
of the governments of the Member States after consultation with a panel responsible
for giving an opinion on candidates’ suitability to perform the duties of a judge. Their
term of office is six years, and is renewable. The judges may be called upon to perform
the task of advocate-general as, unlike the Court of Justice, the General Court does
not have permanent advocates-general.
b. Requirements
Identical to those of the Court of Justice (Article 19 TEU). For appointment to the
General Court, candidates must possess the abilities required for appointment to high
judicial office.
c. Appointment procedure
Identical to that of the Court of Justice.
2. Characteristics of the office
Identical to those of the Court of Justice.
C. Organisation and operation
The judges appoint their President from among their number for a period of three
years and their Registrar for a six-year term of office, although the General Court uses
the services of the Court of Justice for its administrative and linguistic requirements.
In agreement with the Court of Justice, the General Court establishes its Rules of
Procedure (Article 254(5) TFEU). The General Court sits in chambers of three or five
judges. The General Court sits as a full court or in a Grand Chamber or is constituted
by a single judge. More than 80% of the cases brought before the General Court are
heard by a chamber of three judges.
According to the recent amendment of Protocol No 3 (Article 49a), the General Court
shall, like the Court of Justice, be assisted by one or more advocates-general in
dealing with requests for a preliminary ruling. Therefore, the judges of the General

[2]CJEU, Annual report 2022.

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Court shall elect among them (an) advocate(s)-general for a term of three years (one
re-election possible).
Recent amendments to its Rules of Procedure (April 2023) permit the use
of videoconferencing during hearings (Article 107a Rules of Procedure). The
amendments also introduce the concept of a ‘pilot case’ (Article 71a Rules of
Procedure). If several cases raise the same issue of law and the necessary conditions
are met, one of the cases may be identified as the pilot case and the others stayed.
Proceedings may primarily be brought before the General Court, at first instance, in
direct actions brought by natural or legal persons, where they are concerned directly
and individually, and by Member States against acts of the institutions, bodies, offices
or agencies of the EU, and in direct actions seeking compensation for damage caused
by the institutions or their staff. The decisions of the General Court may be subject to
appeal, limited to points of law, before the Court of Justice. On average, around 30%
of decisions by the General Court are challenged.
Parliament and the Council may establish specialised courts attached to the General
Court to hear and determine at first instance certain categories of actions or
proceedings brought in specific areas. To establish these courts, Parliament and the
Council act under the ordinary legislative procedure.
In 2022, 904 cases were brought before the General Court, of which 858 were
resolved. 792 of these cases concerned direct actions (270 on intellectual and
industrial property, 76 on State aid and competition, 66 on the EU civil service, and 380
on other direct actions). A party that is unable to meet the costs of proceedings
may apply for free legal aid (54 cases in 2022). The average duration of proceedings
was 16.2 months. 1 474 cases were pending as of 31 December 2022[3].

THE FORMER EUROPEAN UNION CIVIL SERVICE TRIBUNAL

The European Union Civil Service Tribunal (established in 2004) was responsible for
ruling on disputes between the EU institutions and their staff where these were
not the responsibility of a national court. As part of an overall increase in the total
number of judges of the Court of Justice, the Civil Service Tribunal was dissolved
on 1 September 2016 and integrated into the General Court by Regulation (EU,
Euratom) 2016/1192 of the European Parliament and of the Council of 6 July 2016
on the transfer to the General Court of jurisdiction at first instance in disputes
between the European Union and its servants. Cases pending before the Civil Service
Tribunal on 31 August 2016 were transferred to the General Court with effect from
1 September 2016. The General Court continues to deal with these cases as found
at that date, with the procedural steps taken by the former Civil Service Tribunal
remaining applicable.

ROLE OF THE EUROPEAN PARLIAMENT

As early as 1990, a Court of Justice ruling on a case brought by Parliament as part of
the legislative procedure on the adoption of health measures to be taken following
the Chernobyl nuclear accident granted Parliament the right to bring before the Court

[3]CJEU, Annual report 2022.

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of Justice actions to have decisions declared void for the purpose of safeguarding its
prerogatives under the legislative procedure.
According to Article 257 TFEU, Parliament and the Council, acting in accordance with
the ordinary legislative procedure, may establish specialised courts attached to the
General Court to hear and determine at first instance certain classes of action or
proceedings brought in specific areas. Parliament and the Council are required to act
by means of regulations either on a proposal from the Commission after consultation
of the Court of Justice or at the request of the Court of Justice after consultation with
the Commission.
According to Article 281(2) TFEU, the Statute of the Court of Justice of the European
Union is amended by Parliament and the Council, which act in accordance with the
ordinary legislative procedure (in the form of a regulation of the European Parliament
and of the Council). An example of Parliament’s participation is the Court of Justice’s
own proposal of 30 November 2022 to amend its Statute.
Parliament is one of the institutions mentioned in Article 263 TFEU that may bring an
action (as a party) before the Court of Justice.
According to Article 218(11) TFEU, Parliament can request an opinion from the Court
of Justice as to whether a planned international agreement is compatible with the
Treaties. Where the opinion of the Court of Justice is adverse, the planned agreement
may not enter into force unless it is amended or the Treaties are revised. For example,
in July 2019 Parliament asked for a legal opinion on whether the proposals for
the accession by the EU to the Council of Europe Convention on preventing and
combating violence against women and domestic violence (the Istanbul Convention)
were compatible with the Treaties (Opinion 1/19).
With the entry into force of the Treaty of Lisbon, candidates for the post of judge and
advocate-general are now first appraised by a panel of seven persons, one of whom
is proposed by Parliament (Article 255(2) TFEU and Rule 128 of Parliament’s Rules of
Procedure) by means of a plenary resolution.
In accordance with Article 3(1) of Regulation (EU, Euratom) 2015/2422, on
21 December 2020 the Court of Justice submitted a report on the functioning of the
General Court, which was drawn up by an external consultant. In particular, Article 3(1)
of Regulation (EU, Euratom) 2015/2422 required the report to focus on the efficiency
of the General Court, the necessity and effectiveness of the increase to 56 judges,
the use and effectiveness of resources, and the further establishment of specialised
chambers and/or other structural changes.
On 19 September 2023 the JURI Committee adopted a draft report on a proposal to
amend Protocol No 3 on the Statute of the Court of Justice of the EU (CJEU), aimed
at transferring jurisdiction on preliminary rulings in a number of specific areas from
the Court of Justice to the General Court and at extending the requirement to obtain
permission to appeal in the case of appeals against certain General Court decisions.
On 11 April 2024, the act was adopted by the Council, following Parliament’s first
reading. Within the agreed text are provisions concerning the election of permanent
advocates-general for a term of three years by the General Court.

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1.3.10. COMPETENCES OF THE COURT

OF JUSTICE OF THE EUROPEAN UNION

The Court of Justice of the European Union (CJEU) consists of two courts, the Court
of Justice proper and the General Court, and it offers various means of redress,
as laid down in Article 19 of the Treaty on European Union, Articles 251-281 of the
Treaty on the Functioning of the European Union (TFEU), Article 136 Euratom, and
Protocol No 3 annexed to the Treaties on the Statute of the Court of Justice of the
European Union.

COURT OF JUSTICE
A. Direct proceedings against Member States or an institution, body, office or
agency of the European Union.
The Court gives a ruling on proceedings against states or institutions that have not
fulfilled their obligations under EU law.
1. Proceedings against a Member State for failure to fulfil an obligation
These actions are brought:
— Either by the Commission, after a preliminary procedure (Article 258 TFEU):
opportunity for the state to submit its observations and reasoned opinion (1.3.8);
— Or by a Member State against another Member State after it has brought the
matter before the Commission (Article 259 TFEU).
Role of the Court:
— Confirming that the state has failed to fulfil its obligations, in which case the state
is required to put an immediate end to the infringement;
— If, after a further action is brought by the Commission, the Court finds that the
Member State concerned has not complied with its judgment, it may impose a
financial penalty on it (a fixed lump sum and/or a periodic penalty payment), the
amount being determined by the Court on the basis of a Commission proposal
(Article 260 TFEU).
2. Proceedings against the EU institutions for annulment and for failure to act
Subject: cases where the applicant seeks the annulment of a measure supposedly
contrary to EU law (annulment: Article 263 TFEU) or, in cases of infringement of EU
law, where an institution, body, office or agency has failed to act (Article 265 TFEU).
Referral: actions may be brought by the Member States, the institutions themselves
or any natural or legal person if the actions relate to a measure (in particular a
regulation, directive or decision) adopted by an EU institution, body, office or agency
and addressed to them.

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Role of the Court: the Court declares the act void or declares that there has been a
failure to act, in which case the institution at fault is required to take the necessary
measures to comply with the Court’s judgment (Article 266 TFEU).
3. Other direct proceedings
As the General Court has jurisdiction in all first instance actions referred to in
Articles 263, 265, 268, 270 and 272 TFEU, only actions against Commission decisions
imposing penalties on firms (Article 261 TFEU) are to be brought to the Court of
Justice, as well as those provided for in the Statute of the Court of Justice (as last
amended by Regulation (EU, Euratom) 2019/629 of 17 April 2019). Article 51 of the
Statute of the Court of Justice provides that, by way of derogation from the rule laid
down in Article 256(1) TFEU, jurisdiction shall be reserved to the Court of Justice in the
actions referred to in Articles 263 and 265 TFEU when they are brought by a Member
State against:
— An act of or failure to act by the European Parliament or the Council, or by those
institutions acting jointly, except for:
— decisions taken by the Council under the third subparagraph of
Article 108(2) TFEU;
— acts of the Council adopted pursuant to a Council regulation concerning
measures to protect trade within the meaning of Article 207 TFEU;
— acts of the Council by which the Council exercises implementing powers
in accordance with the second paragraph of Article 291 TFEU;
— An act of or failure to act by the Commission under the first paragraph of
Article 331 TFEU.
Jurisdiction is also reserved to the Court of Justice in the actions referred to in the
same Articles when they are brought by an institution of the Union against an act of, or
failure to act by, the European Parliament, the Council, both those institutions acting
jointly, or the Commission, or brought by an institution of the Union against an act of,
or failure to act by, the European Central Bank.
B. Indirect proceedings: question of validity raised before a national court or
tribunal (Article 267 TFEU - preliminary rulings)
The national courts are normally responsible for applying EU law when a case so
requires. However, when an issue relating to the interpretation of the law is raised
before a national court or tribunal, the court or tribunal may seek a preliminary
ruling from the Court of Justice. If it is a court of last instance, it is compulsory to
refer the matter to the Court. The national court submits the question(s) about the
interpretation or validity of a provision of EU law, generally in the form of a judicial
decision, in accordance with the national procedural rules. However, in its judgment
of 11 December 2018 in Case C-493/17 (Weiss), the Court ruled that ‘it must refuse
to give a ruling on a question referred by a national court where it is quite obvious
that the interpretation, or the determination of validity, of a rule of EU law that is
sought bears no relation to the actual facts of the main action or its purpose, where
the problem is hypothetical, or where the Court does not have before it the factual
or legal material necessary to give a useful answer to the questions submitted to it’.

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The Registry notifies the request to the parties to the national proceedings and also to
the Member States and the institutions of the European Union. They have two months
within which to submit any written observations to the Court of Justice.
C. Responsibility at second instance
The Court has the jurisdiction to review appeals limited to points of law in rulings and
orders of the General Court. The appeals do not have suspensory effect.
If the appeal is considered admissible and well-founded, the Court of Justice sets
aside the General Court’s decision and decides the case itself, or else must refer the
case back to the General Court, which is bound by the decision.

ACHIEVEMENTS
The Court of Justice has shown itself to be a very important factor - some would say
even a driving force - in European integration.
A. In general
Its judgment of 5 February 1963 in Case 26-62 (Van Gend & Loos) established the
principle that Community law is directly applicable in the courts of the Member
States. Similarly, its judgment of 15 July 1964 in Case 6-64 (Costa v E.N.E.L.) was
fundamental in defining Community law as an independent system taking precedence
over national legal provisions. The Court has always claimed ultimate authority in
determining the relationship between EU and domestic law. In the landmark cases Van
Gend & Loos and Costa v E.N.E.L., the Court developed the fundamental doctrines
of the primacy of EU law. According to these doctrines, EU law has absolute primacy
over domestic law, and this primacy has to be taken into account by domestic courts
in their decisions. In its judgment of 17 December 1970 in Case 11-70 (Internationale
Handelsgesellschaft) the Court ruled that EU law enjoyed primacy even vis-à-vis
fundamental rights guaranteed in national constitutions. In point 3 of its grounds
for a decision in this case, the Court stated: ‘The validity of a Community measure
or its effect within a Member State cannot be affected by allegations that it runs
counter to either fundamental rights as formulated by the constitution of that state
or the principles of a national constitutional structure.’ The Court has confirmed
these doctrines in later cases (see Case 106/77, Simmenthal (1978), Case 149/79,
Commission v Belgium (1980), Cases C-46/93 & C-48/93, Brasserie du Pêcheur
and Factortame II (1996), Case C-473/93, Commission v Luxemburg (1996), Case
C-213/07, Michaniki (2008)). In this case law, the Court has developed doctrinal
instruments to give Member States’ courts a certain amount of discretion and to take
their interests seriously. Also, the Court sometimes implicitly adjusts its own case
law in order to take concerns of Member States’ courts into account. Most famously,
the Court developed case law in the field of fundamental rights under the pressure
of Member States’ courts: after the foundation of the European Communities, the
Court of Justice had initially resisted the introduction of fundamental rights into
the EC legal order (Case 36/59, Ruhrkohlen-Verkaufsgesellschaft (1960)). However,
when constitutional courts of the Member States resisted, the Court changed course.
Pre-empting judgments of the German Federal Constitutional Court and the Italian
Constitutional Court, the Court of Justice held that fundamental rights ‘form an

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integral part of the general principles of law’ in the Internationale Handelsgesellschaft

case.
B. In specific matters
— Protection of human rights include the judgment of 14 May 1974 in Case 4-73
(Nold Kohlen- und Baustoffgroßhandlung v Commission of the European
Communities), in which the Court stated that fundamental human rights are an
integral part of the general principles of law that it upholds (4.1.1).
— Free movement of goods: judgment of 20 February 1979 in Case 120/78 (Cassis
de Dijon), in which the Court ruled that any product legally manufactured and
marketed in a Member State must in principle be allowed on the market of any
other Member State.
— Free movement of persons: the judgment of 15 December 1995 in Case C-415/93
(Bosman) stated that professional sport is an economic activity whose exercise
may not be hindered by rules of football federations governing the transfer of
players or restricting the number of nationals of other Member States.
— The external jurisdiction of the Community: the judgment of 31 March 1971 in
Case 22-70 (Commission v Council), which recognised the Community’s right to
conclude international agreements in spheres where the Community has adopted
common rules.
— In its judgment of 19 November 1991 in Cases C-6/90 and C-9/90 (Francovich
and Others), the Court developed another fundamental concept: the liability of a
Member State towards individuals for damage caused to them by an infringement
by that Member State owing to its failure to transpose a directive into national
law or to do so in good time.
— Various judgments relating to social security (Case 43-75, Defrenne (1976),
regarding equal pay for men and women) and health and safety of workers (Case
C-173/99, BECTU (2001)).
Concerning the principle of proportionality, in its judgment of 16 June 2015 (Case
C-62/14, Gauweiler and Others), the Court ruled that according to the settled case law
of the Court, the principle of proportionality requires that acts of the EU institutions
should be appropriate for attaining the legitimate objectives pursued by the legislation
at issue and should not go beyond what is necessary to achieve those objectives.
EU institutions and bodies must therefore weigh up the various interests involved in
such a way as to prevent disadvantages that are manifestly out of proportion to the
objectives pursued (Case C-493/17 (Weiss), paragraph 93). One of the great merits
of the Court has been its statement of the principle that the Treaties must not be
interpreted rigidly but must be viewed in the light of the state of integration and
of the objectives of the Treaties themselves. This principle has allowed legislation
to be adopted in areas where there are no specific Treaty provisions, such as the
fight against pollution: in its judgment of 13 September 2005 in Case C-176/03
(Commission v Council), the Court authorised the European Union to take measures
relating to criminal law where ‘necessary’ in order to achieve the objective pursued as
regards environmental protection.

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The Judicial Network of the European Union (JNEU) was created on the initiative of
the President of the CJEU and the Presidents of the constitutional and supreme courts
of the EU Member States, on the occasion of the 60th anniversary of the signature of
the Treaties of Rome in 2017.
It is designed to promote the exchange of information on jurisprudence between
the participating national courts and the CJEU. On a site with limited access, the
participating national courts and the CJEU publish information on their jurisprudence
concerning EU law, on questions which the national courts had referred to the CJEU
for a preliminary ruling, and on notes and studies.
The collaborative JNEU platform available in all EU languages, pools the work carried
out by the judges of the Court of Justice of the EU and national judges in the course
of their judicial activities. Judges have access to a tool enabling them to make their
case law and research and analysis work available to their counterparts, with a view to
sharing knowledge and improving efficiency.
It has more than 2 000 users in the constitutional and supreme courts of the Member
States.

GENERAL COURT (1.3.9)

A. Jurisdiction of the General Court (Article 256 TFEU)
The Court of Justice of the European Union consists of two courts, the Court of Justice
proper and the General Court. As the Court of Justice has exclusive jurisdiction over
actions between the institutions and those brought by a Member State against the
European Parliament and/or against the Council, the General Court has jurisdiction,
at first instance, in all other actions of this type, particularly in actions brought by
individuals and those brought by a Member State against the Commission.
The TFEU provides that the General Court has jurisdiction to hear at first instance
actions referred to in Articles 263, 265, 268, 270 and 272 TFEU, particularly in the
areas set out below, unless the actions are brought by Member States, EU institutions
or the European Central Bank, in which case the Court of Justice has sole jurisdiction
(Article 51 of the Statute of the Court of Justice of the EU):
— Actions for annulment of acts of the institutions, bodies, offices or agencies of
the EU or for failure to act brought against the institutions by individuals or legal
persons (Articles 263 and 265 TFEU);
— Actions brought by Member States against the Commission;
— Requests for a preliminary ruling under Article 267 TFEU in specific areas (Article
50b of the Statute);
— Actions for the reparation of damage caused by the institutions or the bodies,
offices or agencies of the EU or their staff (Article 268 TFEU);
— Disputes concerning contracts concluded by or on behalf of the Union which
expressly give jurisdiction to the General Court (Article 272 TFEU);

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— Actions relating to intellectual property brought against the European Union

Intellectual Property Office (EUIPO) and against the Community Plant Variety
Office;
— Disputes between the Union and its servants, including disputes between all
institutions and all bodies, offices or agencies, on the one hand, and their servants,
on the other.
The Statute may extend the General Court’s jurisdiction to other areas.
In general, judgments given by the General Court at first instance may be subject to
a right of appeal to the Court of Justice, but this is limited to points of law.
B. Preliminary rulings
The General Court has the jurisdiction to give preliminary rulings (Article 267 TFEU)
in the areas laid down by the Statute (Article 256(3) TFEU). In April 2024, provisions
were introduced into the Statute (Article 50b) in that regard, the General Court now
also has, in specific cases, jurisdiction to give preliminary rulings. The transfer to the
General Court of part of the jurisdiction to give preliminary rulings should enable the
Court of Justice to devote more time and resources to examining the most important
requests for a preliminary ruling.
C. Responsibility for appeals
Rulings made by the General Court, limited to points of law, may, within two months,
be subject to an appeal to the Court of Justice.

EUROPEAN UNION CIVIL SERVICE TRIBUNAL

On 1 September 2016 disputes between the Union and its servants were transferred
to the General Court (1.3.9), which meant the dissolution of the European Union
Civil Service Tribunal created in 2004. Regulation (EU, Euratom) 2016/1192 of the
European Parliament and of the Council of 6 July 2016 on the transfer to the General
Court of jurisdiction at first instance in disputes between the European Union and
its servants therefore repealed Council Decision 2004/752/EC, Euratom, establishing
the European Union Civil Service Tribunal. Cases pending before the Civil Service
Tribunal were transferred to the General Court, which continues to deal with those
cases as it finds them at that date, the procedural steps taken by the former Civil
Service Tribunal in those cases remaining applicable.
A transitional regime was introduced in respect of appeals under examination when
jurisdiction was transferred on 1 September 2016, or brought after that date, against
decisions of the Civil Service Tribunal. The General Court is to continue to have
jurisdiction to hear and determine such appeals. Accordingly, Articles 9 to 12 of Annex I
to the Statute of the Court must remain applicable to the proceedings concerned.

ROLE OF THE EUROPEAN PARLIAMENT

Under Article 257 TFEU, Parliament and the Council, acting in accordance with
the ordinary legislative procedure, may establish specialised courts attached to the
General Court to hear and determine at first instance certain classes of action or
proceedings brought in specific areas. Parliament and the Council are required to act

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by means of regulations either on a proposal from the Commission after consultation

of the Court of Justice or at the request of the Court of Justice after consultation of
the Commission.
According to Article 281 TFEU, the Statute of the Court of Justice of the European
Union is laid down in a separate protocol, Protocol 3, and Parliament and the Council,
acting in accordance with the ordinary legislative procedure, may amend this Statute.
Parliament and the Council have recently reviewed a request by the Court to amend
Protocol 3.
Parliament is one of the institutions mentioned in Article 263 TFEU that may bring an
action (as a party) before the Court.
In accordance with Article 218(11) TFEU, Parliament can request an opinion of the
Court of Justice as to whether an envisaged international agreement is compatible
with the Treaties. Where the opinion of the Court is adverse, the agreement envisaged
may not enter into force unless it is amended or the Treaties are revised.

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1.3.11. THE EUROPEAN CENTRAL BANK (ECB)

The European Central Bank (ECB) is the central institution of the Economic and
Monetary Union, and has been responsible for monetary policy in the euro area
since 1 January 1999. The ECB and all EU national central banks constitute the
European System of Central Banks (ESCB). The primary objective of the ESCB is to
maintain price stability. Since 2014, the ECB has been responsible for tasks relating
to the prudential supervision of credit institutions under the Single Supervisory
Mechanism.

LEGAL BASIS
— Articles 3 and 13 of the Treaty on European Union (TEU);
— Articles 3(1)(c), 119, 123, 127-134, 138-144, 219 and 282-284 of the Treaty on the
Functioning of the European Union (TFEU);
— Protocol (No 4) on the Statute of the European System of Central Banks (ESCB)
and of the European Central Bank (ECB); Protocol (No 16) on Certain Provisions
Relating to Denmark; appended to the TEU and the TFEU;
— Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific
tasks on the European Central Bank concerning policies relating to the prudential
supervision of credit institutions (the Single Supervisory Mechanism (SSM)
Regulation);
— Regulation (EU) No 806/2014 of the European Parliament and of the Council of
15 July 2014 establishing uniform rules and a uniform procedure for the resolution
of credit institutions and certain investment firms (the Single Resolution
Mechanism (SRM) Regulation).

ORGANISATION AND OPERATIONS

According to the Treaties, the ECB’s main responsibilities include conducting
monetary policy for the euro area. In addition, the SSM Regulation conferred certain
supervisory functions for credit institutions on the ECB as of November 2014.
A. Monetary function
The European System of Central Banks (ESCB) is made up of the European Central
Bank (ECB) and the national central banks of all the Member States, including those
that have not adopted the euro. The Eurosystem, meanwhile, comprises the ECB and
the national central banks of only those Member States that have adopted the euro.
The TFEU refers to the ESCB rather than to the Eurosystem, since it was drawn up
on the premise that all Member States would eventually adopt the euro. For Member
States that have not yet adopted the euro (because they have a derogation or opt-
out), certain Treaty provisions referring to the ESCB are not applicable, which means
that general Treaty references to the ESCB in practice mainly refer to the Eurosystem.
The ECB’s independence is enshrined in Article 130 TFEU: ‘When exercising the

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powers and carrying out the tasks and duties conferred upon them by the Treaties
and the Statute of the ESCB and of the ECB, neither the ECB, nor a national central
bank, nor any member of their decision-making bodies shall seek or take instructions
from Union institutions, bodies, offices or agencies, from any government of a Member
State or from any other body’.
1. Decision-making bodies
The ECB’s decision-making bodies are the Governing Council, the Executive Board
and the General Council. The ESCB is governed by the decision-making bodies of the
ECB.
a. Governing Council
The Governing Council of the ECB comprises the members of the ECB Executive
Board and the Governors of the national central banks of euro area Member
States. It formulates monetary policy and establishes the necessary guidelines for
its implementation. The Governing Council adopts the Rules of Procedure of the
ECB, exercises advisory functions and decides how the ESCB is to be represented in
international cooperation. The Governing Council may also delegate certain powers
to the Executive Board. The Governing Council usually meets twice a month and
has a monthly rotating system of voting rights. The Governors from the countries
ranked first to fifth according to the size of their economies and their financial sectors
share four voting rights. The 15 remaining countries share 11 voting rights. In addition
to the national central bank Governors, the ECB’s Executive Board members hold
permanent voting rights.
b. Executive Board
The Executive Board comprises the President, the Vice-President and four other
members. They are appointed by the European Council by qualified majority on a
recommendation from the Council after it has consulted Parliament and the Governing
Council. The term of office is eight years, and is not renewable. The Executive Board
is responsible for the current and day-to-day business of the ECB. It implements
monetary policy in accordance with the guidelines and decisions adopted by the
Governing Council. It also provides instructions to national central banks and prepares
the Governing Council’s meetings.
c. General Council
The General Council is the third decision-making body of the ECB, but only as long
as there are Member States that have not yet adopted the euro. It consists of the
President and Vice-President of the ECB and the Governors of the national central
banks of all the Member States. Other Executive Board members may participate in
meetings of the General Council, but do not have voting rights.
2. Objectives and tasks
According to Article 127(1) TFEU, the primary objective of the ESCB is to maintain
price stability. Without prejudice to this, the ESCB also supports the Union’s general
economic policies in order to help achieve the Union’s objectives, which are outlined
in Article 3 TEU. The ESCB acts in accordance with the principle of an open market
economy with free competition and in compliance with the principles set out in
Article 119 TFEU. The basic tasks carried out through the ESCB are: defining and

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implementing the Union’s monetary policy; conducting foreign exchange operations

consistent with the provisions of Article 219 TFEU; holding and managing the official
foreign reserves of the Member States; and promoting the smooth operation of
payment systems.
3. Powers and instruments
The ECB has the exclusive right to authorise the issue of euro banknotes. Member
States may issue euro coins subject to the ECB’s approval of the volume of the issue
(Article 128 TFEU). The ECB passes regulations and takes decisions necessary for
carrying out the tasks entrusted to the ESCB under the Treaty and the ECB Statute.
It also makes recommendations and delivers opinions (Article 132 TFEU). The ECB
must be consulted on any proposed EU act in its fields of competence, and by national
authorities on any draft legislative provision in its fields of competence (Article 127(4)
TFEU). It may submit opinions about the issues on which it is consulted. The ECB
is also consulted on decisions establishing common positions and on measures
relating to unified representation of the euro area in international financial institutions
(Article 138 TFEU). Assisted by the national central banks, the ECB collects the
necessary statistical information either from the competent national authorities or
directly from economic agents (Article 5 of the ECB Statute). The ECB Statute lists
various instruments that the ECB may use in order to fulfil its monetary functions.
The ECB and the national central banks can open accounts for credit institutions,
public entities and other market participants, and accept assets as collateral. It can
conduct open market and credit operations and require minimum reserves. The
Governing Council may also decide on other instruments of monetary control by a
two-thirds majority. However, Article 123 TFEU prohibits monetary financing, and
sets limits on the use of monetary policy instruments. To ensure efficient and sound
clearing and payment systems, the ECB may provide infrastructure and establish
oversight policies. The ECB may also establish relations with central banks and
financial institutions in other countries and with international organisations.
4. Member States with a derogation or opt-out
Articles 139-144 TFEU lay down special provisions for Member States which have a
Treaty obligation to adopt the euro but have not yet fulfilled the conditions to do so
(‘Member States with a derogation’). Certain Treaty provisions are not applicable to
these Member States, e.g. the objectives and tasks of the ESCB (Article 127(1)-(3),
(5) TFEU) and the issue of euro coins (Article 128 TFEU). Denmark has been granted
an opt-out, and is thus not obliged to join the euro area, as defined in Protocol No 16
attached to the TFEU.
B. Supervisory function
Since November 2014, the ECB has been responsible for the supervision of all credit
institutions in the Member States participating in the SSM, either directly for the
largest banks, or indirectly for other credit institutions. It cooperates closely in this
function with the other entities in the European System of Financial Supervision.
The SSM is made up of the ECB and the national competent authorities of the euro
area Member States. The competent authorities of non-euro area Member States
may participate in the SSM. The ECB directly supervises the largest banks, while the
national supervisors continue to monitor the remaining banks.

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1. Supervisory Board
The Supervisory Board of the ECB is composed of a Chair, a Vice-Chair, four
representatives of the ECB (whose duties may not be directly related to the monetary
function of the ECB) and one representative of the national competent authority in
each Member State participating in the SSM. The European Parliament must approve
the ECB’s nominations for Chair and Vice-Chair. Decisions by the Supervisory Board
are taken by simple majority. The Supervisory Board is an internal body tasked with the
planning, preparation and execution of the supervisory functions conferred upon the
ECB. It prepares and proposes complete draft supervisory decisions to the Governing
Council. These are adopted if the Governing Council does not reject them within a
specified time frame. If a non-euro area participating Member State disagrees with a
draft decision by the Supervisory Board, a special procedure applies and the Member
State concerned may even request termination of the close cooperation.
2. Objectives and tasks
As a banking supervisor, the ECB’s tasks include granting and withdrawing
authorisation for credit institutions, ensuring compliance with prudential
requirements, conducting supervisory reviews and participating in supplementary
supervision of financial conglomerates. It is also tasked with addressing systemic and
macro-prudential risk.
3. Powers and instruments
In order to fulfil its supervisory role, the ECB has investigative powers (information
requests, general investigations and on-site inspections) and specific supervisory
powers (e.g. authorisation of credit institutions). The ECB also has the power to
impose administrative penalties. It may also require credit institutions to hold higher
capital buffers.
C. Other functions
Other legal bases confer additional tasks on the ECB. The European Stability
Mechanism Treaty (in force as of September 2012) conferred certain tasks on the ECB
in relation to granting financial assistance, mainly assessment and analysis. According
to the founding regulations of the European Systemic Risk Board (ESRB), which is
responsible for the macro-prudential oversight of the financial system within the EU,
the ECB provides the secretariat for the ESRB and the President of the ECB also
acts as chair of the ESRB. The ECB has an advisory role in assessing the resolution
plans of credit institutions under the Bank Recovery and Resolution Directive and the
Single Resolution Mechanism Regulation. Within the Single Resolution Mechanism, the
ECB assesses whether a credit institution is failing or likely to fail, and informs the
Commission and the Single Resolution Board accordingly.

ROLE OF THE EUROPEAN PARLIAMENT

The ECB President reports to Parliament on monetary issues in a quarterly Monetary
Dialogue. The ECB also prepares an annual report on monetary policy which is
presented in Parliament. Parliament adopts a resolution on this annual report. MEPs
may put forward questions for written answer to the ECB. In June 2023, the ECB and
the European Parliament signed an Exchange of Letters between the two institutions

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formalising these practices and other informal arrangements for their interaction in
the area of central banking. Parliament is also consulted in the procedure to appoint
members of the ECB’s Executive Board.
The new supervisory responsibilities of the ECB are matched with additional
accountability requirements under the SSM Regulation. The practical modalities for
this are governed by an interinstitutional agreement between Parliament and the
ECB. The accountability arrangements include the attendance of the Chair of the
Supervisory Board at hearings of the Committee on Economic and Monetary Affairs;
answering questions asked by Parliament; and confidential oral discussions with the
Chair and Vice-Chair of the competent committee upon request. In addition, the ECB
prepares an annual supervisory report, which is presented to Parliament by the Chair
of the Supervisory Board.

Giacomo Loi / Maja Sabol

04/2024

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1.3.12. THE COURT OF AUDITORS

The European Court of Auditors (ECA) is in charge of the audit of EU finances. As the
EU’s external auditor, it contributes to improving EU financial management and acts
as the independent guardian of the financial interests of the citizens of the Union.

LEGAL BASIS
— Articles 285 to 287 of the Treaty on the Functioning of the European Union
(TFEU).
— Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the
Council of 18 July 2018 on the financial rules applicable to the general budget of
the Union (see in particular Title XIV on external audit and the discharge).

STRUCTURE
A. Members
1. Number
One Member per Member State (the Nice Treaty formalised what had hitherto only
been the recognised procedure), thus in principle 27.
2. Requirements
The Members must:
— Belong or have belonged in their respective countries to external audit bodies, or
be especially qualified for this office;
— Show that their independence is beyond doubt.
3. Appointment procedure
Members are appointed:
— By the Council, by qualified majority;
— On the recommendation of each Member State regarding its own seat;
— After consulting the European Parliament.
B. Term of office
1. Duration
Six years, renewable.
2. Status
Members enjoy the same privileges and immunities as Judges of the Court of Justice.
3. Duties
Members must be ‘completely independent in the performance of their duties’. This
means:

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— They must not seek or take instructions from any external source;
— They must refrain from any action incompatible with their duties;
— They may not engage in any other professional activity, paid or unpaid;
— If they infringe these conditions, the Court of Justice can remove them from
office.
C. Organisation
The College elects its President from among its Members for a renewable term of
three years.
The Court organises itself around five chambers with responsibility for specific areas
of expenditure and revenue:
— Chamber I: Sustainable use of natural resources;
— Chamber II: Investment for cohesion, growth and inclusion;
— Chamber III: External action, security and justice;
— Chamber IV: Regulation of markets and competitive economy;
— Chamber V: Financing and administering the European Union.
Each Chamber has two areas of responsibility: firstly, to adopt special reports, specific
annual reports and opinions; secondly, to prepare draft observations for the annual
reports on the general budget of the EU and the European Development Fund, and
draft opinions for adoption by the Court as a whole.
The Court has around 980 staff and is based in Luxembourg.

POWERS
A. The Court’s audits
1. Area of responsibility
The Court’s remit covers the examination of any revenue or expenditure accounts
of the European Union or any EU body. It carries out its audits in order to obtain a
reasonable assurance as to:
— The reliability of the annual accounts of the European Union (financial audit);
— The legality and regularity of the underlying transactions (compliance audit); and
— The soundness of financial management (performance audit).
2. Auditing methods
The Court’s audit is continuous; it may be carried out before the closure of accounts
for the financial year in question. It is based on records and may also be carried out
on the premises of:
— EU institutions and agencies;
— Any body that manages revenue or expenditure on the EU’s behalf;
— Any natural or legal person in receipt of payments from the EU budget.

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In the Member States, the audit is carried out in liaison with the national Supreme
Audit Institutions. Auditees are required to forward to the Court any document or
information it considers necessary for its purposes.
The Court does not have investigative powers. It therefore reports cases of possible
fraud and corruption to the European Anti-Fraud Office and/or the European Public
Prosecutor’s Office, which then handle the cases according to their respective
competences.
3. Audit reports
Following its audits, the Court publishes:
— Annual reports on the implementation of the EU budget and the European
Development Fund, including the Statement of Assurance, focusing on
compliance and regularity (by 15 November, or earlier); since 2022, performance
aspects are again being treated in the framework of the annual reports and in
special reports (in contrast to the years 2019-2021 when there was an annual
report on the performance of the EU budget);
— Specific annual reports on the EU agencies, decentralised bodies and joint
undertakings;
— Special reports on topics of interest, in particular on issues of sound financial
management and specific spending or policy areas;
— Reviews that cover policies and management topics from a wide angle, present
an analysis of areas or issues not yet audited or establish a factual basis on certain
topics.
B. Advisory powers
In accordance with Article 287(4) of the TFEU, other institutions may ask the Court for
its opinion whenever they see fit. The Court’s opinion is mandatory when the Council:
— Adopts financial regulations specifying the procedure for establishing and
implementing the budget and for presenting and auditing accounts;
— Determines the methods and procedure whereby the EU’s own resources are
made available to the Commission;
— Lays down rules concerning the responsibility of financial controllers, authorising
officers and accounting officers; or
— Adopts anti-fraud measures.

THE COURT’S ANNUAL REPORTS FOR 2022

A. The ECA annual report for 2022
The overall error rate of expenditure increased from 3.0% in 2021 to 4.2%
in 2022. Of the spending audited, 66% was high-risk expenditure, meaning mainly
reimbursement-based payments, for which complex rules and eligibility criteria apply.
This type of payment is often made under cohesion policy and rural development
programmes, which are administered under shared management between the
Commission and the Member States.

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The error rate for this payment type is estimated at 6% (compared to 4.7% in 2021
and 4.0% in 2020), which is above the materiality threshold and was classified as
‘pervasive’. Therefore, for the fourth consecutive year, the Court issued an adverse
opinion on the regularity of the transactions underlying the accounts (rather than a
qualified opinion, as was the case for the years 2016-2018), highlighting persistent
problems that need to be addressed.
In addition to its audit of spending under the regular EU budget, the Court provided
a separate opinion on expenditure under the Recovery and Resilience Fund (RRF).
It will continue to do so during the lifetime of the fund. Funding from the RRF is
disbursed once certain milestones and targets are achieved. The Court audited all
13 grant payments made in 2022, amounting to EUR 46.9 billion and including the
clearing of the related pre-financing of EUR 6.8 billion, and checked whether the 281
milestones and targets related to these grant payments had been fulfilled, including
the Commission’s preliminary assessments. It found that 15 of the 281 milestones and
targets had been affected by regularity issues and had either not been satisfactorily
fulfilled or did not comply with eligibility conditions. While their minimum financial
impact is estimated to be close to the materiality threshold, no error rate is provided,
as the Commission methodology for suspending payments is based on judgments
and therefore open to interpretation. The Court recommends that the Commission
improve the preliminary assessments and ex post audits in order to (a) ensure that
the payments are made during the eligibility periods and that the grants are not used
to substitute recurring national budgetary expenditure; and (b) ensure that targets
and milestones already reached are not reversed. Moreover, the Commission should
verify whether the reviewed national recovery and resilience plans clearly define all
milestones and targets and cover all key elements of a measure.
B. Performance of the EU budget – Chapter 3 of the Annual Report
For 2019, 2020 and 2021, the Court split its annual report into two parts as part of a
pilot project – first, its annual report focusing on the reliability of EU accounts and
the legality and regularity of underlying transactions and, second, a report on the
performance of EU budget spending programmes.
In 2022, the Court discontinued the annual performance report and reintegrated
performance aspects into Chapter 3 of the annual report. This chapter provides an
overview of the results of 28 ECA special reports in 2022 across five strategic areas,
namely (i) the COVID-19 response, (ii) competitiveness, (iii) resilience and European
values, (iv) climate change, environment and natural resources; and (v) fiscal policies
and public finances. Following the summary of the key messages for each area, the
annual report gives examples of Commission actions in the follow-up to the special
reports and summarises the reactions of the European Parliament and the Council.

ROLE OF THE EUROPEAN PARLIAMENT

The Court of Auditors was established in 1977 on Parliament’s initiative. It was made
an EU institution in 1993. Since then, it has assisted Parliament and the Council in
exercising their role of controlling the implementation of the budget. The annual

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reports and special reports serve as the basis for Parliament’s yearly discharge
exercise.
The Court’s Members are invited to present their reports at committee meetings and
to reply to questions raised by MEPs – primarily in Parliament’s Budgetary Control
Committee (CONT), but also in joint meetings of the CONT Committee with one or
more specialised committees, or, sometimes, in cases of limited interest for the CONT
Committee, only in a specialised committee. Each year, the Court of Auditors and
CONT hold meetings at which CONT members discuss with the Members of the Court
their political priorities, the Court’s annual work programme, detailed arrangements
for cooperation, etc. Once a year, the ECA President attends a meeting of Parliament’s
Conference of Committee Chairs to present the ECA’s annual work programme and
invite all committees to submit their suggestions for the next programming exercise.
Parliament also makes suggestions on these issues in its annual resolutions on the
Court of Auditors’ discharge.
It should also be noted that CONT holds hearings of Members-designate of the Court.
Furthermore, the Court’s expertise helps MEPs in drafting legislation on financial
matters.
For more information on this topic, please visit the website of the Committee on
Budgetary Control.

Vera Milicevic
03/2024

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1.3.13. THE EUROPEAN ECONOMIC

AND SOCIAL COMMITTEE

The European Economic and Social Committee (EESC) is a consultative body of the
European Union, based in Brussels. It is composed of 329 members. Its opinions are
required on the basis of a mandatory consultation in the fields established by the
Treaties or a voluntary consultation by the Commission, the Council or Parliament.
It may also issue opinions on its own initiative. Its members are not bound by any
instructions. They are to be completely independent in the performance of their
duties, in the EU’s general interest.

LEGAL BASIS
— Article 13(4) of the Treaty on European Union (TEU);
— Articles 300-304 of the Treaty on the Functioning of the European Union (TFEU);
— Council Decision (EU) 2019/853 determining the composition of the European
Economic and Social Committee and subsequent Council decisions appointing
the members of the EESC, proposed by different Member States;
— Council Decision (EU) 2020/1392 appointing the members of the European
Economic and Social Committee for the period from 21 September 2020 to
20 September 2025.

COMPOSITION
A. Number and national allocation of seats (Article 301 TFEU and Council Decision
(EU) 2019/853 determining the composition of the European Economic and Social
Committee).
The EESC currently has 329 members, divided between the Member States as follows:
— 24 each for Germany, France and Italy;
— 21 each for Poland and Spain;
— 15 for Romania;
— 12 each for Austria, Belgium, Bulgaria, Czechia, Greece, Hungary, the
Netherlands, Portugal and Sweden;
— 9 each for Croatia, Denmark, Finland, Ireland, Lithuania and Slovakia;
— 7 each for Estonia, Latvia and Slovenia;
— 6 each for Luxembourg and Cyprus;
— 5 for Malta.
Overall, the size of the committee was reduced from 350 to 329 members with effect
from 1 February 2020 (following the United Kingdom’s withdrawal from the EU).

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B. Method of appointment (Article 302 TFEU)

The members of the committee are appointed by the Council by qualified majority, on
the basis of proposals by the Member States (as in this example). The Council consults
the Commission on these nominations (Article 302(2) TFEU). The Member States must
ensure that the various categories of economic and social activity are adequately
represented. In practice, one third of the seats goes to employers, one third to
employees and one third to other groups (farmers, retailers, the liberal professions,
consumers, etc.).
The maximum number of EESC members allowed by the Treaty of Lisbon is 350
(Article 301 TFEU). This was briefly exceeded between July 2013 and September 2015
owing to the accession of Croatia on 1 July 2013. By adding nine new seats for the
new Member State, total membership increased to 353 (from 344). Council Decision
(EU) 2015/1157 adapted the composition of the EESC following the accession of
Croatia: the number of members for Estonia, Cyprus and Luxembourg was reduced
by one each in order to address the discrepancy between the maximum number of
EESC members set out in the first paragraph of Article 301 TFEU and the number
of members following the accession of Croatia. Therefore, the number of members
for Luxembourg and Cyprus was decreased from six to five each and the number of
Estonian members from seven to six. Council Decision (EU) 2019/853 determined the
final composition of the EESC in line with the distribution of seats in the European
Committee of the Regions, which also has 329 members, and in the light of the
withdrawal of the UK from the EU, which resulted in 24 vacant seats. As a result, the
number of members for Luxembourg and Cyprus was increased from five to six once
more and the number of Estonian members from six to seven.
C. Type of mandate (Article 301 TFEU)
The members of the committee are nominated by national governments and
appointed by the Council for a renewable five-year term of office (Article 302
TFEU). They are drawn from economic and social interest groups in Europe. The
latest renewal was in October 2020 for the 2020-2025 term of office (Council
Decision (EU) 2020/1392 of 2 October 2020 appointing the members of the
European Economic and Social Committee for the period from 21 September 2020 to
20 September 2025).
They belong to one of three groups:
— Employers (Group I);
— Workers (Group II);
— Civil society organisations (Group III).
The members must be completely independent in the performance of their duties,
in the general interest of the EU (Article 300(4) TFEU). Every time a member’s or
alternate member’s seat on the EESC becomes vacant following the end of their term
of office, a separate Council decision is needed to replace that member.

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ORGANISATION AND PROCEDURES

The EESC is not among the institutions listed in Article 13(1) TEU. However,
Article 13(4) states that the EESC assists Parliament, the Council and the Commission
by carrying out advisory activities.
— The President and the Bureau, each with a term of office of two and a half years,
are appointed by the Committee from among its members;
— The committee adopts its own rules of procedure;
— It may meet on its own initiative, but it normally meets at the request of the
Council or the Commission;
— To help prepare its opinions, it has the following six specialised sections for the
various fields of EU activity (and can set up subcommittees to deal with specific
subjects):
— Agriculture, Rural Development and the Environment (NAT);
— Economic and Monetary Union and Economic and Social Cohesion (ECO);
— Employment, Social Affairs and Citizenship (SOC);
— External Relations (REX);
— The Single Market, Production and Consumption (INT);
— Transport, Energy, Infrastructure and the Information Society (TEN).
The EESC is assisted by a general secretariat, headed by a Secretary-General who
reports to the President. The general secretariat provides the EESC’s members with
policy, communication, organisational, linguistic and material support. The general
secretariat is made up of approximately 700 staff members. For the sake of efficiency,
the EESC shares its permanent secretariat services in Brussels with the secretariat
of the European Committee of the Regions (with regard to its seat in Brussels, see
Protocol No 6 to the Treaty of Lisbon on the location of the seats of the institutions).
In addition, the Bureau of Parliament also entered into an agreement with the EESC,
in the framework of the 2014 budgetary procedure, to jointly increase efficiency in the
area of translation. This action was in line with Article 314(1) TFEU, which states that:
‘[...] each institution shall [...] draw up estimates of its expenditure for the following
financial year. The Commission shall consolidate these estimates in a draft budget’.
The EESC has an annual administrative budget, included in section VI of the EU
budget as ‘other institution’, of EUR 152.5 million (2022) – a 5.1% increase compared
to the 2021 budget.
With a view to managing its allocated share of the EU budget efficiently, the EESC
has been cooperating closely on administrative matters with the European Committee
of the Regions through consecutive administrative cooperation agreements. These
agreements have provided for administrative cooperation, enabling the pooling of
human and financial resources in the areas of logistics (buildings, security, print shop,
etc.), information technology and translation.

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On 1 November 2021, a new five-year cooperation agreement between the EESC and
the European Committee of the Regions entered into force, based on joint services.
The new agreement further increases the scope of the joint activities by assigning
reception services and paper mail distribution to the joint services. Almost half of the
staff of the EESC (2023: 671 employees) work in the joint service.

POWERS
The EESC was set up by the 1957 Rome Treaties in order to involve economic and
social interest groups in the establishment of the common market and to provide
institutional machinery for briefing the Commission and the Council of Ministers on
European issues. The Single European Act (1986) and the Maastricht Treaty (1992)
expanded the range of issues that must be referred to the committee. The Treaty of
Amsterdam further broadened the areas for referral to the committee and allowed it
to be consulted by Parliament. On average, the EESC delivers 170 advisory documents
and opinions a year (of which about 15 % are issued on its own initiative). Opinions
are published in the Official Journal. The committee also has an advisory function
(Article 300 TFEU). Its purpose is to inform the institutions responsible for EU
decision-making of the opinions of the representatives of economic and social activity.
A. Opinions issued at the request of EU institutions
1. Mandatory consultation
In certain specifically mentioned areas, the TFEU stipulates that a decision may only
be taken after the Council or Commission has consulted the EESC. These areas are:
— Agricultural policy (Article 43);
— Free movement of persons and services (Articles 46, 50 and 59);
— Transport policy (Articles 91, 95 and 100);
— Harmonisation of indirect taxation (Article 113);
— Approximation of laws on the single market (Articles 114 and 115);
— Employment policy (Articles 148, 149 and 153);
— Social policy, education, vocational training and youth (Articles 156, 165 and 166);
— Public health (Article 168);
— Consumer protection (Article 169);
— Trans-European networks (Article 172);
— Industrial policy (Article 173);
— Economic, social and territorial cohesion (Article 175);
— Research and technological development and space (Articles 182 and 188);
— The environment (Article 192).
2. Voluntary consultation
The EESC may also be consulted by Parliament, the Commission or the Council on any
other matter as they see fit. When these institutions consult the committee, whether

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on a mandatory or voluntary basis, they may set a time limit (of at least one month)
after which the absence of an opinion cannot prevent them from taking further action
(Article 304 TFEU).
B. Issuing an opinion on its own initiative
The committee may decide to issue an opinion whenever it considers such action
appropriate.

ROLE OF THE EUROPEAN PARLIAMENT

The cooperation agreement between Parliament and the EESC of 5 February 2014
aims to reinforce the democratic legitimacy of the EU. Specifically, the European
Parliament and the EESC agreed on several issues:
— The EESC will prepare impact assessments with information and relevant
materials from civil society on how existing EU legislation is working and what
deficiencies need to be taken into account in making and revising EU legislation.
This is sent to Parliament in due time before the start of the amendment
procedure;
— In all relevant parliamentary committee meetings, one seat will be reserved for an
EESC member. EESC rapporteurs will be invited to present substantial opinions
in hearings of the relevant parliamentary committees;
— General legislative cooperation and the work plan are discussed twice a
year between the Chair of the Conference of Committee Chairs, Parliament
committee chairs and the President of the EESC.

Alexandru-George Moș / Udo Bux / Mariusz Maciejewski

07/2024

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1.3.14. THE EUROPEAN COMMITTEE OF THE REGIONS

The European Committee of the Regions is made up of 329 members representing

the regional and local authorities of the 27 Member States of the European Union.
It issues opinions sought on the basis of mandatory (as required by the Treaties)
and voluntary consultation and, where appropriate, own-initiative opinions. Its
members are not bound by any mandatory instructions. They are independent in the
performance of their duties, in the European Union’s general interest.

LEGAL BASIS
Article 13(4) of the Treaty on European Union (TEU), Articles 300 and 305 to 307 of
the Treaty on the Functioning of the European Union (TFEU), and various Council
decisions appointing the members and alternate members of the Committee, as
proposed by the Member States, for their five-year term of office.

OBJECTIVES
Created in 1994 after the entry into force of the Maastricht Treaty, the European
Committee of the Regions (CoR) is an advisory body which represents the interests of
regional and local authorities in the European Union and addresses opinions on their
behalf to the Council and the Commission. Members can be, for example, leaders of
regional authorities, mayors or elected or non-elected representatives of regions and
cities of the 27 EU Member States.
In the words of its mission statement, the CoR is a political assembly of holders of
a regional or local electoral mandate serving the cause of European integration. It
provides institutional representation for all the EU’s territorial areas, regions, cities
and municipalities.
Its mission is to involve regional and local authorities in the European decision-making
process and thus encourage greater participation by citizens. It is a political body
bringing together and empowering Europe’s locally elected representatives, including
329 members and 329 alternate members from 300 regions, 100 000 local authorities
and 1 million local politicians representing 441 million EU citizens.
In order to better fulfil this role, the CoR has long sought the right to refer cases of
infringement of the principle of subsidiarity to the Court of Justice. Following the entry
into force of the Treaty of Lisbon, it now has this right under the terms of Article 8 of
Protocol No 2 on the application of the principles of subsidiarity and proportionality.
According to the CoR’s three political priorities for 2020-2025, adopted in July 2020,
all decisions taken at EU level to tackle the major societal transformations facing
villages, cities and regions today, such as global pandemics, the green and digital
transitions, demographic challenges and migratory flows, must be taken as close to
citizens as possible in line with the principle of subsidiarity.

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Priority 1: Bringing Europe closer to people: democracy and the future of the EU.
Modernising and reinforcing democracy at all levels of government in order for the EU
to respond more efficiently to people’s real needs.
Priority 2: Managing fundamental societal transformations: building resilient regional
and local communities, responding to global pandemics, climate, digital and
demographic transitions, as well as the flow of migration through a coherent,
integrated and local European approach.
Priority 3: Cohesion, our fundamental value: place-based EU policies that put the EU
at the service of its people and their places of living. Cohesion is not money, it is a
fundamental EU value designed to foster economic, social and territorial cohesion.

ORGANISATION
A. Composition (Article 305 TFEU, Council Decision (EU) 2019/852[1])
1. Number and national allocation of seats
In accordance with the provisions of Council Decision (EU) 2019/852 of 21 May 2019,
the European Committee of the Regions is made up of 329 members and an equal
number of alternate members, split between the Member States as follows:
— 24 for Germany, France and Italy;
— 21 for Spain and Poland;
— 15 for Romania;
— 12 for Austria, Belgium, Bulgaria, Czechia, Greece, Hungary, the Netherlands,
Portugal and Sweden;
— 9 for Croatia, Denmark, Finland, Ireland, Lithuania and Slovakia;
— 7 for Latvia, Estonia and Slovenia;
— 6 for Cyprus and Luxembourg;
— 5 for Malta.
2. Method of appointment
Members are appointed for five years by the Council acting unanimously on proposals
made by the Member State concerned (Article 305 TFEU). For the period from
26 January 2020 to 25 January 2025, the Council adopted Decision (EU) 2019/2157 on
10 December 2019 appointing the members and alternate members of the Committee.
On 20 January 2020, the Council adopted Decision (EU) 2020/102, whereby it also
appointed the members and alternate members for whom it received proposals from
the respective Member State after 20 December 2019. The term of office is renewable.
Members must either hold a regional or local authority electoral mandate, or be
politically accountable to an elected assembly (Article 300(3) TFEU). Every time a
member or alternate member’s seat on the CoR becomes vacant at the end of their

[1]Council Decision (EU) 2019/852 of 21 May 2019 determining the composition of the European Committee of the Regions,
OJ L 139, 27.5.2019, p. 13.

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term of office (e.g. at the end of the regional or local mandate on the basis of which
the member was proposed), a separate Council decision becomes necessary.
B. Structure (Article 306 TFEU)
The European Committee of the Regions elects its President and officers from among
its members for a term of two and a half years. It adopts its Rules of Procedure on the
basis of Article 306 TFEU and submits them to the Council for approval. As a rule, it
holds six plenary sessions per year. According to the political affiliation of its Members,
it currently operates in six political groups.
The presidents of those groups meet as the Conference of Presidents, which prepares
the work of the Plenary Assembly, the Bureau and the commissions and facilitates the
search for political consensus on decisions to be taken.
The plenary is chaired by the assembly’s President (Article 306 TFEU) and its main
functions are to adopt opinions, reports and resolutions, adopt the CoR’s draft
estimates of expenditure and revenue, adopt its political programme at the beginning
of every term, elect the President, the First Vice-President and the remaining
members of the Bureau, set up policy commissions, and adopt and revise its Rules of
Procedure.
The CoR’s work is carried out in six specialist commissions, which draw up draft
opinions and resolutions that are then submitted for adoption in plenary: the
Commission for Citizenship, Governance, Institutional and External Affairs (CIVEX),
the Commission for Territorial Cohesion Policy and EU Budget (COTER), the
Commission for Economic Policy (ECON), the Commission for Environment, Climate
Change and Energy (ENVE), the Commission for Natural Resources (NAT) and
the Commission for Social Policy, Education, Employment, Research and Culture
(SEDEC).
In the interests of efficiency, some of its permanent Secretariat’s services (total staff
2023: 496) at its seat in Brussels (see Protocol No 6 on the location of the seats of
the institutions and of certain bodies, offices, agencies and departments of the EU)
are shared with the Secretariat of the European Economic and Social Committee.
The CoR (Section 7 of the EU budget) has an administrative budget of approximately
EUR 116.1 million (2023 budget).

ATTRIBUTIONS
A. Opinions issued at the request of other institutions
1. Mandatory consultation
The Council and the Commission are required to consult the European Committee of
the Regions before taking decisions on matters concerning:
— Education, vocational training and youth (Article 165 TFEU);
— Culture (Article 167 TFEU);
— Public health (Article 168 TFEU);
— Trans-European transport, telecommunications and energy networks (Article
172 TFEU);

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— Economic and social cohesion (Articles 175, 177 and 178 TFEU).
2. Voluntary consultation
The Commission, the Council and Parliament may also consult the European
Committee of the Regions on any other matter as they see fit.
When Parliament, the Council or the Commission consult the European Committee
of the Regions (whether on a mandatory or voluntary basis), they may set a time limit
(at least one month in accordance with Article 307 TFEU) for its response. Should
the deadline expire without an opinion being issued, they may proceed without the
benefit of an opinion. As an example of voluntary cooperation, in December 2020 the
Commission and the CoR agreed a partnership on the integration of migrants with the
aim of joining forces to support the work on integration into EU cities and regions. This
partnership builds on the CoR’s 2019 ‘Cities and Regions for Integration of Migrants’
initiative and provides a political platform for European mayors and regional leaders
to share information and showcase positive examples of the integration of migrants
and refugees.
B. Issuing an opinion on its own initiative
1. Every time the European Economic and Social Committee is consulted, the
European Committee of the Regions is informed and may also issue an opinion
on the matter if it considers that regional interests are involved.
2. As a general rule, the CoR may issue an opinion whenever it considers such
action to be appropriate. The Committee has, for instance, issued opinions on its
own initiative in the following areas: small and medium-sized enterprises (SMEs),
trans-European networks, tourism, structural funds, health (the fight against
drugs), industry, urban development, training programmes and the environment.
C. Referral to the Court of Justice of the European Union – ex-post judicial review
The Committee may also institute proceedings before the Court of Justice in order
to safeguard the prerogatives allocated to it (Article 263 TFEU). In other words, it
may bring proceedings before the Court of Justice if it considers that it has not been
consulted when it should have been or if the consultation procedures have not been
applied correctly (annulment of acts (1.3.10)).
The right to bring proceedings under Article 8 of the Protocol (No 2) on the application
of the principles of subsidiarity and proportionality, annexed to the Lisbon Treaty,
if consultation procedures have not been correctly applied, enables the European
Committee of the Regions to ask the Court of Justice to ascertain whether a
legislative act falling within the Committee’s sphere of competence complies with the
subsidiarity principle.

ROLE OF THE EUROPEAN PARLIAMENT

The European Parliament’s Rules of Procedure (Annex VI, point XII) make the
Committee on Regional Development (REGI) responsible for maintaining relations
with the CoR, interregional cooperation organisations and local and regional
authorities.

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Under the Cooperation Agreement between the European Parliament and the CoR of
5 February 2014:
— The CoR prepares impact assessments on proposed EU legislation, which it sends
to Parliament in due time before the start of the amendment procedure. These
impact assessments include detail at national, regional and local level on how
existing legislation is working, plus opinions on improvements to the proposed
legislation;
— One member from the CoR is invited to all relevant Parliament committee
meetings. This rapporteur or spokesperson presents the CoR’s opinions. In turn,
Parliament rapporteurs can attend CoR committee meetings;
— The general legislative cooperation and the work plan are discussed twice a year
between the Chair of the Conference of Committee Chairs of Parliament and the
Chair’s counterpart in the European Committee of the Regions.
Since 2008, the REGI Committee and COTER Commission have organised an annual
joint meeting in the framework of the ‘Open Days: European Week of Regions and
Cities’ event.

Udo Bux / Mariusz Maciejewski

07/2024

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1.3.15. THE EUROPEAN INVESTMENT BANK

The European Investment Bank (EIB) furthers the objectives of the European Union
by providing long-term project funding, guarantees and advice. It supports projects
both within and outside the EU. Its shareholders are the Member States of the EU.
The EIB is the majority shareholder in the European Investment Fund (EIF), and the
two organisations together make up the EIB Group.

LEGAL BASIS
— Articles 308 and 309 of the Treaty on the Functioning of the European Union
(TFEU). Further provisions regarding the EIB are contained in Articles 15, 126, 175,
209, 271, 287, 289 and 343 TFEU;
— Protocol (No 5) on the Statute of the European Investment Bank and Protocol
(No 28) on Economic, Social and Territorial Cohesion, appended to the Treaty on
European Union and TFEU.

OBJECTIVES
According to Article 309 TFEU, the task of the EIB is to contribute to the balanced and
steady development of the internal market in the interest of the Union. The EIB, in all
sectors of the economy, facilitates the funding of projects that:
— Seek to develop less-developed regions;
— Seek to modernise or convert undertakings, or develop new activities which
cannot be completely financed by means available in individual Member States;
— Are of common interest to several Member States.
It also contributes to the promotion of economic, social and territorial cohesion
in the Union (Article 175 TFEU and Protocol No 28). In addition, it supports
the implementation of measures outside the EU that support the development
cooperation policy of the Union (Article 209 TFEU).
EIB activities focus on six priority areas: climate and environment; development;
innovation and skills; small businesses; infrastructure; and cohesion.

RESOURCES AND INSTRUMENTS

A. Resources
In the pursuit of its objectives, the EIB mainly has recourse to its own resources and
the international capital markets (Article 309 TFEU).
1. Own resources
The own resources are provided by the members of the EIB, i.e. the Member States
(Article 308 TFEU). The contribution to the capital by each individual Member State is
laid down in Article 4 of the EIB’s Statute and is calculated in accordance with Member

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States’ economic weight. Member States can increase their capital subscriptions on a
voluntary basis. The EIB’s total subscribed capital amounts to EUR 248.8 billion.
2. Capital markets
The EIB raises the greater part of its lending resources from international capital
markets, mainly through the issuing of bonds. It is one of the largest supranational
lenders in the world. In order to acquire cost-efficient funding, an excellent credit
rating is important. The major credit rating agencies currently attribute the highest
rating to the EIB, reflecting the quality of its loan portfolio. The EIB generally finances
one third of each project, but supportive financing can reach 50%.
B. Instruments
The EIB uses a wide range of different instruments, but mainly loans and guarantees.
However, a number of other, more innovative instruments with a higher risk profile
have also been developed. Further instruments will be designed in cooperation with
other EU institutions. Financing provided by the EIB may also be combined with
financing from other EU sources (inter alia, the EU budget), a process known as
blending. Besides financing projects, the EIB also operates in an advisory capacity.
Lending is mainly provided in the form of direct or intermediate loans. Direct project
loans are subject to certain conditions, e.g. the total investment costs must exceed
EUR 25 million, and the loan can only cover up to 50% of the project costs. Intermediate
loans consist of lending to local banks or other intermediaries that, in turn, support
the final recipient. The majority of lending takes place in the EU.
In addition to its more traditional lending activities, the EIB also uses blending facilities
to blend its loans with grants from public bodies or philanthropic organisations.

GOVERNANCE AND STRUCTURE

A. Governance
The EIB has legal personality, in accordance with Article 308 TFEU. It is directed
and managed by a Board of Governors, a Board of Directors and a Management
Committee. An Audit Committee audits the activities of the Bank.
The Board of Governors consists of the ministers designated by the Member States.
It lays down general directives for the credit policy of the Bank and ensures its
implementation. It is required, among other things;
— To decide whether to increase the subscribed capital;
— To determine the principles applicable to financing operations undertaken within
the framework of the Bank’s tasks;
— To take decisions in respect of the granting of finance for investment operations
to be carried out, in whole or in part, outside the EU; and
— To approve the annual report of the Board of Directors, the annual balance sheet,
the profit and loss account, and the Rules of Procedure of the Bank.
The Board of Directors consists of 28 directors and 31 alternate directors. The
directors are appointed by the Board of Governors for five years. Each Member State
nominates a director, as does the Commission. The Board of Directors takes decisions

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in respect of: granting finance, in particular in the form of loans and guarantees; raising
loans; fixing the interest rates on loans granted, as well as the commission and other
charges. It ensures that the Bank is properly run and is managed in accordance with
the provisions of the Treaties and of the Statute and with the general directives laid
down by the Board of Governors.
The Management Committee consists of a President and eight Vice-Presidents,
appointed for a period of six years by the Board of Governors on the proposal of the
Board of Directors. Their appointments are renewable. It is responsible for the day-
to-day business of the Bank, under the authority of the President and the supervision
of the Board of Directors; it prepares the decisions of the Board of Directors, and
ensures that these decisions are implemented.
The Audit Committee consists of six members, appointed by the Board of Governors.
It checks annually that the operations of the Bank have been conducted and its books
kept in a proper manner.
B. Structure
The EIB Group was established in 2000 and consists of the EIB and the EIF, which
was founded in 1994 and set up as a public-private partnership with three main
shareholder groups: the EIB, as majority shareholder with 62.2%, the Commission
(30%), and several public and private financial institutions (7.8%). The EIF provides
various forms of risk capital instruments, e.g. venture capital. The lending focus of
the EIF is small and medium-sized enterprises (SMEs), and it uses a wide range of
innovative instruments with the aim of improving access to finance for SMEs.

AN INVESTMENT PLAN FOR EUROPE

Since the onset of the global economic and financial crisis, the EU has been
suffering from low levels of investment. The Commission communication entitled
‘An Investment Plan for Europe’ provided guidance on how to revive investment in
the EU, create jobs and foster long-term growth and competitiveness. To this end,
Regulation (EU) 2015/1017 creating the European Fund for Strategic Investments
(EFSI) was adopted on 25 June 2015.
The EFSI aimed to generate private investment via the mobilisation of public
money and to create an investment-friendly environment. An initial EU guarantee of
EUR 16 billion to the EIB, together with a EUR 5 billion commitment from the EIB itself,
was used to mobilise private money, and by mid-2018 the EFSI had surpassed its aim
of generating an additional EUR 315 billion in finance for investment in the EU.
The EFSI Regulation also established the European Investment Advisory Hub (EIAH),
which aimed to provide advisory and technical assistance for the identification,
preparation and development of investment projects.
The EFSI 2.0 Regulation was adopted in December 2017 and entered into force on
1 January 2018. This regulation extended the duration of the EFSI (until the end
of 2020) and made further enhancements to the fund and the EIAH, with a view to
mobilising EUR 500 billion of additional financing for investment.

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INVESTEU
Adopted in March 2021 as the successor of the Investment Plan for Europe, InvestEU
brings together the EFSI and 13 other EU financial instruments. It focuses on four
main policy areas (sustainable infrastructure; research, innovation and digitisation;
SMEs; social investment and skills) and aims to mobilise EUR 372 billion in additional
investment between 2021 and 2027. The programme consists of the InvestEU Fund,
the InvestEU Advisory Hub and the InvestEU Portal.
Member States have the option of using InvestEU to implement their recovery and
resilience plans under the Recovery and Resilience Facility.

THE EU’S ‘CLIMATE BANK’

In June 2019, the European Council invited the EIB to ‘step up its activities in support
of climate action’. The EIB responded in November 2019 with a new climate strategy
and energy lending policy.
The EIB has committed to align all its financing activities with the goals of the Paris
Agreement. Most notably, the EIB will increase the share of investments under its
‘climate action and environmental sustainability’ priority to 50% by 2025. The EIB
stopped financing fossil fuel projects at the end of 2021.
The EIB’s new energy lending policy, which will govern its activities in the energy
sector, is based on five principles:
— Prioritising energy efficiency with a view to supporting the new EU target under
the EU Energy Efficiency Directive;
— Enabling energy decarbonisation through increased support for low or zero-
carbon technology, with the aim of achieving a 32% renewable energy share
throughout the EU by 2030;
— Increasing financing for decentralised energy production, innovative energy
storage and e-mobility;
— Ensuring the grid investment that is essential for new, intermittent energy
sources such as wind and solar, as well as strengthening cross-border
interconnections; and
— Increasing the impact of investment to support energy transformation outside
the EU.

RESPONSE TO THE COVID-19 CRISIS

In 2020, as part of the EU’s response to the economic consequences of the COVID-19
crisis, the EIB created a EUR 25 billion guarantee fund to enable the EIB Group to scale
up its support for companies in all Member States by mobilising an additional amount
of up to EUR 200 billion.
This came on top of an immediate support package of up to EUR 40 billion, which
consisted of:

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— Dedicated guarantee schemes for banks based on existing programmes, for

immediate deployment, mobilising up to EUR 20 billion of financing;
— Dedicated liquidity lines for banks to ensure an additional EUR 10 billion of
working capital support for SMEs and mid-caps; and
— Dedicated asset-backed securities purchase programmes to allow banks to
transfer risk on portfolios of SME loans, mobilising another EUR 10 billion of
support.

RESPONSE TO THE RUSSIAN INVASION OF UKRAINE

EIB activities related to Ukraine date back to 2007. It operates in Ukraine in line
with the European neighbourhood policy, the Eastern Partnership and other EU
bilateral agreements. Since the Russian invasion of Ukraine, the EIB has stepped
up its support. The funding from the instrument aims to help Ukraine fix damaged
infrastructure, restart municipal services and support urgent energy-efficiency
measures in preparation for the cold seasons. Furthermore, the EIB has coordinated
humanitarian aid donations, prioritising emergency relief for people impacted by the
conflict in Ukraine and its neighbouring countries.
In the context of Russia’s war of aggression against Ukraine and the need to boost
Member States’ military capacities, a discussion has started on whether to add
investment in the defence sector to the EIB’s objectives. Ukraine would also be eligible
for such funding. This would be a radical departure from current practice, which
excludes supporting investment linked to defence. One particular aspect to take into
account is the effect that an additional objective, should it lead the EIB to increase
its borrowing on the capital markets, could have on its ability to keep a high credit
rating. The conclusions of the European Council meeting of 21-22 March 2024 state
that ‘the European Investment Bank is invited to adapt its policy for lending to the
defence industry and its current definition of dual-use goods, while safeguarding its
financing capacity’.

ROLE OF THE EUROPEAN PARLIAMENT

In accordance with Article 308 TFEU, Parliament is consulted when the Statute of the
EIB is amended. The EIB is directly accountable to the Member States. It does not have
formal reporting obligations to Parliament, nor is it accountable to it. However, in a
gesture of goodwill, the EIB President accepts invitations to appear in plenary and at
relevant Parliament committee meetings, and the EIB is open to questions from MEPs.
Every year, the Committee on Budgetary Control (CONT) reviews the EIB’s activities
and presents a report in plenary, to which the EIB President is invited.
Under the existing regulation, Parliament approves the appointment of the Managing
Director and the Deputy Managing Director of the EFSI. The annual appropriations
from the EU budget related to the guarantee fund are authorised by Parliament and
the Council as part of the annual budgetary procedure.
Parliament was involved, as a co-legislator, in the adoption of the EFSI and InvestEU
initiatives.

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For more information on this topic, please see the website of the Committee on
Economic and Monetary Affairs.

Christian Scheinert
04/2024

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1.3.16. THE EUROPEAN OMBUDSMAN

The European Ombudsman conducts inquiries into cases of maladministration by

European Union institutions, bodies, offices and agencies, acting on their own
initiative or on the basis of complaints from EU citizens, or any natural or legal person
residing or having their registered office in a Member State. The Ombudsman is
elected by the European Parliament for the duration of the parliamentary term.

LEGAL BASIS
Articles 20, 24 and 228 of the Treaty on the Functioning of the European Union (TFEU)
and Article 43 of the Charter of Fundamental Rights of the European Union.
The European Ombudsman’s status and duties were spelt out by the European
Parliament in a decision of 9 March 1994 taken after consulting the European
Commission and with the approval of the Council of the European Union[1]. The
European Ombudsman then adopted provisions implementing that decision. The
decision was repealed and substituted by a European Parliament Regulation of
24 June 2021, following the same procedure[2]. The procedures for electing and
dismissing the European Ombudsman are laid down in Rules 231 to 233 of the
European Parliament’s Rules of Procedure.

OBJECTIVES
Established by the Maastricht Treaty (1992), the European Ombudsman is a body that
aims to:
— Improve the protection of citizens or any natural or legal person residing or
having their registered office in a Member State in connection with cases of
maladministration by European Union institutions, bodies, offices or agencies;
and
— Thereby enhance openness and democratic accountability in the decision-making
and administration of the EU’s institutions.
A. Status
1. Election
a. Requirements
The European Ombudsman must be chosen from persons who:
— Are citizens of the EU;
— Have full civil and political rights;
— Offer every guarantee of independence;

[1]OJ L 113, 4.5.1994, p. 15 – amended by the European Parliament decisions of 14 March 2002 (OJ L 92, 9.4.2002, p. 13) and of
18 June 2008 (OJ L 189, 17.7.2008, p. 25).
[2]Regulation (EU, Euratom) 2021/1163 of the European Parliament of 24 June 2021 laying down the regulations and general
conditions governing the performance of the Ombudsman’s duties (Statute of the European Ombudsman) and repealing
Decision 94/262/ECSC, EC, Euratom (OJ L 253, 16.7.2021, p. 1).

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— Meet the conditions required for the exercise of the highest judicial office in their
country or have the acknowledged competence and qualifications to undertake
the duties of the European Ombudsman;
— Have not been members of national governments or members of the European
Parliament, the European Council or the European Commission within the two
years preceding the date of publication of the call for nominations.
b. Procedure
At the start of each parliamentary term or in the event of the death, resignation or
dismissal of the European Ombudsman, the President of the European Parliament
calls for nominations for the office of European Ombudsman and sets a time limit
for their submission. Nominations must have the support of at least 40 Members
of the European Parliament from at least two Member States. Nominations are
submitted to the European Parliament’s Committee on Petitions, which considers
their admissibility. The committee may ask to hear the nominees. A list of admissible
candidates is then put to the vote in the European Parliament. The European
Ombudsman is elected by a majority of the votes cast.
2. Term of office
a. Length
The European Ombudsman is elected by the European Parliament after each
European election for the duration of its legislature. They may be re-elected.
b. Obligations
During the term of office, the European Ombudsman must:
— Be completely independent and impartial in the exercise of their duties;
— Not seek or take instructions from any government, institution, body, office or
entity;
— Refrain from any act incompatible with their duties;
— Not engage in any other political or administrative duties, or any other occupation,
whether gainful or not.
3. Dismissal
The European Ombudsman may be dismissed by the Court of Justice of the European
Union (CJEU) at the request of the European Parliament if they no longer fulfil the
conditions required for the exercise of their duties or are guilty of serious misconduct.
B. Role
1. Scope
The European Ombudsman deals with cases of maladministration by European Union
institutions, bodies, offices or agencies.
a. The European Ombudsman may find maladministration if an institution fails to
respect:
— Fundamental rights;
— Legal rules or principles;

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— The principles of good administration.

The European Ombudsman’s inquiries mainly concern:
— Transparency in decision-making and in lobbying/accountability;
— Access to documents;
— Culture of service;
— Respect for procedural rights;
— Proper use of discretion;
— Respect for fundamental rights;
— Recruitment;
— Good management of EU personnel issues and appointments;
— Sound financial management;
— Ethics;
— Public participation in EU decision-making.
Around one third of the inquiries the European Ombudsman carries out every year
concern a lack of or refusal to provide information.
b. Exceptions
The following matters cannot be investigated:
— Action by the CJEU acting in its judicial role. The European Ombudsman’s
inquiries concerning the CJEU relate only to its non-judicial activities, for example
tenders, contracts and staff cases;
— Complaints against local, regional or national authorities, even when these
complaints refer to matters connected to the European Union;
— Actions by national courts or ombudsmen: the European Ombudsman does not
serve as a court of appeal against decisions taken by these bodies;
— Any cases which have not previously been through the appropriate administrative
procedures within the organisations concerned;
— Complaints against individual EU officials in relation to their conduct.
2. Referrals
The European Ombudsman conducts inquiries for which they find grounds either on
their own initiative or on the basis of complaints submitted by EU citizens or any
natural or legal person residing or having their registered office in a Member State,
either directly or through a Member of the European Parliament, except where the
alleged facts are or have been the subject of legal proceedings.
3. Powers of enquiry
The European Ombudsman can request information from:

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— Institutions and bodies, which must comply and provide access to the files
concerned, unless they are unable to do so on duly substantiated grounds of
secrecy;
— Officials and other staff of said institutions and bodies, who are required to testify
at the request of the European Ombudsman, although continuing to be bound by
the rules to which they are subject;
— The Member States’ authorities, which must comply unless such disclosure is
prohibited by law or regulation. Even in such cases, however, the European
Ombudsman can obtain the information on the understanding that it will not be
passed on.
If the European Ombudsman does not obtain the assistance requested, they inform
the European Parliament, which takes appropriate action. The European Ombudsman
can also cooperate with their counterparts in the Member States, subject to the
provisions of the national law concerned. If the information appears to relate to
a matter of criminal law, however, the European Ombudsman immediately notifies
the competent national authorities and the European Anti-Fraud Office (OLAF). If
appropriate, the European Ombudsman may also inform the EU institution to which
the official or member of staff is answerable.
4. Outcome of inquiries
Wherever possible, the European Ombudsman acts in concert with the institution
or body concerned to find a solution satisfactory to the complainant. Where
the European Ombudsman establishes that maladministration has occurred, their
recommendations are referred to the institution or body concerned, which then
has three months in which to inform the European Ombudsman of its views.
If the institution does not accept the proposed recommendations, the European
Ombudsman can draw up a special report for submission to the European Parliament.
The European Parliament may in turn draw up a report on the special report
submitted by the European Ombudsman. Finally, the European Ombudsman informs
the complainant of the result of the inquiry, the opinion delivered by the institution or
body concerned and any personal recommendations.
C. Administration
The European Ombudsman is assisted by a secretariat, whose staff are subject to the
rules of the European civil service. The European Ombudsman appoints the head of
the secretariat.
D. Activities
The first European Ombudsman, Jacob Söderman, served two terms of office, from
July 1995 to 31 March 2003. During his term, the Code of Good Administrative
Behaviour was approved by the European Parliament (in 2001). This is a procedural
code which takes account of the principles of EU administrative law contained
in the case law of the CJEU and draws inspiration from national laws. The
European Ombudsman uses this code when investigating whether there has been
maladministration, drawing on its provisions in their inquiries. In addition, the code

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acts as a guide and a resource for EU officials, encouraging the highest standards of
administration.
Nikiforos Diamandouros was European Ombudsman from April 2003 to 14 March 2013,
when he resigned with effect from 1 October 2013. On 11 July 2006, he submitted
a proposal on adjustments to the European Ombudsman’s Statute, which was
supported by the European Parliament’s Committee on Petitions, by the European
Parliament and by the Council of the European Union. The statute was amended to
strengthen and clarify the role of the European Ombudsman, for instance in terms of
access to documents and notification of information to OLAF when it might fall within
its remit.
The former Irish Ombudsman, Emily O’Reilly, following her election by the European
Parliament at the July 2013 part-session, took up office as European Ombudsman
on 1 October 2013 and has been reconfirmed twice, following the 2014 and 2019
European elections. She has enhanced the visibility of the European Ombudsman’s
role by focusing on the most relevant issues for EU citizens, by ensuring that the EU
delivers the highest standards of administration, transparency and ethics. She has
promoted transparency in the EU decision-making process and notably in trilogues
and in the Council of the European Union, as well as in relation to lobbying, expert
groups, conflicts of interest, revolving doors, EU agencies (such as the European
Border and Coast Guard Agency, Frontex), and international negotiations (such as the
Transatlantic Trade and Investment Partnership). She has worked to improve the rules
on whistleblowing, on the European Citizens’ Initiative and on disabilities. She has also
examined instances of maladministration in relation to the appointment of a former
European Commission Secretary-General.
The European Ombudsman also coordinates the European Network of Ombudsmen
and since 2017 has handed out the ‘Award for Good Administration’ once every two
years.

ROLE OF THE EUROPEAN PARLIAMENT

Although entirely independent in the exercise of their duties, the European
Ombudsman is a parliamentary ombudsman. The European Ombudsman has very
close relations with the European Parliament, which has sole power to elect and
ask the Court of Justice to dismiss them, lays down rules governing the exercise
of their duties, assists with investigations and receives their reports. The European
Parliament’s Committee on Petitions, on the basis of the Rules of Procedure
(Rule 232), draws up a report every year on the annual report on the activities of the
European Ombudsman. In these reports, it has repeatedly expressed full support for
the work of the European Ombudsman and emphasised that the EU institutions should
fully cooperate with it in order to increase the EU’s transparency and accountability,
notably by implementing its recommendations. On 12 February 2019, the European
Parliament adopted a resolution on a draft regulation proposing an updated statute
of the European Ombudsman, with the aim of strengthening its independence and
powers. On 24 June 2021 the European Parliament adopted the Regulation laying
down the new Statute of the European Ombudsman, which codifies many of the office
working practices, such as the power to launch own-initiative inquiries.

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Pablo Abril Marti / Georgiana Sandu

05/2024

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1.4. FINANCING

1.4.1. THE UNION’S REVENUE

The EU budget is financed in large part from own resources, and supplemented
by other revenue. Annual revenue must completely cover annual expenditure, as a
budget deficit is not allowed. The system of own resources is decided by the Council
on the basis of unanimity, having regard to the opinion of the European Parliament,
and needs to be ratified by each Member State. A reform of the own resources
system composed of two packages of new own resources was proposed by the
Commission in 2022 and 2023.

LEGAL BASIS
— Articles 311 and 322(2) of the Treaty on the Functioning of the European Union
and Articles 106a and 171 of the Treaty establishing the European Atomic Energy
Community;
— Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system
of own resources of the European Union;
— Council Regulation (EU, Euratom) 2021/768 of 30 April 2021 laying down
implementing measures for the system of own resources of the European Union,
Council Regulation (EU, Euratom) No 609/2014 of 26 May 2014 on the methods
and procedure for making available the traditional, VAT and GNI-based own
resources and on the measures to meet cash requirements, Council Regulation
(EU, Euratom) 2021/769 of 30 April 2021 on the definitive uniform arrangements
for the collection of own resources accruing from value added tax, and Council
Regulation (EU, Euratom) 2021/770 of 30 April 2021 on the calculation of the own
resource based on plastic packaging waste that is not recycled, on the methods
and procedure for making available that own resource, on the measures to meet

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cash requirements, and on certain aspects of the own resource based on gross
national income.

OBJECTIVE
To provide the European Union with financial autonomy within the bounds of
budgetary discipline.

HOW IT WORKS
The Own Resources Decision of 21 April 1970 provided the European
Economic Community (EEC) with its own resources. Per Council Decision (EU,
Euratom) 2020/2053 of 14 December 2020, the level of own resources that can be
called on per year is currently limited to a maximum of 1.4% of EU gross national
income (GNI). As overall spending cannot exceed total revenues, expenditure is also
restricted by this ceiling under the current 2021-2027 multiannual financial framework
(MFF) (1.4.3).

REVENUE COMPOSITION
1. Own resources
‘Traditional’ own resources consist of customs duties, agricultural duties and sugar
levies collected since 1970. The percentage that may be retained by Member States
to cover collection costs has been raised back up to 25% from 20%. ‘Traditional’ own
resources now usually account for around 10-15% of own resource revenue[1].
The VAT-based own resource consists of the transfer of a percentage of the estimated
value added tax (VAT) collected by the Member States to the Union. Although
provided for in the 1970 decision, this resource was not applied until the VAT systems
of the Member States were harmonised in 1979. The VAT resource now accounts for
around 10% of own resource revenue.
The GNI-based own resource consists of a uniform percentage levy on Member
States’ GNI set in each year’s budget procedure, and was created by Council
Decision 88/376/EEC, Euratom of 24 June 1988. Originally it was only to be collected
if the other own resources did not fully cover expenditure, but it now finances the bulk
of the EU budget. The GNI-based resource has tripled since the late 1990s, and now
makes up around 60-70% of own resource revenue.
The ‘plastic’ own resource was introduced as of 1 January 2021 by the 2020 Own
Resources Decision. It is a national contribution (direct transfer from Member State
budgets) on the basis of the quantity of non-recycled plastic packaging waste, with
a uniform call rate of EUR 0.80 per kilogram. The contributions of Member States
with a GNI per capita below the EU average are reduced by an annual lump sum
corresponding to 3.8 kilograms of plastic waste per capita. The revenue from this
resource provides around 3-4% of the EU budget.

[1]Consolidated Annual Accounts of the European Union for the Financial Year 2021.

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2. Other revenue and the balance carried over from the previous year
Other revenue includes taxes paid by EU staff on their salaries, contributions from
non-EU countries to EU programmes, interest payments and fines paid by companies
found in breach of EU laws. If there is a surplus, the balance from each financial year is
entered in the budget for the following year as revenue. Other revenue, balances and
technical adjustments usually make up around 2-8% of total revenue.
Borrowing is also accounted under ‘other revenue’, and currently amounts to 25-30%
of the budget. The EU budget cannot run a deficit, and funding its expenditure through
borrowing is not allowed. However, in order to finance the grants and loans provided
by the NextGenerationEU (NGEU) recovery scheme, the Commission was authorised
on an exceptional and temporary basis to borrow up to EUR 750 billion (in 2018 prices)
on capital markets. New net borrowing should stop at the end of 2026, after which
only refinancing operations will be allowed.
3. Correction mechanisms
The own resources system has also been used to correct budgetary imbalances
between Member States’ net contributions. Although the ‘UK rebate’ introduced
in 1984 no longer applies, lump sum corrections will continue to benefit Denmark,
Germany, the Netherlands, Austria and Sweden over the 2021-2027 period.

TOWARDS THE REFORM OF EU OWN RESOURCES

The Treaty of Lisbon reiterated that the budget should be financed wholly from own
resources, and maintained the power of the Council, after consulting Parliament,
to unanimously adopt a decision on the system of own resources of the Union[2],
to establish new categories of own resources and abolish existing ones. It also
established that the Council can only adopt the implementing measures for these
decisions with the consent of Parliament, strengthening Parliament’s position in the
process.
Building on the new provisions of the Treaty of Lisbon, Parliament has repeatedly
called for an in-depth reform of the system of own resources in a number of positions
and resolutions in recent years[3]. Parliament has highlighted problems with the own
resources system, particularly its excessive complexity and its financial dependence
on national contributions.
In January 2017, the high-level ‘Monti’ group created in 2014 to undertake a general
review of the own resources system presented its final report on more transparent,
simple, fair and democratically accountable ways to finance the EU budget. The main
conclusion was that the EU budget needed reform, on both the revenue and the

[2]Any such decision needs to be ratified by the Member States.

[3]Position of 17 December 2014 on the system of the European Communities’ own resources; position of 16 April 2014 on the
draft Council decision on the system of own resources; resolution of 6 July 2016 entitled ‘Preparation of the post-electoral
revision of the MFF 2014-2020: Parliament’s input ahead of the Commission’s proposal’; resolution of 26 October 2016 on
the mid-term revision of the MFF 2014-2020; resolution of 24 October 2017 on the Reflection Paper on the Future of EU
Finances; resolution of 14 March 2018 on reform of the European Union’s system of own resources; resolution of 30 May 2018
on the 2021-2027 multiannual financial framework and own resources; resolution of 14 November 2018 on the Multiannual
Financial Framework 2021-2027, resolution of 10 October 2019 on the 2021-2027 multiannual financial framework and own
resources: time to meet citizens’ expectations.

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expenditure sides, so as to be able to address current challenges and achieve tangible

results for EU citizens.
Based on this report and the subsequent Reflection paper on the future of EU
finances, the Commission made proposals[4] on 2 May 2018 to simplify the current
VAT-based own resource and to introduce a basket of new own resources. The
Commission also proposed abolishing all rebates and reducing from 20% to 10% the
share of customs revenues that Member States keep as collection costs, as well as an
increase in the ceiling on annual calls for own resources to take account of a smaller
total GNI of the EU-27 and of the proposed integration of the European Development
Fund into the EU budget.
With a view to achieving a more stable EU budget designed to support EU policy
objectives, it repeatedly called for an ambitious and balanced basket of new EU own
resources that is fair, simple, transparent and fiscally neutral for citizens. Parliament
also pushed for reforms to make revenue collection simpler, more transparent and
more democratic, to reduce the share of GNI contributions, to reform or scrap the
VAT resource and to phase out all forms of rebate.

REFORM PROPOSALS
At the European Council meeting of 17-21 July 2020, the Heads of State or
Government agreed on a new MFF, the NGEU, raising the ceiling for payments
and a new own resource based on non-recycled plastic waste to be applied from
January 2021.
The NGEU was based on the Commission proposal of 28 May 2020, to borrow up
to EUR 750 billion by issuing bonds on the international markets on behalf of the
EU with maturities of between 3 and 30 years, in order to counter the effects of
the COVID-19 pandemic. To underpin the liabilities incurred by the EU to eventually
reimburse the market finance raised, the Commission proposed to raise the own
resources ceiling exceptionally and temporarily by 0.6% of the EU’s GNI on top of the
proposed permanent increase from 1.2% to 1.4% of GNI in order to take account of the
new economic context.
In response, in its resolution of 23 July 2020, Parliament stressed that only the creation
of additional new own resources can help to repay the EU’s debt that resulted from
the NGEU-related borrowing, while salvaging the EU budget and alleviating the fiscal
pressure on national treasuries and EU citizens. On 16 September 2020, Parliament’s
position under the consultation procedure reiterated calls for the introduction of new
own resources following a roadmap, and for the abolition of all rebates.
On 10 November 2020, Parliament, Council and Commission negotiators reached
a political agreement on the MFF, own resources and certain aspects concerning
the governance of the recovery instrument. As a result, a new annex to the
Interinstitutional Agreement between the European Parliament, the Council and
the Commission on budgetary discipline, cooperation in budgetary matters and
sound financial management established a roadmap for the introduction of new own
resources over the 2021-2027 period. Income from new own resources should be

[4]The Court of Auditors delivered an opinion on the proposals on 29 November 2018 (Opinion No 5/2018).

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sufficient to cover the repayment of the NGEU, while any remaining revenue should
fund the EU budget.
Under the new Own Resources Decision adopted on 14 December 2020, rebates
for certain Member States were maintained and the collection costs on customs
duties were increased from 20% to 25%. Following its ratification by all Member
States by 31 May 2021, the Own Resources Decision has applied retroactively since
1 January 2021.
After the proposals of 14 July 2021 for the revision of the EU Emissions Trading System
(ETS) and the introduction of a carbon border adjustment mechanism, a proposal for a
next generation of EU own resources was published on 22 December 2021. It specifies
that 25% of revenues from ETS allowances auctioned, 75% of the income generated by
the carbon border adjustment mechanism and 15% of the share of the residual profits
reallocated to EU Member States under the Organisation for Economic Co-operation
and Development / G20 agreement on international corporate taxation (‘pillar one’)
would be paid into the EU budget.
On 20 June 2023, the Commission published its proposals for a second package of
own resources. This included a temporary statistical own resource, paid as a national
contribution on company profits at 0.5% of the notional EU company profit base
(based on the gross operating surplus for the sectors of financial and non-financial
corporations, calculated by Eurostat). Eventually, this will be replaced by a genuine
own resource based on corporate taxation, a contribution from a future Business
in Europe: Framework for Income Taxation (BEFIT). The proposal also envisages an
increase of the call rate of the ETS own resource from 25% to 30%, justified by
the increasing carbon prices. The proposed package could bring in additional annual
revenues of about EUR 23 billion from 2024 and EUR 36 billion from 2028, which
corresponds to around 18-20% of the total revenues.
All the recently proposed new own resources are currently awaiting decisions by the
Council.

THE EUROPEAN PARLIAMENT’S VIEWS

During the consultation procedure on the first basket of new own resources,
Parliament broadly endorsed the proposal, with some amendments. Parliament also
adopted a resolution on 10 May 2023 urging the Council to adopt the first basket and
suggesting additional new own resources.

Andras Schwarcz
04/2024

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1.4.2. THE EU’S EXPENDITURE

Budget expenditure is approved jointly by the Council and Parliament. The annual
EU budget must respect the expenditure ceilings agreed under the multiannual
financial framework (MFF) for different headings, i.e. categories of expenditure,
such as those on the single market, cohesion and natural resources. Thematic
and non-thematic special instruments ensure that the EU can react in the event
of unexpected needs. The use of budgetary guarantees and financial instruments
creates a leverage effect as regards EU spending. In addition to the MFF, the
total EU expenditure for 2021-2027 includes the temporary recovery instrument
NextGenerationEU, which will help the EU economy to recover from the COVID-19
crisis.

LEGAL BASIS
— Articles 310-325 and 352 of the Treaty on the Functioning of the European Union
(TFEU) and Articles 106a, 171-182 and 203 of the Treaty establishing the European
Atomic Energy Community;
— Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the
Council of 18 July 2018 on the financial rules applicable to the general budget of
the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU)
No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU)
No 223/2014, (EU) No 283/2014 and Decision No 541/2014/EU, and repealing
Regulation (EC, Euratom) No 966/2012;
— Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying
down the multiannual financial framework for the years 2021 to 2027 (the MFF
Regulation);
— Council Regulation (EU, Euratom) 2024/765 of 29 February 2024 amending
Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial
framework for the years 2021 to 2027;
— Council Regulation (EU) 2020/2094 of 14 December 2020 establishing a European
Union Recovery Instrument to support the recovery in the aftermath of the
COVID-19 crisis;
— Interinstitutional Agreement (IIA) of 16 December 2020 between the European
Parliament, the Council of the European Union and the European Commission on
budgetary discipline, on cooperation in budgetary matters and on sound financial
management, as well as on new own resources, including a roadmap towards the
introduction of new own resources.

OBJECTIVE
The overall objective of the EU budget is to finance the European Union’s policies
within the bounds of budgetary discipline, in line with the rules and procedures in
place. The EU budget is mainly dedicated to investment. For this reason, the EU

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adopts long-term spending plans, known as multiannual financial frameworks (MFFs),

that run for a period of five to seven years (see below).

BASIC PRINCIPLES
The EU budget obeys the nine general rules of unity, budgetary accuracy, annuality[1],
equilibrium, unit of account (the euro), universality, specification (each appropriation
is allocated to a particular kind of expenditure), sound financial management and
transparency, pursuant to Articles 6 to 38 of the Regulation on the financial rules
applicable to the general budget of the EU.
The annuality rule has to be reconciled with the need to manage multiannual actions,
which have grown in importance within the budget. The budget therefore includes
differentiated appropriations consisting of:
— Commitment appropriations, covering the total cost during the current financial
year of legal obligations contracted for activities lasting a number of years;
— Payment appropriations, covering expenditure in connection with implementing
commitments contracted during the current financial year or previous ones.
The IIA of 16 December 2020 stipulates that the Commission must prepare an annual
report providing an overview of the financial and budgetary consequences of various
EU activities, whether financed by or outside the EU budget. This report must contain
information on the assets and liabilities of the EU, various lending and borrowing
operations - including the European Stability Mechanism and the European Financial
Stability Facility (2.6.8) - and other possible future mechanisms. In addition, the report
must include information on climate expenditure, expenditure contributing to halting
and reversing the decline of biodiversity, the promotion of equality between women
and men, and the implementation of the United Nations Sustainable Development
Goals in all relevant EU programmes.

STRUCTURE AND CATEGORIES OF EU EXPENDITURE

1. Sections of EU expenditure
The general budget is divided into 10 sections, one for each institution. While
the other institutions’ sections consist essentially of administrative expenditure,
the Commission section (Section III) consists of operational expenditure, and the
administrative costs of implementing them (technical assistance, agencies and
human resources). In 2024, the overall administrative expenditure is expected to
represent 6.3% of the total commitment appropriations of EUR 189.28 billion.
The Commission uses a budget nomenclature that presents resources by policy
area and programme, aligning the programme areas with headings or ‘programme
clusters’ (see below), thus making it easier to assess the cost and effectiveness of
each EU policy.

[1]The principle that appropriations entered in the budget are authorised for a financial year running from 1 January to
31 December.

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2. Multiannual financial framework (MFF) (1.4.3)

Since 1988, EU expenditure has been placed in a multiannual framework, which breaks
the budget down into headings corresponding to broad policy fields, with expenditure
ceilings reflecting the main budgetary priorities for the period covered. The first
programming period lasted five years, with the length of the subsequent and current
periods being seven years. The annual budgets must respect the limits set out in the
multiannual framework.
The EU budget is subject to a strict equilibrium principle enshrined in Article 310 TFEU
and the Financial Regulation. This means in practice that the EU budget is ‘expenditure
driven’. In other words, revenues on aggregate can only increase as much as allowed
ex ante by the MFF ceilings and the size of special instruments over and above such
ceilings. In accordance with the provisions of Article 4 of the MFF Regulation, such
ceilings are subject to a nominal automatic upward adjustment of 2% per year[2].
The MFF covering the period from 2021 to 2027 provided for total commitment
appropriations of EUR 1 824.3 billion in 2018 prices, consisting of EUR 1 074.3 billion for
the MFF and EUR 750 billion for the NextGenerationEU recovery instrument (NGEU),
increased by a further EUR 11 billion as a result of programme-specific adjustments
set out in Article 5 of the MFF Regulation.
Following a legislative proposal put forward by the Commission on 20 June 2023,
Parliament and the Council reached an agreement on 6 February 2024, paving the
way for the first ever mid-term revision of the MFF. This agreement will affect the
remaining years of the ongoing MFF by allowing for the revision of the MFF ceilings,
as well as the scope and size of special instruments over and above those ceilings.
More specifically, the deal provides for EUR 21 billion (in 2024 prices) of additional
expenditure in net nominal terms, including EUR 17 billion of grants dedicated to
Ukraine through a new special instrument over and above the MFF ceilings[3]. This
increase corresponds to a 2.8% increase in maximum allowed expenditure for the
remainder of the ongoing MFF period.
All in all, despite the nominal increase of funding for expenditure, EU spending
overall will contract significantly in real terms due to the inflation surge of the
period 2021 to 2023. For the first 2.5 years of the current MFF for 2021–2027,
accumulated inflation in the EU already stands at 23.7%. As pointed out in a recent
study commissioned by Parliament, all else being equal this development is expected
to reduce the volume of the MFF as a percentage of EU gross national income by 0.96%
by the end of the period in 2027. This is well below the 1.05% of gross national income
that the MFF for 2021-2027 was expected to represent when it was adopted.
The table below provides the breakdown of the 2024 budget by policy field, as defined
under the MFF for 2021-2027.
EU budget 2024 (in millions of euros): breakdown of
commitment and payment appropriations into MFF categories

APPROPRIATIONS BY HEADING Budget 2024

[2]The same automatic adjustment applies for the purpose of implementing NGEU-specific programmes.
[3]The deal also provides for EUR 33 billion of back-to-back loans for Ukraine in the context of the newly agreed Ukraine
Facility.

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Commitments Payments
Single Market, Innovation and Digital 21 493.4 20 828.0
Cohesion. Resilience and Values 74 560.7 33 716.0
Economic, social and territorial cohesion 64 665.2 24 155.7
Resilience and Values 9 895.5 9 560.3
Natural Resources and Environment 57 338.6 54 151.4
Market related expenditure and direct
40 517.3 40 505.5
payments
Migration and Border management 3 892.7 3 249.0
Security and Defence 2 321.2 2 035.4
Neighbourhood and the World 16 230.0 15 291.2
European Public Administration 11 988.0 11 988,0
Thematic special instruments 2 221,7 1 734.4
Total appropriations 189 385.4 142 630.3

Source: European Commission. Figures expressed in November 2023 prices.

3. Flexibility and thematic special instruments
On top of expenditure programmed in order to finance the EU’s policies under
multiannual programmes, some financial resources have been reserved in the EU
budget for the purpose of responding to unexpected crises and situations. These
special flexibility and thematic instruments may be used in the event of economic
crises (e.g. EGF - the European Globalisation Adjustment Fund), natural disasters,
public health crises and humanitarian emergencies (e.g. SEAR - the Solidarity and
Emergency Aid Reserve) or other unexpected needs (e.g. the Flexibility Instrument) in
EU Member States, candidate countries or outside the EU. Such funding allows limited
exceptional financial needs to be covered.

EUROPEAN UNION RECOVERY INSTRUMENT - NEXTGENERATIONEU

Under this instrument, the Commission will mobilise EUR 750 billion at 2018 prices,
of which up to EUR 390 billion may be used for grants and up to EUR 360 billion
may be used for providing loans, on top of the long-term 2021-2027 budget, in
order to help rebuild a post-COVID-19 EU. The Commission has been empowered,
under Article 5(1) of the Own Resources Decision, to borrow funds on capital markets
on behalf of the EU. The repayment of the principal of such funds to be used for
expenditure (EUR 390 billion in 2018 prices) and the related interest due will have to
be financed by the general budget of the EU, including by sufficient proceeds from
new own resources introduced gradually from 2021. (1.4.1)
The NGEU should in particular focus on (a) restoring employment and job creation;
(b) reforms and investments to reinvigorate the potential for sustainable growth
and employment in order to strengthen cohesion among Member States and
increase their resilience; (c) measures for businesses, especially small and medium-
sized enterprises, affected by the economic impact of the COVID-19 crisis, and
strengthening sustainable growth in the EU, including direct financial investment in
enterprises; (d) measures for research and innovation in response to the COVID-19
crisis; (e) increasing the level of crisis preparedness and enabling a quick and effective

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EU response to major emergencies, including the stockpiling of essential supplies

and medical equipment, and acquiring the necessary infrastructure for rapid crisis
response; (f) measures to ensure that a just transition to a climate-neutral economy
will not be undermined by the COVID-19 crisis; (g) measures to address the impact of
the COVID-19 crisis on agriculture and rural development.
To support the Member States with investments and reforms, the new Recovery and
Resilience Facility (RRF) was agreed on 12 February 2021. The facility was initially
expected to provide up to EUR 672.5 billion (in 2018 prices) in loans and grants
available to the Member States to be implemented through the national recovery and
resilience plans[4]. The plans need to contain reforms and investments covering key
policy areas (six pillars[5]), advance the green and digital transitions and address the
country-specific recommendations of the European Semester.
In the context of the Russian invasion of Ukraine, the Commission published the
REPowerEU communication on 18 May 2022, which lays down a strategy for reducing
the EU’s dependency on Russian energy imports. According to the Commission’s
assessment, this strategy requires an additional EUR 210 billion of investment in
order to be a success. With that in mind, the Commission proposed, among other
measures[6], to amend the RRF Regulation to reshuffle up to EUR 225 billion of the
leftover loans from the RRF as well as to allocate up to 7.5% of funds available under
European Regional Development Fund, the European Social Fund Plus and Cohesion
Funds for REPowerEU purposes. Moreover, up to EUR 20 billion in 2022 prices will
be made available from auctioning allowances from the Emissions Trading System
under Directive 2003/87/EC or from transfers from the Brexit Adjustment Reserve
established by Regulation (EU) 2021/1755. These resources will fund a new chapter
of national recovery and resilience plans identifying specific measures to diversify
energy supplies and reduce dependence on fossil fuels, in the form of loans (up
to EUR 225 billion) and grants (up to EUR 75 billion). Member States requested
EUR 127.24 billion of loans in the context of revised RRPs by the deadline set in the
REPowerEU Regulation
The above-mentioned mid-term MFF review agreement notably introduces a new
funding ‘cascade mechanism’ for covering overruns related to NGEU-related interest
payments. This mechanism may mobilise as a last resort a new thematic special EU
Recovery Instrument over and above the MFF ceilings, only if the amounts already
provided under Heading 2b, in addition to decommitments, reprioritisations and
resources available under non-thematic special instruments, are not sufficient.

[4]Retrospectively, and after consideration of updated national recovery and resilience plans that take into account
REPowerEU, such amounts correspond to EUR 648 billion in 2022 prices. With the amended RRF Regulation, additional
grants under the Emissions Trading System and the Brexit Adjustment Reserve have been made available to Member States.
Therefore, the EUR 357 billion in grants is now split into EUR 338 billion in original RRF grants, EUR 17.3 billion in Emissions
Trading System grants and EUR 1.6 billion in Brexit Adjustment Reserve grants. Furthermore, Member States could request
loan support until August 2023. Of the total available envelope of EUR 385 billion, close to EUR 291 billion had been committed
by end 2023.
[5]Green transition; digital transformation; economic cohesion, productivity and competitiveness; social and territorial
cohesion; health, economic, social and institutional resilience; policies for the next generation.
[6]REPowerEU also provides new funding through the allocation of EUR 20 billion of Emissions Trading System allowances
held in the Market Stability Reserve, as well as transfers from Cohesion Funds (up to 12.5% of Member States’ allocations) and
rural development transfers (also 12.5% of their allocations).

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ROLE OF THE EUROPEAN PARLIAMENT

Parliament shares budgetary authority with the Council, and powers in this area
were among the first to be acquired by MEPs in the 1970s (1.2.5). The budgetary
powers relate to the establishment of the overall amount and distribution of annual EU
expenditure, as well as the exercise of control over the implementation of the budget.
Parliament’s Committee on Budgets is responsible for negotiations on the MFF and
the adoption of the annual budget on behalf of Parliament and represents Parliament’s
views in the negotiations with the Council. It has usually been successful in taking on
board priority increases resulting from its amendments (although not always of their
initial magnitude).
In the negotiations for the 2021-2027 MFF, Parliament notably defended and largely
secured (a) an increase of the MFF ceiling and a reinforcement of a number of flagship
programmes; (b) a commitment to introduce new EU own resources with the aim
of covering at least the costs related to the NGEU (principal and interest); (c) its
role in the implementation of the Recovery Instrument, in line with the Community
method; (d) the importance of the EU budget contribution to the achievement of the
climate and biodiversity objectives and gender equality; (e) the introduction of the
new mechanism to protect the EU budget from breaches of the principles of the rule
of law (1.4.3).
Parliament has also been systematically insisting on budgetary transparency and
proper scrutiny of all operations and instruments financed from the EU budget.
Parliament is the discharge authority (Article 319 of the TFEU) for which the
Committee on Budgetary Control prepares all the work on political scrutiny of
budgetary implementation (1.4.5). Each year, the discharge procedure reflects its
conclusions at the end of a process on the way in which the Commission and other
institutions and bodies have implemented the EU budget. It aims to verify whether
implementation was carried out in accordance with relevant rules (compliance),
including the principles of sound financial management (notably performance related
requirements).
Parliament’s Committee on Budgetary Control holds an annual meeting with the
European Investment Bank (EIB) (1.3.15) to scrutinise its financial activities, and
prepares an annual report assessing the EIB’s past performance and results.
Parliament’s Committee on Budgets and Committee on Economic and Monetary
Affairs agreed to produce an annual report assessing the EIB’s current and future
actions; they alternate as the lead committee. While considering that financial
instruments can be a valuable tool in multiplying the impact of EU funds, Parliament
has stressed that they should be implemented under strict conditions, limiting risks to
the EU budget. To that end, detailed rules for the use of financial instruments funded
or guaranteed by the EU budget have been included in the Financial Regulation.
Parliament’s Committee on Budgets and Committee on Economic and Monetary
Affairs are jointly responsible for the scrutiny of the RRF, by means of a Working Group
and bi-monthly Recovery and Resilience Dialogues with the Commission.

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1.4.3. MULTIANNUAL FINANCIAL FRAMEWORK

There have been six multiannual financial frameworks (MFFs) to date,

including 2021-2027. The Treaty of Lisbon transformed the MFF from an
interinstitutional agreement into a regulation. Established for a period of at least five
years, an MFF is there to ensure that the EU’s expenditure develops in an orderly
manner and within the limits of its own resources. It sets out provisions with which
the annual budget of the EU must comply. The MFF Regulation sets expenditure
ceilings for broad categories of spending called headings. After its initial proposals
of 2 May 2018 and in the wake of the COVID-19 outbreak, on 27 May 2020 the
Commission proposed a recovery plan (NextGenerationEU) that included revised
proposals for the MFF 2021-2027 and own resources, and the setting up of a
recovery instrument worth EUR 750 billion (in 2018 prices). The package was
adopted on 16 December 2020 following interinstitutional negotiations. In the light
of new developments, the MFF was revised in December 2022 and then again more
substantially in February 2024.

LEGAL BASIS
— Article 312 of the Treaty on the Functioning of the European Union (TFEU);
— Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down
the multiannual financial framework for the years 2021-2027;
— Council Regulation (EU) 2020/2094 of 14 December 2020 establishing a European
Union Recovery Instrument to support the recovery in the aftermath of the
COVID-19 crisis;
— Interinstitutional Agreement of 16 December 2020 between the European
Parliament, the Council of the European Union and the European Commission on
budgetary discipline, on cooperation in budgetary matters and on sound financial
management, as well as on new own resources, including a roadmap towards the
introduction of new own resources.

BACKGROUND
In the 1980s, a climate of conflict in relations between the institutions arose out of a
growing mismatch between available resources and actual budgetary requirements.
The concept of a multiannual financial perspective was developed as an attempt to
lessen conflict, enhance budgetary discipline and improve implementation through
better planning. The first interinstitutional agreement (IIA) to this end was concluded
in 1988. It contained the financial perspective for 1988-1992 (also known as the
Delors I package), which aimed to provide the resources needed for the budgetary
implementation of the Single European Act. A new IIA was agreed on 29 October 1993,
together with the financial perspective for 1993-1999 (the Delors II package), which
enabled the Structural Funds to be doubled and the own resources (1.4.1) ceiling to
be increased. The third IIA, on the financial perspective for 2000-2006, also known

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as Agenda 2000, was signed on 6 May 1999, and one of its main goals was to
secure the necessary resources to finance enlargement. The fourth IIA, covering the
period 2007-2013, was agreed on 17 May 2006.
The Treaty of Lisbon transformed the MFF from an interinstitutional agreement
into a Council regulation to be adopted unanimously, subject to the consent of the
European Parliament, under a special legislative procedure. In addition to determining
the ‘amounts of the annual ceilings on commitment appropriations by category of
expenditure and of the annual ceiling on payment appropriations’, Article 312 TFEU
states that the MFF must also ‘lay down any other provisions required for the annual
budgetary procedure to run smoothly’.
The fifth MFF, covering the period 2014-2020, was the first to see a real-term
decrease in overall amounts. One of Parliament’s preconditions for accepting it was
therefore a mandatory mid-term revision allowing for a reassessment and adjustment
of budgetary needs during the MFF period, if necessary. The agreement also secured,
inter alia, enhanced flexibility to enable full use of the amounts planned and an
understanding on the way towards a true system of own resources for the EU. A
revised MFF for 2014-2020 was adopted on 20 June 2017 with additional support
for migration-related measures, jobs and growth. The Flexibility Instrument and the
Emergency Aid Reserve were also reinforced, allowing for further funds to be shifted
between budget headings and years, in order to be able to react to unforeseen events
and new priorities.

THE 2021-2027 MULTIANNUAL FINANCIAL FRAMEWORK

On 2 May 2018, the Commission presented legislative proposals for an MFF covering
the years 2021 to 2027. The Commission’s proposal amounted to EUR 1 134.6 billion
(2018 prices) in commitment appropriations, representing 1.11% of the EU-27’s gross
national income (GNI). It included increases for border management, migration,
security, defence, development cooperation and research. Cuts were proposed in
particular for cohesion and agricultural policy. The overall architecture was to be
streamlined (from 58 to 37 expenditure programmes) and the Commission proposed
a set of special instruments outside the MFF ceilings to improve flexibility in EU
budgeting. The European Development Fund (EDF) would be integrated into the MFF.
The Commission also proposed modernising the revenue side, with the introduction
of several new categories of own resources.
Parliament adopted resolutions on the MFF for 2021-2027 on 14 March 2018 and
30 May 2018. On 14 November 2018, Parliament further outlined its negotiating
mandate, including amendments to the MFF Regulation and IIA proposals and a
complete set of figures with a breakdown by heading and by programme. It specified
that the MFF ceiling for commitments should increase from 1.0% (for the EU-28)
to 1.3% of EU GNI (for the EU-27), i.e. EUR 1 324 billion (2018 prices), an increase
of 16.7% on the Commission proposal. Allocations for the common agricultural policy
and cohesion policy should remain unchanged in real terms, while several priorities
should be further reinforced, including Horizon Europe, Erasmus+ and LIFE; a new
Child Guarantee (EUR 5.9 billion) and a new Energy Transition Fund (EUR 4.8 billion)
should be created; financing for decentralised agencies involved in migration and
border management should increase more than fourfold (to more than EUR 12 billion).

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The EU budget’s contribution to the achievement of climate objectives should be set

at a minimum of 25% of MFF expenditure for 2021-2027, be mainstreamed across
relevant policy areas, and rise to 30% no later than 2027. Mid-term revision of the MFF
should be mandatory.
On 30 November 2018 and 5 December 2019, the Council published a draft
‘negotiating box’, also comprising horizontal and sectoral issues that were normally
in the remit of expenditure programmes subject to the ordinary legislative procedure
(which was criticised by Parliament, for example, in paragraphs 14 to 16 of its
resolution of 10 October 2019). The Council was in favour of an overall MFF amount
of EUR 1 087 billion in commitment appropriations, in 2018 prices (1.07% of the EU-27
GNI), well below Parliament’s expectations.
On 10 October 2019 and 13 May 2020, Parliament updated its mandate following
the European elections and requested that the Commission submit a proposal for
an MFF contingency plan to provide a safety net to protect the beneficiaries of EU
programmes in the event that the ongoing MFF needed to be extended, given the
disagreement within the European Council.
Meanwhile, on 14 January 2020, the Commission put forward a proposal for a Just
Transition Fund as an additional element in the package of MFF proposals, as part of
the European Green Deal.
Following the COVID-19 crisis and the serious economic effects of the necessary
lockdowns, the Commission published amended proposals on 27 May 2020 for
an MFF of EUR 1 100 billion and on 28 May 2020 for an additional recovery
instrument, NextGenerationEU (NGEU), worth EUR 750 billion (in 2018 prices), with
EUR 500 billion in the form of grants and EUR 250 billion as loans. The package
involved legislative proposals for new financial instruments as well as changes to MFF
programmes already on the table. The financing of the additional package was to be
secured by borrowing on the financial markets. For this purpose, the Commission
also modified the proposal for an Own Resources Decision to enable the borrowing
of up to EUR 750 billion. Finally, the Commission package included a EUR 11.5 billion
increase in the MFF 2014-2020 commitments ceiling for the year 2020, in order to
begin mobilising support before the new MFF.
On 21 July 2020, the European Council adopted conclusions on the recovery effort
(NextGenerationEU), the 2021-2027 MFF and own resources. The recovery effort was
endorsed at EUR 750 billion for the years 2021-2023. However, the grant component
was reduced from EUR 500 to 390 billion and the loan component was increased from
EUR 250 to 360 billion. The European Council rejected the upward revision of the
MFF ceiling for the year 2020. The overall ceiling for commitments in the 2021-2027
MFF was set at EUR 1 074.3 billion. Furthermore, the conclusions stated that a regime
of conditionality to protect the budget and NGEU from breaches of the rule of law
would be introduced. A new own resource was agreed from 1 January 2021 based
on non-recycled plastic packaging waste. Work towards the introduction of other
own resources over the course of the 2021-2027 MFF was planned, to be used
for early repayment of borrowing under NGEU. The proposed legal basis of NGEU
was Article 122 TFEU, which allows the EU to establish measures appropriate to

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the economic situation with a qualified majority in the Council, without involving
Parliament in the legislative procedure.
Parliament immediately reacted to these conclusions in a resolution adopted on
23 July 2020, in which it called the creation of the recovery instrument a historic move,
but deplored the cuts made to future-oriented programmes. It insisted on targeted
increases on top of the figures proposed by the European Council and reiterated
that it would not give its consent to the MFF without an agreement on the reform of
the EU’s own resources system, with the aim of covering at least the costs related
to NGEU (principal and interest), so as to ensure its credibility and sustainability.
Parliament also demanded to be fully involved as budgetary authority in the recovery
instrument, in line with the Community method.
Trilateral talks involving Parliament, the Council and the Commission started in
August 2020 and were concluded on 10 November 2020. The Council Regulation
on the MFF 2021-2027 was adopted on 17 December 2020, following Parliament’s
consent. A new mechanism of conditionality to protect the EU budget and NGEU from
breaches of the rule of law, which was another prerequisite for Parliament’s consent,
entered into force on 1 January 2021.All 27 Member States ratified the Own Resources
Decision by 31 May 2021, enabling the EU to begin issuing debt on the capital markets
under NGEU.
Multiannual financial framework (EU-27) (EUR million, 2018 prices)

Commitment Total
2021 2022 2023 2024 2025 2026 2027
appropriations 2021-2027
1. Single market, innovation
19 712 19 666 19 133 18 633 18 518 18 646 18 473 132 781
and digital
2. Cohesion, resilience and
49 741 51 101 52 194 53 954 55 182 56 787 58 809 377 768
values
2a. Economic, social and
45 411 45 951 46 493 47 130 47 770 48 414 49 066 330 235
territorial cohesion
2b. Resilience and values 4 330 5 150 5 701 6 824 7 412 8 373 9 743 47 533
3. Natural resources and
55 242 52 214 51 489 50 617 49 719 48 932 48 161 356 374
environment
of which: market-related
expenditure and direct 38 564 38 115 37 604 36 983 36 373 35 772 35 183 258 594
payments
4. Migration and border
2 324 2 811 3 164 3 282 3 672 3 682 3 736 22 671
management
5. Security and defence 1 700 1 725 1 737 1 754 1 928 2 078 2 263 13 185
6. Neighbourhood and the
15 309 15 522 14 789 14 056 13 323 12 592 12 828 98 419
world
7. European public
10 021 10 215 10 342 10 454 10 554 10 673 10 843 73 102
administration
of which: administrative
expenditure of the 7 742 7 878 7 945 7 997 8 025 8 077 8 188 55 852
institutions

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TOTAL COMMITMENT
154 049 153 254 152 848 152 750 152 896 153 390 155 113 1 074 300
APPROPRIATIONS
TOTAL PAYMENT
156 557 154 822 149 936 149 936 149 936 149 936 149 936 1 061 058
APPROPRIATIONS

The political agreement covers not only the 2021-2027 MFF, but also the future system
of own resources and flanking measures for the new NGEU recovery instrument. In
addition to the MFF Regulation of 17 December 2020, the compromise is reflected in
an interinstitutional agreement (IIA) and a set of joint declarations.
Parliament was able to secure, in particular:
— EUR 15 billion extra compared to the July 2020 proposal, going to flagship
programmes: Horizon Europe, Erasmus+, EU4Health, InvestEU, the Border
Management and Visa Instrument, the European Border and Coast Guard Agency
(Frontex), the Neighbourhood, Development and International Cooperation
Instrument – Global Europe (NDICI-Global Europe), Humanitarian Aid, Rights and
Values, and Creative Europe;
— a legally binding roadmap for the introduction of new EU own resources;
— a progressive increase of the overall ceiling for the 2021-2027 MFF from
EUR 1 074.3 to EUR 1 085.3 billion in 2018 prices (explained below);
— a further EUR 1 billion for the Flexibility Instrument;
— a new procedural step (the ‘budgetary scrutiny procedure’) for the setting up of
future crisis mechanisms based on Article 122 TFEU, with potential appreciable
budgetary implications;
— Parliament’s involvement in the use of NGEU external assigned revenue (EAR),
a general reassessment of EAR and borrowing and lending in the next revision
of the Financial Regulation, and of arrangements for cooperation in future MFF
negotiations;
— an enhanced climate tracking methodology to reach the target of at least 30% of
MFF/NGEU expenditure to support climate objectives[1];
— a new annual biodiversity target (7.5% in 2024 and 10% in 2026 and 2027) and the
design of a methodology to measure gender expenditure;
— a reform of the collection, quality and comparability of data on beneficiaries in
order to better protect the EU budget, including NGEU expenditure.
Other components of the MFF 2021-2027 corresponding to Parliament’s priorities
include:
— integration of the EDF into the EU budget;
— overall levels of funding for agriculture and cohesion of a size comparable
to 2014-2020;
— creation of the Just Transition Fund.

[1]On 21 June 2022, the Commission published its approach to climate mainstreaming in the 2021-2027 MFF and the NGEU in
a staff working document.

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The additional EUR 15 billion includes a EUR 11 billion progressive increase, the
main source of which is a new mechanism linked to fines collected by the
EU, resulting in automatic additional allocations to the programmes concerned
in 2022-2027. The overall ceiling of the seven-year MFF will therefore incrementally
reach EUR 1 085.3 billion in 2018 prices, i.e. EUR 2 billion higher in real terms than
the equivalent 2014-2020 MFF ceiling (EUR 1 083.3 billion in 2018 prices, without the
UK, with the EDF). Complementary sources include: margins left unallocated within
the ceilings set by the European Council (EUR 2.5 billion); reflows from the ACP
Investment Facility (EDF), to the benefit of NDICI-Global Europe (EUR 1 billion); and
decommitted appropriations in the area of research, to the benefit of Horizon Europe
(EUR 0.5 billion)[2].
Under the IIA, it was agreed in 2020 that repayments and interests of recovery debt
would be financed by the EU budget under the MFF ceilings for the 2021-2027
period, ‘including by sufficient proceeds from new own resources introduced
after 2021’, without prejudice to how this matter will be addressed in future MFFs
from 2028 onwards. The express aim was to preserve EU programmes and funds.
On 22 December 2021, the Commission proposed new own resources and a targeted
amendment of the MFF Regulation (subsequently withdrawn) aimed at, inter alia,
introducing a new mechanism that would allow ceilings to automatically increase
from 2025 in order to accommodate any additional revenue yielded by new own
resources for the early repayment of NGEU debt. Parliament adopted an interim
resolution concerning this amendment on 13 September 2022.
The Commission stated that it would present a review of the functioning of the MFF
by 1 January 2024, and, as appropriate, proposals for a revision. In its communication
of 18 May 2022 on Ukraine relief and reconstruction, it recognised that the ‘unforeseen
needs created by war in Europe are well beyond the means available in the current
multiannual financial framework’. On 19 May 2022, Parliament thus requested ‘a
legislative proposal for a comprehensive MFF revision as soon as possible and no later
than the first quarter of 2023’.
As a first step, Council Regulation (EU, Euratom) 2022/2496 amended the MFF
in December 2022 as part of a package adopted by Parliament under an urgent
procedure on 24 November 2022. It extended the budgetary coverage, thus far
applicable to the loans to the Member States, to macro-financial assistance loans to
Ukraine, for the years 2023 and 2024: in case of default, the necessary amounts would
be mobilised from the ‘headroom’, above the MFF ceilings, up to the limits of the own
resources ceiling.
To set the agenda for a far more comprehensive revision, on 15 December 2022
Parliament adopted a resolution on ‘Upscaling the 2021-2027 Multiannual Financial
Framework: a resilient EU budget fit for new challenges’, setting out its key demands.
On 20 June 2023, the Commission proposed a targeted revision covering most of
these demands (six months before its review had initially been planned):
— a reserve of EUR 50 billion to deal with the war in Ukraine and its humanitarian,
economic and budgetary consequences (grants, loans and guarantees);

[2]Article 15(3) of the Financial Regulation.

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— additional funding for migration, global challenges and natural disasters –

with the ceilings of Headings 4 and 6 to be increased by EUR 2 billion and
EUR 10.5 billion respectively, and the Solidarity and Emergency Aid Reserve to
be increased by EUR 2.5 billion;
— a new European Union Recovery Instrument (EURI) over and above the MFF
ceilings, in order to address the problem linked to the repayment of EURI debt in
a context of steep acceleration of inflation and interest rates;
— a Strategic Technologies for Europe Platform (STEP) to increase Europe’s
strategic autonomy following global supply chain disruptions – with the ceilings
of Headings 1, 3 and 5 to be increased by EUR 3.5 billion, EUR 5 billion and
EUR 1.5 billion respectively, and research decommitments to be further used in
Heading 1;
— an increase of EUR 3 billion in funding for the Flexibility Instrument to create more
budgetary space for reacting to unforeseen circumstances;
— additional funding for administration (EUR 1.9 billion), raising the ceiling of
Heading 7 accordingly.
On 3 October 2023, Parliament adopted its mandate stressing that the revised
MFF must be in place by 1 January 2024. However, the European Council of
15 December 2023 ended in deadlock.
Once a political agreement was finally found, the MFF revision was published on
29 February 2024. It includes cuts to Horizon Europe (only partly offset by reusing
the last MFF research decommitments), EU4Health (mitigated by the MFF Article
5 mechanism) and the direct management of the common agricultural policy and
cohesion policy, as well as limited fresh money for STEP.
However, this is the first time that a mid-term MFF review has led to a net
increase in spending ceilings. The main positive outcomes include: EUR 50 billion
for Ukraine for 2024-2027, increased funding for migration and external action and
for the European Defence Fund (under STEP), an increase in funding for the special
instruments (Flexibility Instrument and EU Solidarity Reserve for reconstruction after
extreme weather events and natural disasters, now separate from the Emergency Aid
Reserve for emergency assistance to non-EU countries), and the establishment of
an uncapped EURI special instrument protecting programmes from significant cuts.
Some of the costs of EU joint borrowing are to be covered in the annual budgetary
procedure (the European Council set a non-binding benchmark of 50%). In order
to use the EURI special instrument for these purposes, roughly half of the costs
must be covered by special instruments or redeployments from programmes. The
latter operates in two steps: the first is the mobilisation of resources equivalent to
the amount of decommitted funds and the second is a ‘last resort’ mechanism of
additional national contributions.
Further details can be found in the Commission communication on the technical
adjustment of the MFF.
For more information on this topic, please see the website of the Committee on
Budgets.

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Alix Delasnerie
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1.4.4. IMPLEMENTATION OF THE BUDGET

The Commission is responsible for implementing the budget in cooperation with the
Member States, subject to political scrutiny by the European Parliament.

LEGAL BASIS
— Articles 290, 291, 317, 318, 319, 321, 322 and 323 of the Treaty on the Functioning
of the European Union (TFEU) and Article 179 of the Euratom Treaty;
— The Financial Regulation, i.e. Regulation (EU, Euratom) 2018/1046 of the
European Parliament and of the Council of 18 July 2018 on the financial rules
applicable to the general budget of the Union;
— The Interinstitutional Agreement (IIA) of 16 December 2020 between the
European Parliament, the Council and the Commission on budgetary discipline,
on cooperation in budgetary matters and on sound financial management, as well
as on new own resources, including a roadmap towards the introduction of new
own resources.

OBJECTIVE
The Commission is responsible for implementing the revenue and expenditure of the
budget in accordance with the Treaties and the provisions and instructions set out in
the Financial Regulation, and within the limits of the appropriations authorised (1.4.3).
The Member States cooperate with the Commission to ensure that the appropriations
are used in accordance with the principles of sound financial management, i.e.
economy, efficiency and effectiveness.

DESCRIPTION
A. Basic mechanism
The implementation of the budget involves two main operations: commitments
followed by payments. For the commitment of expenditure, a decision is taken to use
a particular sum from a specific budgetary line in order to finance a specific activity.
Once the corresponding legal commitments (e.g. contracts) have been established,
and the requested services or works have been performed, or the goods ordered have
been delivered, the expenditure is authorised and payment is made.
B. Methods of implementation
The Commission may implement the budget in one of the following ways:
— Directly (‘direct management’) by its departments, or through executive
agencies;
— Jointly with Member States (‘shared management’);

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— Indirectly (‘indirect management’), by entrusting budget implementation tasks

to entities and persons, e.g. non-EU countries, international organisations and
others.
In practice, some 70% of the budget is spent under ‘shared management’
arrangements (with Member States distributing funds and managing expenditure),
around 20% under ‘direct management’ by the Commission or its executive agencies,
and the remaining 10% under ‘indirect management’[1].
The Financial Transparency System provides information on the beneficiaries of
funds directly managed by the Commission. Each Member State is responsible for
publishing data on the beneficiaries of the funds it administers under indirect and
shared management.
Article 317 TFEU specifies that the Commission must implement the budget in
cooperation with the Member States and that the regulations made pursuant to
Article 322 TFEU must lay down the control and audit obligations of the Member
States in the implementation of the budget and the resulting responsibilities.
Furthermore, in the broader context of the implementation of EU legislation,
Articles 290 and 291 TFEU set out the provisions governing the delegated and
implementing powers conferred on the Commission and, in particular, the control
exercised over the Commission in this regard by the Member States, the Council and
the European Parliament.
Under Article 290 TFEU, a legislative act may delegate to the Commission the power
to adopt non-legislative acts to supplement ‘certain non-essential elements of the
legislative act’. Parliament and the Council have the right to revoke such delegation
of powers to the Commission, or to object to it, thereby preventing it from entering
into force.
Article 291 TFEU governs the implementing powers conferred on the Commission.
Whereas Article 291(1) stipulates that Member States are responsible for the adoption
of all measures of national law necessary to implement legally binding Union acts,
Article 291(2) provides for these acts to confer implementing powers on the
Commission or, in the case of Articles 24 and 26 of the Treaty on European Union
(TEU), on the Council, where ‘uniform conditions for implementing legally binding
Union acts are needed’. Pursuant to Article 291(3) TFEU, Parliament and the Council
lay down, by means of regulations, the rules concerning mechanisms for control of the
Commission’s exercise of implementing powers.
A new Inter-Institutional Agreement ‘on budgetary discipline, on cooperation in
budgetary matters and on sound financial management, as well as on new own
resources, including a roadmap towards the introduction of new own resources’, was
agreed by the institutions in 2020. Adopted in parallel with the Multiannual Financial
Framework (MFF) Regulation for 2021-2027, its aim is not just to ensure the continued
cooperation between institutions on budgetary matters, but also to improve the
Union’s annual budgetary procedure and, through a roadmap set out in an annex,
facilitate the introduction of new own resources for the EU under this MFF.

[1]Data for 2021-2027 provided by the Commission’s Directorate-General for Budget.

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Article 291 TFEU is supplemented by Regulation (EU) No 182/2011 of the European

Parliament and of the Council of 16 February 2011 laying down the rules and general
principles concerning mechanisms for control by Member States of the Commission’s
exercise of implementing powers. This control is exercised through committees
composed of representatives of the Member States and chaired by a representative
of the Commission. The regulation lays down two new types of procedure, applicable
depending on the scope of the act in question: under the examination procedure,
the Commission cannot adopt the measure if the committee has delivered a negative
opinion; under the advisory procedure, the Commission is obliged to take ‘utmost
account’ of the committee’s conclusions, but is not bound by the opinion.
Member States which implement the budget incorrectly are penalised under the
clearance-of-accounts procedure and in the context of eligibility checks: following
audits carried out by the Commission and the Court of Auditors, the revenue that
national governments receive from the EU budget is offset by a request for repayment
of funds unduly allocated. Decisions concerning such corrections are taken by the
Commission in accordance with the aforementioned procedures for the exercise of
implementing powers (1.4.5).
The implementation of the budget is thus regularly examined by the Court of Auditors
(1.3.12). Certain sectors have repeatedly been the subject of criticism in its reports.
C. Implementation rules
The Financial Regulation, based on Article 322 TFEU, sets out all the principles and
rules governing the implementation of the budget. It is horizontal in scope, being
applicable to all areas of expenditure and all revenue. Further rules applicable to the
implementation of the budget are to be found in sector-based regulations covering
particular EU policies.
The current Financial Regulation was adopted in July 2018 and entered into force on
2 August 2018. However, most of its provisions concerning the implementation of
the European institutions’ administrative appropriations did not enter into force until
1 January 2019[2].
The Commission’s main tool for implementing the budget, and for monitoring its
execution, is its computerised accounting system ABAC (accruals-based accounting).
The Commission has taken action to meet the highest international accounting
standards, in particular the International Public Sector Accounting Standards (IPSAS)
established by the International Federation of Accountants (IFAC). An important
aspect of budgetary implementation is compliance with EU legislation applicable
to public procurement contracts (supply, works and services 2.1.10). In addition,
the Early Detection and Exclusion System (EDES) enhances the protection of the
Union’s financial interests. It makes for the early detection of unreliable persons and
entities applying for EU funds or having entered into legal commitments with the
Commission or other institutions and provides for their exclusion from procedures
and the imposition of financial penalties on them[3].

[2]Article 282(3)(c) of the new Financial Regulation.

[3]It is governed by the Financial Regulation and is consistent with Regulation (EU) 2018/1725 of the European Parliament and
of the Council of 23 October 2018 on the protection of natural persons with regard to the processing of personal data by the
EU institutions, bodies, offices and agencies and on the free movement of such data.

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ROLE OF THE EUROPEAN PARLIAMENT

The European Parliaments interaction with the budget is twofold:
— As one of the two arms of the budgetary authority, it co-authorises the budgetary
appropriations for the coming year;
— Through the annual discharge procedure, it scrutinises the implementation of the
budget during the preceding year.
With the budget procedure, Parliament has ‘prior’ influence on the implementation of
the EU budget by means of amendments made and decisions taken in the context of
the budgetary procedure (1.2.5) to allocate funds.
If it has doubts regarding the justification of expenditure or the Commission’s ability
to implement it, Parliament may decide to make use of the budget reserve mechanism,
placing the funds requested in the reserve until the Commission provides appropriate
evidence as part of a request to transfer funds from the reserve. Both Parliament and
the Council are required to approve proposals for transfers. Appropriations cannot be
implemented until they have been transferred from the reserve to the relevant budget
line.
The discharge procedure (1.4.5) enables Parliament to control the implementation of
the current budget. Although most questions raised concern the discharge period
(usually the previous year), many of the questions put to the Commission by
Parliament’s Committee on Budgetary Control – as part of the discharge procedure
– refer to the implementation of the current budget. The discharge resolution,
which is an integral part of the discharge decision, sets out requirements and
recommendations addressed to the Commission and other bodies involved in the
implementation of the budget.
Under the Treaty of Lisbon, Parliament along with the Council, is responsible for
establishing ‘the financial rules which determine in particular the procedure to be
adopted for establishing and implementing the budget and for presenting and
auditing accounts’ (Article 322(1) TFEU).
Furthermore, in almost all policy areas, Parliament influences the implementation of
the budget through its legislative and non-legislative activities, e.g. by reports and
resolutions or simply by addressing oral or written questions to the Commission.
Over the past few years, Parliament has strengthened its political scrutiny over the
Commission by introducing instruments which make for exchanges of information on
the implementation of funds and the amount of commitments outstanding (i.e. legal
commitments which have not yet been honoured by means of payment). The latter can
become a problem if they accumulate over longer periods, and Parliament is therefore
pushing the Commission to keep these under control.
New tools are being developed to make for better monitoring of the implementation
process and to improve the value for money offered by EU programmes. For this
purpose, Parliament calls for high-quality activity statements (to be prepared by
the Commission in the context of its working documents on the preliminary draft

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general budget) and the regular submission of cost-effectiveness analyses for EU

programmes.
For more information on this topic, please see the website of the Committee on
Budgets.

Stefan Schulz
05/2024

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1.4.5. BUDGETARY CONTROL

Each EU institution and the Member States scrutinise the EU budget. The European
Court of Auditors and the European Parliament perform detailed checks at various
levels. Each year, Parliament scrutinises the implementation of the budget with a
view to granting discharge to the Commission, the other EU institutions and the
decentralised EU agencies.

LEGAL BASIS[1]
— Articles 287, 317, 318, 319, 322 and 325 of the Treaty on the Functioning of the
European Union (TFEU);
— Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the
Council of 18 July 2018 on the financial rules applicable to the general budget of
the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU)
No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU)
No 223/2014 and (EU) No 283/2014 and Decision No 541/2014/EU, and repealing
Regulation (EU, Euratom) No 966/2012 (see in particular Title II, Chapter 7, on
the principle of sound financial management and performance, and Title XIV, on
external audit and the discharge);
— Interinstitutional Agreement of 16 December 2020 between the European
Parliament, the Council of the European Union and the European Commission on
budgetary discipline, on cooperation in budgetary matters and sound financial
management, as well as on new own resources, including a roadmap towards the
introduction of new own resources, Part III;
— Rules of Procedure of the European Parliament, Title II, Chapters 6 and 7, Rules 99,
100 and 104; Title V, Chapter 2, Rule 134; Annex V.

OBJECTIVES
Ensuring the legality, accuracy and sound financial management of budget operations
and financial control systems, as well as the sound financial management of the
EU budget (economy, efficiency and effectiveness), and, with regard to the role of
the European Court of Auditors and the European Parliament, ensuring that these
objectives are achieved (performance criteria).

ACHIEVEMENTS
A. Control at national level
Initial control of revenue and expenditure is carried out to a large extent by national
authorities. They have kept their powers, particularly on traditional own resources
(1.4.1), an area in which they can carry out the procedures required to collect and
verify the amounts concerned. Budgetary control is also exercised by combating

[1]Interinstitutional negotiations on the new Financial Regulation were ongoing at the time of writing.

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irregularities and fraud (1.4.6). The operational expenditure of instruments falling

under shared management, such as the European Regional Development Fund, the
European Social Fund (which together make up the Structural Funds), as well as the
European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund
for Rural Development (EAFRD) is also scrutinised in the first instance by the Member
State authorities.
B. Control at EU level
1. Internal
In each institution, control is exercised by authorising officers and accountants and
then by the institution’s internal auditor.
2. External: by the European Court of Auditors (1.3.12)
External control is carried out by national audit institutions and by the European
Court of Auditors (ECA), which submits detailed reports each year to the budgetary
authority in accordance with Article 287 TFEU, i.e.:
— The ‘statement of assurance as to the reliability of accounts and the legality and
regularity of the underlying transactions’ (known as the DAS);
— The annual report on the implementation of the general budget, including the
budgets of all the institutions and satellite bodies;
— Specific annual reports on the EU agencies and bodies;
— Special reports on specific issues (performance and compliance audits);
— Opinions (on new or amended laws that have a significant impact on the EU’s
financial management);
— Reviews that cover policies and management topics, analyse areas or issues not
yet audited or establish a factual basis on certain topics;
— For the 2019, 2020 and 2021 financial years, the ECA published a report on the
overall performance of the EU budget. It stopped publishing this report from
the 2022 financial year.
The ECA also regularly draws up reports on borrowing and lending operations and the
European Development Fund (EDF). The last EDF covered the 2014-2020 period and
it was then integrated into the EU budget with the 2021-2027 multiannual financial
framework[2].
3. Control at political level: by the European Parliament
Within the European Parliament, the Committee on Budgetary Control is responsible
for preparing Parliament’s position and in particular for:
— Scrutinising implementation of the EU budget and of the EDF;
— Preparing the decisions on discharge, including the internal discharge procedure;
— Closing, presenting and auditing the accounts and balance sheets of the EU, its
institutions and any bodies financed by it;

[2]The 8th, 9th, 10th and 11th EDFs are still being implemented and will be reported on separately until their closure.

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— Scrutinising the financial activities of the European Investment Bank (1.3.15);

— Monitoring the cost-effectiveness of the various forms of EU funding in
connection with the implementation of EU policies;
— Appointing members of the ECA, considering its reports;
— Looking into fraud and irregularities in connection with implementation of the
EU budget, adopting measures to prevent fraud and irregularities and bring
prosecutions in such cases, and protecting the EU’s financial interests in general;
— Relations with the ECA, the European Anti-Fraud Office (OLAF) and the
European Public Prosecutor;

THE DISCHARGE PROCEDURE

Once a year, on a recommendation from the Council, Parliament grants discharge to
the Commission (and other institutions and bodies) in respect of the implementation
of the budget for the year n-2, after having examined, among other things, the annual
activity reports of the Commission’s DGs (and of other institutions), the Commission’s
annual management and performance report, the evaluation report (under Article 318
TFEU, this report focuses on the results achieved by EU programmes, taking account
of the recommendations made in earlier years by Parliament and the Council),
the ECA’s annual report and the replies from the Commission and the other
institutions to Parliament’s questions (Article 319 TFEU). This process is known
as parliamentary scrutiny of the implementation of the budget, and it is aimed at
ensuring compliance with legal and regulatory requirements, as well as sound financial
management. The Committee on Budgetary Control prepares Parliament’s stance
on the abovementioned reports. The resulting discharge decisions are accompanied
by a resolution, which contains Parliament’s observations and recommendations
concerning the implementation of the budget.
The Commission and the other institutions are required to act on the observations
made by Parliament in its discharge resolutions (Article 319(3) TFEU and Article 262
of the Financial Regulation).
As a general rule, Parliament considers the discharge reports at a part-session before
15 May (Article 260 of the Financial Regulation). Thus, other than in exceptional
circumstances, the votes on granting discharge are taken at the May part-session
or, in the event of a postponement, at the October part-session. If a proposal to
grant discharge is not carried by a majority, or if Parliament decides to postpone
its discharge decision (in the spring), Parliament informs the institutions or agencies
concerned of the reasons. The latter are required to act without delay to remove
the obstacles to a discharge decision. The Committee on Budgetary Control then
submits a fresh report, within six months, containing a fresh proposal to grant or
refuse discharge.
Although the TFEU refers only to discharge for the Commission, for reasons of
transparency and democratic oversight Parliament also grants separate discharge
to the other institutions and bodies and to each agency or similar entity (discharge
provisions for the decentralised agencies and public-private partnerships are set
out in their founding regulations). Parliament has refused to grant discharge to the

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Secretary-General of the Council since 2009, due to the Council’s lack of cooperation
in the discharge procedure. Finally, Parliament’s discharge decisions and resolutions
concerning the implementation of the EU general budget, Section I — European
Parliament, are addressed to the President of Parliament.

ROLE OF THE EUROPEAN PARLIAMENT

A. Development of powers
From 1958 to 1970, Parliament was kept informed of decisions on discharge given
by the Council to the Commission in respect of its implementation of the budget.
In 1971, it secured the power to grant discharge together with the Council. Since
1 June 1977, when the Treaty of 22 July 1975 entered into force, it alone has the
power to grant discharge, once the Council has given its recommendation. Through
its relevant committees, Parliament also holds hearings of Commissioners-designate,
and the Committee on Budgetary Control holds hearings for Members-designate of
the ECA, the candidates shortlisted for the post of Director-General of OLAF and the
members of the OLAF Supervisory Committee. These posts cannot be filled until the
hearings have been held. It should be noted, lastly, that the Director-General of OLAF
is appointed by the Commission, after consulting Parliament and the Council, and that
the members of the OLAF Supervisory Committee are appointed by common accord
by Parliament, the Council and the Commission.
B. Use of the discharge
Parliament may decide to postpone discharge where it is dissatisfied with particular
aspects of the Commission’s management of the budget. Refusing to grant discharge
can be regarded as tantamount to requiring the Commission to resign. This threat was
put into effect in December 1998: following a vote in plenary to reject the discharge
motion, a group of five independent experts was established, which reported on
accusations of fraud, mismanagement and nepotism against the Commission. The
Commissioners then resigned en bloc on 16 March 1999.
With regard to the implementation of the EU general budget by the Commission,
Parliament introduced two new features during the discharge procedures for 2011
and 2012: verification of the lawfulness and regularity of expenditure, which go hand
in hand with a performance evaluation (Article 318 TFEU); an evaluation report on
the EUʼs finances based on the results achieved, and the provision stipulating that a
discharge decision may be ‘counterbalancedʼ by reservations concerning particular
policy areas. In the discharge procedure for 2019, for the first time in four years the
ECA had to issue an adverse opinion on the legality and regularity of the expenditure
underlying the accounts. However, in its first report on the overall performance of
the EU budget, the ECA found that satisfactory procedures were in place. Parliament
upheld the ECA’s suggestion that the Commission’s information quality should be
further improved, and emphasised that result and impact indicators are better suited
for performance measurement than input and output indicators.
During the 2019 discharge procedure, Parliament also examined shortcomings in
the European Border and Coast Guard Agency’s (Frontex) budgetary and finance
management, and found the agency’s explanations insufficient. Parliament decided
to postpone Frontex’s discharge from spring 2021 to 21 October 2021, when the

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plenary voted in favour of granting the agency discharge, but put EUR 90 million –
or around 12% of the agency’s total budget – under reserve. These funds can only be
released if Frontex fulfils certain conditions, namely recruiting 20 missing fundamental
rights monitors and three deputy executive directors who must be sufficiently
qualified to fill these positions as well as setting up a mechanism for reporting
serious incidents on the EU’s external borders and a functioning fundamental rights
monitoring system. During the subsequent discharge procedure (for the 2020 budget)
Parliament postponed its decision on Frontex’s accounts because it felt that Frontex
had not met the conditions Parliament had set in October 2021. Additionally, the
agency still had to address the findings of an OLAF investigation into harassment,
misconduct and migrant pushbacks, and to report on its progress to Parliament. In
the latest discharge procedures, Parliament’s concerns have focused on the control
requirements of the Recovery and Resilience Facility, high error rates for spending
programmes, transparency in the use of EU funds (including information on final
beneficiaries), access of non-governmental organisations to EU funds and reinforcing
the control and monitoring framework for tracking EU funds in unstable or conflict
zones.
As stated above, the Commission, the other institutions and the decentralised
agencies must report on the action taken on the observations made by Parliament in
discharge resolutions. Member States must inform the Commission of the measures
they have taken in response to Parliament’s observations, and the Commission must
take them into account in its own follow-up report (Article 262 of the Financial
Regulation).
Parliament’s specialised committees also help to ensure that EU funds are spent
efficiently in the best interests of the EU taxpayer. The members of the Committee
on Budgetary Control have, on a number of occasions, held discussions with
representatives of the equivalent committees in Member State parliaments, with
national audit authorities and with representatives of customs agencies.
For more information on this topic, please see the website of the Committee on
Budgetary Control.

Diána Haase
04/2024

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1.4.6. COMBATING FRAUD AND PROTECTING

THE EU’S FINANCIAL INTERESTS

The European Union’s action in the field of budgetary control is based on two
principles: on the one hand, ensuring that the EU’s budget is properly spent and,
on the other, protecting the Union’s financial interests and combating fraud. The
European Anti-Fraud Office (OLAF) has the power to investigate fraud against the
EU budget, corruption and serious misconduct and develops anti-fraud policy. The
European Public Prosecutor’s Office (EPPO) investigates, prosecutes and brings to
justice crimes against the EU budget.

LEGAL BASIS
— Articles 310(6) and 325 of the Treaty on the Functioning of the European Union
(TFEU) on combating fraud;
— Article 287 TFEU on the European Court of Auditors;
— Article 86 TFEU on the establishment of a European Public Prosecutor’s Office;
— Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the
Council of 18 July 2018 on the financial rules applicable to the general budget of
the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU)
No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU)
No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing
Regulation (EU, Euratom) No 966/2012, Titles XIII and XIV;
— Interinstitutional Agreement of 16 December 2020 between the European
Parliament, the Council and the Commission on budgetary discipline, on
cooperation in budgetary matters and on sound financial management, as well as
on new own resources, including a roadmap towards the introduction of new own
resources, Part III;
— Rules of Procedure of the European Parliament, Title II, Chapter 6, Rules 92, 93
and 94; Title V, Chapter 1, Rule 129, Chapter 2, Rule 134 and Chapter 4, Rule 142;
Annex V.

OBJECTIVES
For citizens to be confident that their money is being used properly, the European
Union, together with its Member States, needs to protect the financial interests of the
Union. It is also important to monitor and supervise the work of OLAF and the EPPO
and to support their actions to combat fraud and irregularities in the implementation
of the EU budget.

BACKGROUND
The fight against fraud and corruption and the protection of the EU’s financial interests
was formalised with the creation of the Anti-Fraud Coordination Unit task force

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in 1988. The Convention on the protection of the European Communities’ financial

interests was introduced by the Council Act of 26 July 1995. OLAF was established
in 1999. Council Regulation (EU) 2017/1939 of 12 October 2017 established the EPPO,
which became operational in June 2021.
The following objectives are included in these and other legislative texts and
recommendations:
— Guaranteeing the protection of financial interests by means of criminal law
and administrative investigations, through an integrated policy to safeguard
taxpayers’ money and through the Commission’s anti-fraud strategy;
— Improving OLAF‘s governance and strengthening procedural safeguards in
investigations;
— Supporting the EPPO;

LEGISLATION
A. Strengthening anti-fraud mechanisms
In 2004, the first Hercule programme was introduced with the aim of protecting the
EU’s financial interests by combating irregularities, fraud and corruption affecting
the EU budget. Hercule I was succeeded by Hercule II (2007-2013) and Hercule III
(2014-2020). All Hercule programmes were administered by OLAF. In the context of
the multiannual financial framework (2021-2027), a new EU anti-fraud programme
was introduced. It is designed to replicate and improve on the Hercule III programme,
and combine it with the Anti-Fraud Information System (AFIS), and the Irregularity
Management System (IMS), both of which are managed by OLAF.
The AFIS is the technical infrastructure for fraud-related information exchanges
between the national and EU administrations and it supports the application of the law
on customs and agricultural matters by providing tools to exchange information and
assist in operational activities to detect fraud or corruption. The IMS is an electronic
data information sharing system that facilitates the reporting of irregularities in
various domains. This system is provided to the Member States and the beneficiaries
of EU funds. The IMS is part of the AFIS and is currently used by 35 countries.
Parliament has supported the Commission’s action plan to step up the fight against
tax fraud and tax evasion, proposed as part of the package for fair and simple taxation.
This would entail a strategy for improved and multidimensional cooperation and
coordination among the Member States themselves, as well as between the Member
States and the Commission. Particular attention should be paid to the development
of mechanisms for prevention, early detection and customs transit monitoring.
The new Central Electronic System of Payment Information has been operational
since 1 January 2024. It will keep records of cross-border payment information within
the EU, as well as payments to non-EU countries or territories. This will allow tax
authorities to properly monitor the correct fulfilment of VAT obligations on cross-
border business-to-consumer (B2C) supplies of goods and services. In recent years,
Parliament has urged the Commission to take action to ensure complete transparency
for all beneficiaries of EU funds in the Member States by publishing a list of all
beneficiaries on the Commission’s website. Parliament also called on the Member

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States to cooperate with the Commission and provide full and reliable information on
the beneficiaries of the EU funds that they manage.
As of 1 January 2016, the Commission introduced the Early Detection and Exclusion
System. The system is used for the protection of the EU’s financial interests by
detecting unreliable persons and entities applying for EU funds or having legal
commitments with EU institutions, bodies, offices and agencies.
Arachne is an IT tool used for data mining and data enrichment. It is used for
administrative controls and management checks in the field of the structural funds.
Arachne is able to identify project beneficiaries, contracts and contractors that might
conduct fraud, conflicts of interest and other irregularities. The proposed revision of
the Financial Regulation would make the using the system mandatory.
Directive (EU) 2017/1371 (PIF Directive) increases the level of protection of the EU
budget by harmonising the definitions, sanctions and limitation periods for criminal
offences affecting the EU’s financial interests. The Commission issues an annual
report on the protection of the EU’s financial interests (PIF report), which provides an
assessment of the year’s achievements in combating fraud and protecting the EU’s
financial interests.
B. New European anti-fraud policy and programmes
In early 2019, the European Court of Auditors stressed in its Special Report No 01/2019
entitled ‘Fighting fraud in EU spending: action needed’ that the EU must step up its
fight against fraud, and that the Commission should take a leading role in this respect
and reconsider the role and responsibility of its anti-fraud office.
In April 2019, the Commission presented a new strategy (the Commission Anti-
Fraud Strategy – CAFS) updating the anti-fraud strategy of 2011. The new strategy
aimed to improve consistency and coordination in the fight against fraud among the
Commission’s various departments. This strategy should also pave the way for more
data-driven anti-fraud measures in the coming years. Although the CAFS itself is still
valid, the action plan accompanying it was updated in 2023 to tackle the problems
related to inflation, post-pandemic recovery, climate change and the Russian war of
aggression on Ukraine. The action plan now comprises 44 actions divided over seven
chapters.
The introduction of the NextGenerationEU recovery plan led to a new operation
to protect the EU’s financial interests under the supervision of Europol. Operation
Sentinel specifically targets fraud concerning COVID-19 EU recovery funds. Launched
on 15 October 2021, the operation involves cooperation between Europol, the EPPO,
Eurojust, OLAF and 19 Member States.
A regime of conditionality on the rule of law to protect the EU budget was introduced
with the adoption of Regulation (EU, Euratom) 2020/2092. The regulation was created
to tackle ongoing violations of the principles of the rule of law. It entered into force
on 1 January 2021.

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INSTITUTIONS
A. European Anti-Fraud Office (OLAF)
OLAF functions independently of the Commission and has the power to investigate
fraud against the EU budget, corruption and serious misconduct within the European
institutions and develops anti-fraud policy for the Commission. Parliament, the
Council and the Commission signed an interinstitutional agreement on internal
investigations in 1999 to ensure that OLAF’s investigations run smoothly. Some of
those rules, which are now incorporated into the Staff Regulations of Officials of
the European Union, require staff to cooperate with OLAF, and provide a degree of
protection for officials who disclose possible fraud or corruption.
The new OLAF regulation was adopted in 2013 and amended in July 2016. The new text
makes substantial improvements, which have made OLAF more effective, efficient
and accountable, while safeguarding its investigative independence. In particular,
it provides a clearer definition of the legal framework for anti-fraud investigations.
It also includes definitions of ‘irregularity’, ‘fraud, corruption and any other illegal
activity affecting the financial interests of the Union’, and the concept of an ‘economic
operator’. It refers to the Charter of Fundamental Rights, safeguarding the right
to defence and procedural guarantees, the rights of witnesses and whistleblowers,
and the right of access to records and other relevant documentation during OLAF
investigations.
The latest version of the regulation arranges OLAF investigations in the light of the
establishment of the EPPO with a view to ensuring maximum complementarity and
enhancing the effectiveness of OLAF’s investigative functions as regards, among
other matters, on-the-spot checks, inspections, assistance for national authorities,
bank account information, the admissibility of evidence collected by OLAF, anti-fraud
coordination services and coordination activities.
B. European Public Prosecutor’s Office (EPPO)
The rules governing the creation of the EPPO are detailed in Article 86 TFEU, which
states that, ‘In order to combat crimes affecting the financial interests of the Union,
the Council, by means of regulations adopted in accordance with a special legislative
procedure, may establish a European Public Prosecutor’s Office from Eurojust.’
The regulation establishing the EPPO was adopted under the enhanced cooperation
procedure on 12 October 2017, and entered into force on 20 November 2017.
Currently, there are 22 participating countries.
The EPPO is a decentralised European Union prosecution office with exclusive
competence for investigating, prosecuting and bringing to justice crimes against the
EU budget. It has uniform investigative powers throughout the participating Member
States based on and integrated into their national law systems.
The EPPO started operations on 1 June 2021.

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ROLE OF THE EUROPEAN PARLIAMENT

Parliament is a co-legislator for the 2021-2027 EU anti-fraud programme, which was
adopted on 29 April 2021. It was also a co-legislator for the PIF Directive, which was
adopted by Parliament and the Council on 5 July 2017.
Every year Parliament examines the PIF report and comments on it by means of a
resolution. The most recent one was adopted on 18 January 2024.
Parliament’s Budgetary Control Committee holds hearings for Members-designate of
the Court of Auditors, as well as the shortlisted candidates for the post of Director-
General of OLAF. These posts cannot be filled without these parliamentary hearings.
The Director-General of OLAF is appointed by the Commission, after consultation
with Parliament and the Council, while the members of the OLAF Supervisory
Committee are appointed by agreement among Parliament, the Council and the
Commission.
Parliament and the Council also agree on the appointment of the European Chief
Prosecutor of the EPPO, the role to which Laura Codruţa Kövesi was appointed on
14 October 2019.
For more information on this topic, please see the website of the Committee on
Budgetary Control.

Alexandra Cynthia Jana Pouwels

03/2024

© This document has been prepared by the Directorate-General for Internal Policies of the Union
and the Directorate-General External Policies of the Union.
Reproduction of this document for non-commercial purposes are authorised,
provided the source is acknowledge.

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