Essential and Non‐essential Measures: Delegation of Powers in EU Securities Regulation

• Author: Yannis V. Avgerinos
• Published date: 01 June 2002
• Date: 01 June 2002
• DOI: http://doi.org/10.1111/1468-0386.00153

Essential and Non-essential Measures:

Delegation of Powers in EU

Securities Regulation

Yannis V. Avgerinos*

Abstract: This article examines the new regulatory process in the regulation of EU

securities markets, as proposed by the Wise Men Committee and welcomed by the

Council and the Parliament. The new structure involves inter alia the creation of a

`comitology' committee and recognises two layers of legislation: essential measures that

will be enacted through the normal co-decision process on the one hand, and more detailed

technical and `non-essential' measures, which will be decided by the new comm ittee and

the Commission, on the other. It is believed that the new structure will respond to the need

for speed, eciency and ¯exibility in securities regulation. However, the starting point

for discussion and the decisive question is how one can distinguish between these two

levels of legislative measures. Although the Wise Men Committee does not give sucient

guidance on this issue, it is alleged that the success of the proposed regime will heavily

depend on the clear de®nition and distinction between essential and non-essential

measures. The theoretical exercise of this article involves an analysis of the delegation

issues arising from the proposal and the identi®cation of some potentially useful guiding

principles and criteria derived from primary and secondary Community legislation and

case law as well as from inter-institutional agreements. Its ultimate goal is a proposal for

the adoption of common principles, criteria and dividing lines at EU level.

I Introduction

The shortcomings of European securities regulation led to the ®nal Report of the

Committee of Wise Men on the Regulation of European Securities Markets in

February 2001

1

. The Report, welcomed by the Stockholm European Council,

2

European Law Journal, Vol. 8, No. 2, June 2002, pp. 269±289.

#Blackwell Publishers Ltd. 2002, 108 Cowley Road, Oxford OX4 1JK, UK

and 350 Main Street, Malden, MA 02148, USA

* LLM

(Warwick)

, PhD

(London)

, Research Fellow, British Institute of International & Comparative Law,

Emile Noe

Èl Fellow, Harvard Law School, Member of the Athens Bar. The author is most grateful to

Nigel Phipps for his guidance in writing this article. The author would also like to thank Jonathan

Herbst, Peter Snowdon, Mads Andenas, David Green, Nick Kerigan, Christopher Boyce and David

Eacott for their useful comments. This paper constitutes part of a research project supported by the

Financial Services Authority (FSA). However, the views expressed in it do not represent those of the

FSA. The usual disclaimer applies.

1

Committee of Wise Men, Final Report on the Regulation of European Securities Markets (15 February

2001) (hereinafter `Wise Men Report'). The Committee of Wise Men under the chairmanship of Mr

Lamfalussy was set up by the Council (ECOFIN) in July 2000.

2

European Council, Resolution of 23 March 2001 on more eective securities market regulation in the

European Union (OJ C 138/1 of 11 May 2001) Paragraph 3 (hereinafter `2001 Resolution').

concluded that the process of EU law making constitutes one of the main obstacles to

a single market for investment services. Therefore, it proposed a new four-level

regulatory approach to make the regulatory process of EU securities legislation

more eective, ¯exible and transparent. With regard to legislation, this approach

recognised two layers related to securities markets: a) on Level 1, basic political choices

that can be translated into broad but suciently precise framework norms and

essential measures and b) on Level 2, more detailed technical measures, in full

conformity with this framework, needed to implement the objectives pursued by

Level 1 legislation.

3

Level 1 essential measures will be enacted through the normal EU

legislative process of co-decision between the Council and the European Parliament

(EP). Level 2 implementing rules will be decided by a new high-level EU Securities

Committee (ESC)

4

on a proposal from the Commission and with the support of a new

Committee of European Securities Regulators (CESR).

5

The purpose of the distinction between Level 1 and 2 measures is the establishment

of a fast-track legislative procedure

6

responding to the need for eciency and

¯exibility. An important aim has been to achieve the objectives stated in the Report

with the lowest cost in terms of regulatory burden. Moreover, the new regulatory

structure should provide speedy implementation and be ¯exible, so that regulation

can be quickly adapted to the rapid changes driven by technology and market

developments.

7

It should be pointed out that the new fast-track legislative process will probably not

only to aect investment business but ®nancial services in general. For instance, the

Commission's proposal for a new capital adequacy framework (CAD III) is also likely

to use a similar comitology structure, although in a less evident and straightforward

manner,

8

in order to ensure that European banks and investment ®rms are able to

respond quickly to market change, to operate ¯exibly and to safeguard consistency

and proper supervision for customers and consumers. Comitology is also used in the

proposal for a Conglomerates Directive, where the Commission is to be assisted by a

Financial Conglomerates Committee.

9

It is obvious that one of the factors that will determine the success of the new

regulatory approach in securities regulation is the clear de®nition and distinction

European Law Journal Volume 8

270 #Blackwell Publishers Ltd. 2002

3

The other parts of the proposal relate to the enhanced cooperation and networking among EU securities

regulators to ensure consistent and equivalent transposition into national law of Level 1 and 2 legislation

(Level 3) and to the strengthened enforcement (Level 4).

4

The ESC was established by the Draft Commission Decision 2001/1493/EC of 6 June 2001 (hereinafter

`ESC Decision').

5

The CESR was established by the Draft Commission Decision 2001/1501/EC of 6 June 2001.

6

This should not be confused with the `fast-track procedure' within the co-decision process, as adopted by

the Council, which involves the frequent use of Regulations; see 2001 Resolution, Article 3.

7

See Wise Men Report, 20.

8

It seems likely that the future CAD III proposal will assume a more or less standard directive, where

co-decision of the whole text and the allocation of issues across both Levels 1 and 2 will be subject to

the Council and the European Parliament. However, the delegated authority for the comitology

procedure (likely to be the existing Banking Advisory Committee) will presumably have the power,

within very clear and highly circumscribed limits, to amend a great amount of details, probably

included in the Annexes.

9

European Commission, Proposal for a Directive on the supplementary supervision of credit institutions,

insurance undertakings and investment ®rms in a ®nancial conglomerate and amending Council Directives

73/239/EEC, 79/267/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC and Directives 98/78/EC and 2000/12/EC

of the European Parliament and the Council (COM(2001) 213 ®nal of 24 April 2001), Article 17

(hereinafter `Proposed Conglomerates Directive').