Constitutionalising Subsidiarity in Integrated Markets: The Case of Tobacco Regulation in the European Union

• Date: 01 July 2006
• DOI: http://doi.org/10.1111/j.1468-0386.2006.00330.x
• Published date: 01 July 2006

Constitutionalising Subsidiarity in

Integrated Markets: The Case of Tobacco

Regulation in the European Union

Mattias Kumm*

Abstract: The article establishes three propositions. First, if a constitution establishes the

principles of subsidiarity and proportionality as legal principles, questions of competencies

are closely tied up with questions of regulatory policy. This means that the Treaty carves out

a powerful role for the Court of Justice to assess the jurisdictional reasonableness of market

intervention when reviewing whether the EU was legally competent to act. Second, general

scepticism about courts being able to play such a demanding role in policing jurisdictional

boundaries in federal systems are unjustif‌ied in the EU. The new procedure established in the

Constitutional Treaty, which is likely to be included in any renegotiated constitutional

settlement, involves national Parliaments and the Commission building a written record

addressing the relevant policy issues on which the court can base its review. Additionally

national courts serve as an external check on the Court of Justice, disciplining the Court of

Justice to focus on taking competencies seriously or facing the prospect of national courts

disapplying EU law on the grounds that it was enacted ultra vires. Third, even though there

are some promising points of departure in its case law, the Court of Justice has not yet

adopted a doctrinal framework that effectively operationalises the Treaty’s commitment to

subsidiarity and proportionality in the context of the common market.

I Introduction

In Tobacco Advertising1the Court of Justice struck down, for the f‌irst time2in the

history of the European Union, a European legislative act3on the grounds that the EU

* Professor of Law, NYU School of Law. I thank the Conveners and Participants of the Radcliff Workshop

at Harvard on ‘Regulatory Dynamics: The Normative Question’, and Alexander Somek, Viktor Mayer-

Schoenberger, Don Regan, and Joel Trachtman in particular, for their comments and fruitful conversa-

tions on the issues that this article discusses. I also thank Grainne de Búrca, Eleanor Fox, Barry Friedman,

and Clay Gillette for helpful discussions and/or comments.

1Case C-376/98 Germany v Parliament and Council (Tobacco Advertising).

2In Case C –84/94 of Nov. 12 1996 (Working Time) the court struck down one provision of a Directive

regulating the organisation of working time as enacted outside of the EU’s jurisdictional boundaries, while

upholding the directive generally.

3Other leading cases in which the Court of Justice precluded (non legislative) Community action included

Opinion 2/94, [1996] ECR I-1759 (holding that the European Community could not, without an amend-

ment of the treaties, accede to the European Convention of Human Rights) and Opinion 1/94 [1994] ECR

I-5267 (holding that certain aspects of the GATS as well as the TRIP Agreement do not covered by the

EU’s ‘Common Commercial Policy’ under Art 133 TEC).

European Law Journal, Vol. 12, No. 4, July 2006, pp. 503–533.

© 2006 The Author

Journal compilation © 2006 Blackwell Publishing Ltd, 9600 Garsington Road, Oxford, OX4 2DQ, UK

and 350 Main Street, Malden, MA 02148, USA

was acting outside its jurisdictional boundaries. Yet the doctrinal framework it used to

determine the limits of the EU’s power to regulate the internal market left a great many

questions open. In recent decisions such as Imperial Tobacco4and Swedish Match,5

dealing with different aspects of tobacco regulation, these issues were not resolved.

Instead, in Swedish Match in particular the Court of Justice struggles to f‌ind a way to

translate the EU’s commitments to both a functioning internal market and the principle

of subsidiarity and proportionality into a plausible legal test.

The Court of Justice’s struggles in the context of tobacco regulation provide a good

opportunity to revisit three basic questions. First, what are the legitimate purposes that

justify EU market intervention under Europe’s Commerce Clause? Second, what is the

general doctrinal framework within which the relevant range of concerns should be

addressed? What beyond the existence of a legitimate purpose needs to be shown to

prove that the EU acted within its jurisdictional boundaries? What, if anything, do the

requirements of subsidiarity and proportionality amount to in this respect? Third, what

is the appropriate institutional role of the Court of Justice in policing jurisdictional

boundaries in the EU? To what extent is the application of the relevant standards a

political question best left to the political process?

The article establishes three propositions. First, if a constitution establishes the

principles of subsidiarity and proportionality as legal principles, questions of compe-

tencies are closely tied up with questions of regulatory policy. This means that the

Treaty carves out a powerful role for the Court of Justice to assess the jurisdictional

reasonableness of market intervention when reviewing whether the EU was legally

competent to act. Second, general scepticism about courts being able to play such a

demanding role in policing jurisdictional boundaries in federal systems are unjustif‌ied

in the EU, because of some unique enabling institutional features. These features

include the new procedure established in the Constitutional Treaty that involves

national parliaments in building a written record addressing the relevant policy issues

on which the court can base its review. It also includes national courts serving as an

external check on the Court of Justice, helping the Court of Justice to focus on taking

competencies seriously or facing the prospect of national courts disapplying EU law on

the grounds that it was enacted ultra vires. Third, even though there are some promising

points of departure in its case law, the Court of Justice has not yet adopted a doctrinal

framework that effectively operationalises the Treaty’s commitment to subsidiarity and

proportionality in the context of the common market. The Court of Justice is mis-

guided to focus on ‘distortion of competition’ as a ground for regulatory intervention,

and fails to appropriately connect the proportionality requirement with its analysis of

competencies.

The following consists of three parts. Using the Court of Justice’s Tobacco Adver-

tising decision as its starting point, the f‌irst part analyses the kind of concerns that

provide a legitimate purpose—a prima facie reason—for the EU to step in and regulate

the integrated market. The removal of obstacles as a legitimate ground for intervention

is relatively uncontroversial, given explicit textual commitments in Article 95 ECT in

conjunction with Article 14 ECT. The question is whether there are additional grounds

that justify federal intervention. The Court of Justice claims that ‘distortion of com-

petition’ provides such a ground. I will argue the idea of ‘distortion of competition’

4Case C-491/01 of Dec. 10 2002.

5Case C-210/03 of Dec 14 2004.

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© 2006 The Author

504 Journal compilation © Blackwell Publishing Ltd. 2006