The UK-EU deal

  • David Cameron has announced a new deal for the UK in the EU. What does it entail?

    The package is a mixture of some useful, significant things; some trivial, symbolic things; and some things that are not particularly good ideas.

    But the upcoming referendum is not Yes or No to Cameron’s reforms — it is a vote on the much bigger question of whether Britain should walk out of the European Union. His reforms may help persuade a few more in his badly-divided party, and will reassure a significant segment of public opinion. But it is in any case in Britain’s vital interest to stay at the heart of the EU.

    What are genuinely useful are the protections for non-euro countries, the commitment to deepen the single market, the commitment that the drive to ease regulatory burdens will continue “while continuing to ensure high regulatory standards”, and the ability to take strong measures against abuse of rights, from using forged documents to sham marriages and deporting persons who are a security threat.

    Symbolic or even trivial are the interpretations of what is meant by “ever-closer union” (which confirm that it never created any legal obligation on states to integrate beyond what they explicitly agree in the treaties) and the “red card” for a majority of 55% of national parliaments (when anyway a minority, which can be as low as just 4 out of 28, of the ministers representing those same national parliaments can in any case block decisions).

    The provisions on limiting welfare benefits for internal EU migrants represent a considerable concession by other European countries. For in-work benefits, it means that employed, taxpaying workers (say, an Irishman, a Brit and a Pole), doing the same job at the same workplace, will now get different remuneration for the same work, after tax credits are taken into account, depending on their nationality. It was a problematic concession to secure, as it is a derogation from the fundamental EU principle of non-discrimination on grounds of nationality, and it meant persuading countries like Poland and Ireland that their citizens working in Britain would be disadvantaged.

    Labour can be delighted that the social chapter (enshrining workplace rights across the EU) has not been touched. This is a notable victory for Labour and the trade union movement, who warned the government off a course of action which would have triggered a race to the bottom across Europe.

  • Cameron portrait

Legal status of the proposals

The deal is in the form of a “Decision of the Heads of State or Government, meeting within the European Council”, accompanied by a number of commitments to modify existing European legislation and, potentially, to adapt the treaties themselves in due course. It will come into force if and when the UK votes to remain a member of the EU.

There is no provision in the EU treaties for a ‘decision’ of this kind. It will therefore be registered with the UN as an intergovernmental agreement in international law. This avoids the need to change the EU treaties. However, some elements, notably relating to the social benefits, will in due course require modification of European legislation, and therefore approval by the European Parliament. The latter can, legally, reject it, but in practice is unlikely to do so (as confirmed by leaders of the main party groups in the Parliament).

Protecting non-eurozone countries

The Decision specifies that measures relating to Economic and Monetary Union will be voluntary for non-euro countries (but non-euro countries accept the need for further eurozone integration). It requires the Union to ensure the equality of all Member States as well as the level playing field and the integrity of the single market.

Several measures will protect non-euro countries:

  • Citizens and businesses cannot be discriminated against on the basis of the currency of their home country. Legal acts must not discriminate between countries or introduce barriers to trade.
  • Only eurozone countries and those that have opted into Banking Union will be subject to supervision by the European Central Bank.
  • Taxpayers in non-euro countries cannot be liable for bailouts or other emergency measures aimed at securing the financial stability of the Eurozone. If the EU budget is used in such cases, non-euro member states will have to be reimbursed for their share.
  • The supervision of the financial system in non-euro countries is for their own national authorities (without prejudice to those areas where the financial stability of the whole EU is threatened, or existing EU powers).
  • The informal meetings of eurozone finance ministers must be subordinate to the full EU Council meetings of all 28 member states, and must respect the overall power of the Council as a whole. Binding decisions must be taken in the Council, not by the meeting of eurozone ministers. All members of Council may participate in its deliberations, even where not all members have the right to vote.

This section of the Decision is accompanied by a draft decision to be adopted by the (ordinary) Council (of ministers). It specifies that, whenever a piece of euro-specific or banking union legislation is discussed in Council, any non-euro country can oppose the adoption of such an act. In that case, discussions must continue and ministers have to do “all in [their] power” to address the concerns raised. Any member state may also request that an issue be discussed by the European Council (summit). However, there is no veto for single countries and legal deadlines must be respected.

Competitiveness

The decision specifies that the EU must enhance competitiveness and strengthen the internal market as well as take “concrete steps towards better regulation” — lowering burdens on economic operators, especially SMEs, and repealing unnecessary legislation, “while continuing to ensure high standards of consumer, employee, health, and environmental protection”. The Union will pursue an “active and ambitious trade policy”.

This is accompanied by a Declaration of Competitiveness setting out further details, such as better use of impact assessment and ex-post evaluation, and building on the REFIT programme (of re-visiting all existing EU legislation to see if it can be simplified, repealed or improved). Reference is made to the recent inter-institutional agreement of the Parliament, the Council and the Commission on better lawmaking.

Sovereignty

It is “recognised that the UK … is not committed to further political integration into the European Union” and this will be reaffirmed in the treaties at the time of their next revision.

It is clarified that the reference to “ever-closer union among the peoples of Europe” in the treaties does not offer a legal basis to extend EU competence. Formal changes in competence can only happen through treaty change. There is nothing to prevent some EU countries from integrating more without this applying to others.

The principle of subsidiarity is restated, with an explicit mention of the fact that “reasoned opinions” issued by national parliaments must be taken into account as part of EU decision-making. If reasoned opinions opposing a legislative proposal are submitted within 12 weeks by 55% of national parliaments, then “Council will discontinue consideration of the [proposal], unless it is amended to accommodate the concerns expressed”. This is clearly a weak point (more than 50% needed to reject), but a theoretical one — after all, even a small minority of ministers, representing those same national parliaments, have always been able to block proposals in Council.

It is specified that rights of member states under the Protocols annexed to the treaties have equal status to the treaties themselves. Protocols 21 (and 22) confirming the UK (and Danish) opt-in/opt-out arrangements for police and justice cooperation are mentioned specifically in this regard.

There is also a reference to Article 4(2), which specifies that national security is a matter for individual countries (while recognising the benefits of collective action).

An accompanying Declaration by the Commission undertakes to review all existing legislation to ensure that it complies with subsidiarity.

Social benefits and free movement

There is recognition that, while free movement of workers (the earlier draft said “people”) is an essential part of the EU, differences between social security systems of different member states, “which Union law coordinates but does not harmonise”, may in itself attract workers to certain member states (the earlier draft had added “without this being a natural consequence of a well-functioning market”, but this is now dropped). It is therefore “legitimate to take this situation into account” and provide for “measures limiting the flow of workers of such a scale that they have negative effects both for the Member State of origin and for the Member State of destination”.

This is dealt with in two ways: interpreting current EU rules, and providing for changing existing legislation.

On the former, the Decision:

  • states that “Member States have the right to define the fundamental principles of their social security systems and enjoy a broad margin of discretion to define and implement their social and employment policy, including setting the conditions for access to welfare benefits”.
  • specifies that non-discrimination on ground of nationality in matters of employment may be subject to limitations on grounds of public policy, public security, or public health. Furthermore, free movement of workers may be restricted “if overriding reasons of public interest make it necessary” (such as for encouraging recruitment, reducing unemployment, protecting vulnerable workers, averting the risk of seriously undermining the sustainability of social security systems), provided the measures are “proportionate to the legitimate aim pursued”.
  • says that conditions may be imposed to in relation to certain benefits to ensure that there is a real and effective degree of connection between the person concerned and the labour market of the host country.
  • recalls that free movement of citizens is already subject to limitations and conditions, and people who are not working have to have enough resources so that they and their family do not become a burden on the country they have moved to. Member states can refuse to give benefits to people who have only moved there in order to claim social assistance, and do not have enough resources to claim right of residence. Member states can also refuse benefits to people who do not have a right of residence, or whose right of residence is only linked to their job search — this can include benefits designed to cover minimum subsistence costs, even if those benefits are supposed to help people access the labour market.
  • says that people enjoying the right of freedom of movement have to abide by the laws of the host country. Member states can take action to prevent abuse or fraud, and specifically can tackle “marriages of convenience” where people marry third-country nationals in order to regularise an unlawful stay in a member state or to bypass national immigration rules. Host countries may also take restrictive measures against individual people if they are believed to represent a genuine and serious threat to public policy or security — the threat doesn’t have to be imminent, and there doesn’t even have to be a previous criminal conviction; the member state can just take into account past behaviour.

On the latter, the Commission undertakes to put forward proposals (which will require approval from the Council and the European Parliament):

  • amending the Regulation on the Coordination of Social Security Systems, to allow child benefit payments to be indexed to the country where the child resides, if that is a different country to the one where the parent is based.
  • amending the Regulation on Freedom of Movement for Workers in the Union to provide for an “alert and safeguard mechanism” in order to respond to situations where there is an inflow of workers to one particular member state “of an exceptional magnitude over an extended period of time”, including where this is “as a result of past policies following previous EU enlargements” (an allusion to the UK not having availed itself of the transition period to postpone free movement after the 2004 enlargement). This mechanism would allow a member country to notify the Commission and Council that essential aspects of its social security system, employment market or public services were under excessive pressure. The Commission and Council could then authorise that country to restrict access to non-contributory in-work benefits for EU workers for up to four years. The limited access has to be graduated — nothing at all to start with, but increasing access to benefits over the four years to reflect a growing connection with their host country. This authorisation would be time-limited to 7 years.

An accompanying Declaration by the Commission says that it believes that the UK is already in a situation that would justify the use of the mechanism — and so could be expected to obtain approval as soon as the necessary changes to the legislation are made.

This is also accompanied by a Declaration on the abuse of the right of free movement in which the Commission undertakes to adopt a new proposal to complement the existing Directive free movement. This new proposal would exclude two kinds of people from the right to free movement:

  • people who come from non-EU countries and had no prior lawful residence in the EU before marrying an EU citizen;
  • people who only marry an EU citizen after that EU citizen has established residence in another member state.

Such cases will be entirely subject to national immigration laws.

The Declaration also clarifies that member states can address abuses of these rules, by restricting freedom of movement for non-EU nationals who have married an EU citizen living in another EU country, who then returns to their own country in order to avoid these new rules. The Declaration also clarifies that “marriage of convenience” also covers a marriage which is only maintained in order to allow a non-EU national the right to remain in an EU country. Finally, the Declaration reiterates that member states can stop people coming to their country if they pose a serious threat to public policy or security — and says that those terms will be clarified in future.

This whole section on benefits has been the one that caused the most controversy. It challenges the principle of non-discrimination on ground of nationality laid down in the treaty.

Restricting out-of-work benefits is one thing — and recent case-law at the European Court has made it clear that member countries are entitled to refuse to grant assistance to anyone coming to their country simply to claim benefits, not to work (the so-called benefit tourists). But in-work benefits, not least tax credits and child benefits for employed (and therefore taxpaying) EU migrants, is another matter.

And, of course, all the other countries know that this issue is a contrived one: EU migrants in Britain pay overall far more in taxes than they take out in benefits and services. The subject didn’t feature in Cameron’s initial “Bloomberg” speech setting out his intentions to reform the EU.

This, along with the guarantees for non-euro countries, must be seen as a major concession.

More on the UK referendum

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