Abstract
The European Union is one of the best examples of regional integration frameworks in the world. In the current essay, the author examined this organisation from the perspective of the European Court of Justice. The legal institution is outlined as an example of how neo-institutionalism can improve and accelerate the process of integration. Two policies formulated and implemented by the European Union were examined with respect to their compatibility with laws from individual states. The European Court of Justice has adjudicated on disputes relating to environmental and social policies associated with the EU. The rulings made in these disputes helped create a new policy for the union. To this end, the court of justice was analysed on the basis of neo-institutionalism in relation to regional integration.
Introduction
History of the European Court of Justice
The European Court of Justice (ECJ) is well understood against the background of the European Union. The desire to come up with a judicial institution to address disputes relating to the coming together of the European states was first developed in the aftermath of the Second World War (Rosas 2013). The establishment of such a monumental institution is associated with the existence of other equally reputable organisations like the Supreme Courts established in various countries. The motivation behind the formation of ECJ notwithstanding, it is noted that justice is a universal requirement for the existence of any civilised society. The ECJ acts as the court of last resort with respect to the various disagreements reported among the European Union’s member states.
In Europe, justice is seen to be dispensed only in a court that has the requisite legal competencies. As such, judicial institutions in this region are required to meet a high threshold for them to be acceptable. According to Rosas (2013), the establishment of the ECJ is termed by many scholars as one of the major legal revolutions in history. Europe is an expansive continent. In light of this, the court appeared to set a precedent in the adjudication of cases involving parties drawn from different member states. The court derives its ‘universal court of appeal’ status from the papal courts of the Middle Ages. The EU law brings about the need to transcend beyond nationalism to what is envisioned as supranationalism. As such, the court has to operate as an overseer of legal justice in all the member states.
The judicial agency has evolved significantly over time. It has undergone a number of turbulent scenarios, some of which threatened its existence. However, as is the norm with other courts of law around the world, ECJ relies mostly on precedents to adjudicate on disputes brought before it. According to Arnull (2006), the court is a key component of the European Union. It plays a very critical role with respect to the enactment of laws that foster harmony within the regional bloc. The exact role of ECJ with regards to integration is highlighted more in this essay.
European Union: The Integration Process
In the current essay, the author analyses the amalgamation process from the perspective of a region with countries keen on forging a common interest. Rosas (2013) is of the view that regional integration is the process that brings together a group of countries interested in fostering economic, political, and social cooperation. The process is often enhanced by the setting up of certain regulatory frameworks and institutions meant to realise the common goal. According to Chryssochoou (2001), the assimilation process is brought about by the need to foster economic and political unity. It relies on decision-making initiatives at the government level of the parties involved.
Regional integration is an age-old initiative where member states have established common grounds to promote cohesion and peaceful coexistence. Wasserfallen (2010) is of the opinion that the process is necessitated by increased activities on the economic front. Consequently, regional blocs are formed with the objective of enhancing the movement of goods and persons and reducing trade barriers among the countries.
The European Union is a classic illustration of how the assimilation process takes place. Rosas (2013) holds the view that the integration relies on the theory of organisation. To this end, various theoretical frameworks are outlined when discussion the formation and functioning of economic entities. The theories are formulated with the objective of explaining the assimilation process in a detailed fashion. For instance, theories like functionalism, institutionalism, and law are outlined in integration debates to support the importance of regional assimilation.
The supra-nationalism associated with regional integration takes a long time to realise. According to Rosas (2013), the amalgamation process requires policies, which rely on the institutions put in place. The ECJ plays an integral role in adjudicating on cases that can enhance the integration process.
How the European Court of Justice Shapes Policy
For many years now, the European Union has acted as a model for integration in the world. The success of this organisation is attributed to the various policy frameworks formulated by the stakeholders. According to Wasserfallen (2010), the growth of the EU can be explained by member states’ adherence to the constitutional frameworks put in place. The European court is seen as one of the agencies that enable parties to resolve disputes with respect to the implementation of EU policies.
The ECJ enhances policy through its judicial authority. Davis (2005) argues that policymaking is realised through legislation. There are a number of cases adjudicated by the ECJ and which enhance the legislation of policy. A case in point is Luxembourg’s tax measures. The court settled this case and found that Luxembourg contravened the spirit of the freedom of movement (Kleinman 2002). In this regard, the ECJ enhances policymaking by interpreting the laws formed by the legislative arm of the European Union.
The court ensures that any inconsistencies are addressed, and all member states can adopt a uniform policy with respect to the establishment of businesses. Similarly, the EU has made it possible for people to traverse the region without having to pay additional taxes (Kleinman 2002). The ECJ adjudicates cases where some members try to impede the movement of goods and people across their borders. To this end, the court promotes adherence to these policies.
The adjudication of legal battles and interpretation of laws in relation to the existence of the European Union falls under the ambit of the ECJ. As already mentioned, the integration process relies on, among others, the theory of law. In light of this, the ECJ uses its powers to ensure that EU policies are adhered to by the members. Davis (2005) is of the view that the supreme status of the court enhances the legitimacy of its decisions among the nations that are part of it. Consequently, such decisions are seen as policy frameworks since they cannot be challenged by any of the parties. Examples include the taxation laws in the UK. The laws had to be changed to conform to the EU policies on the business establishment.
Theoretical Framework
Integration through Law
Integration of a regional bloc has significant political and social impacts on the parties involved. As such, it is important to analyse the legal frameworks behind the process. Such scholars, as Wasserfallen (2010) support the idea of a legal structure through which the integration process is promoted. The formulation of this theoretical framework is based on the idea that regional integration cannot be discussed in the absence of constitutionalism. The integration of the European Union is an example of a scenario where constitutionalism plays a key role in the formation of regional blocs.
As already mentioned, integration based on a legal theoretical framework is well understood from the perspective of a need for constitutionalism. Wasserfallen (2010) argues that such a theory highlights the legislative and adjudicative aspects of the law. A good example of this is observed in the EU where ECJ is established with the aim to enhance constitutionalism in the region.
The process of integration envisages the creation of supra-nationalist ideas. The theory enhances the integration process through legislative initiatives. The ECJ relies on the law to enhance these initiatives. A study by Cormac (and cited in Wasserfallen 2010) suggest that the law can be observed as both a toll and an object. Both of these elements enhance integration. Jurisprudence surrounding the subject brings to the fore aspects of federalism and comparative politics in the region. To this end, the law is seen as an avenue through which differences among member states are resolved amicably.
The ECJ addresses constitutional conflicts and pluralism among the member nations. Based on this theory, it is apparent that regional organisations require a sound legal system that will enhance the resolution of the various disputes that may arise during or after the integration process. The European court of justice makes use of the law to ensure that the policies developed by the EU are not violated.
Neo-Functionalism
The theory is derived from the larger framework of regional integration. According to Chryssochoou (2001), this model is seen as a build-up of the theory of functionalism, which was first advanced by Ernst B. Haas. The premise of regional integration promotes the said assimilation by emphasising on the roles of the specific agencies affiliated to a regional bloc. Functionalism assumes that regional integration is brought about by the need for development. The theory further postulates that the states forming regional entities have ‘internally functional’ institutions. However, neo-functionalism looks at the issue from a different perspective.
The force behind neo-functionalism is the idea of a new political community. Haas (as cited in Wallace, Wallace & Pollack 2005) assumes that regional integration intends to bring about the growth of a community with common interests. To this end, neo-functionalism disagrees with the notion that individual states can act as centres of different interests. The concept brings all the functions of the regional bloc into one centre.
The coming together of the European nations (as seen in their participation in the EU) is an example of the workings of the theory of regional integration. Wallace et al. (2005) argue that European harmony was fostered with the intention of promoting peace. Neo-functionalism was used to achieve the said objective. The divisions in Europe were driven by nationalist sentiments. However, neo-functionalism created the vision of a central supranational state. As such, the varying sentiments of nationalism are quelled.
Neo-functionalism helps to promote regional integration through three main mechanisms. The positive spillover is one of these strategies. It entails the need to have uniform policy measures with respect to the said integration (Wallace et al. 2005). The transfer of domestic alliances is another mechanism. According to Chryssochoou (2001), this element helps the nations to discard nationalism and enjoy the benefits of a supranational bloc. The technical automaticity, as seen from the perspective of neo-functionalism, is an ideal framework that should be used to advance the integration policy in the EU. The continued assimilation is supported by the strength of the individual supranational institutions.
Neo-Institutionalism
Neo-institutionalism, just like neo-functionalism, is developed from the theory of regional integration. According to Davis (2005), the theoretical framework was first advanced by John Meyer and Brian Rowan around 1977. Based on this model, it is assumed that organisational structures are shaped through knowledge, rational myths, and institutional forces. Davis (2005) explains that organisations are derived from political and social parameters. The implication is that the institutional framework of a given entity is developed on the basis of the ‘culture’ of such social and political parameters.
The element of institutionalisation is closely related to social stability. According to Jepperson (as cited in Davis 2005), this aspect is described on the basis of the ability of a society to incorporate its cultures into a given organisational structure. However, historical accounts of institutionalisation suggest that such factors are taken for granted. The result is the failure to realise the tenets of the organisational theory.
The need for regional integration and realisation of the organisational theory enhances the process of institutionalisation. Davis (2005) argues that for integration to work, institutionalism must be supported by specific mechanisms. In a study, DiMaggio and Powell (cited in Davis 2005) found that institutionalism is enhanced by a number of factors. The elements include political coercion, professional input, and the need to stop taking things for granted. Institutionalism becomes beneficial when these factors come together to realise integration.
The European Court of Justice and Regional Assimilation: Policy Fields
As already indicated in this paper, the ECJ plays a key role in the advancement of specific policies within the EU. According to Arnull (2006), the integration of any regional body is characterised by legal glitches. The court sets out policy by referring to precedents used to address the legal hurdles. Examples of such policy fields ranging from economic and political differences to social and environmental conundrums. In this section, social and environmental policies are compared.
Social Policy
Societies are characterised by the existence of a number of parameters that make up the social policy. Marriage, security, and healthcare are some of the social issues whose policies are framed under the auspices of the European Union. However, the guidelines vary between the member states. According to Arnull (2006), different countries in the EU have varying laws touching on social affairs. Consequently, there is a need to harmonise these legislations. The ECJ appears to be the ideal institution through which such harmony can be established. The reason for this involves the kind of cases that are heard and determined by this appellate court. The State of the Netherlands v. Ann Florence Reed, C-59/85 case is one such example.
The dispute at the heart of this case was the freedoms of unmarried partners with regards to their respective rights to residency. The dispute revolved around the definition of certain terms associated with a marital relationship (Wallace et al. 2005). According to Wallace et al. (2005), the parties failed to agree on the use of the term ‘spouse’. Article 10 of Regulation no. 1612/68, a spouse was regarded as a partner in a relationship brought about by marriage. The implication of this law was that the residency of an individual who does not fit the description of a spouse would be disregarded.
The reason why this case stands out is the fact that member states were invoking their domestic laws touching on social affairs. Wallace et al. (2005) opine that social development is unique in the different member states of the EU. Based on this argument, it is obvious that countries interpret legal matters based on their own social development process. The ECJ delivered a ruling to the effect that countries will have to make such interpretations based on the social progression of the EU.
The formation of the EU created a borderless region. With this development, citizens from the member states were allowed to move and settle freely within the region. However, residency is limited under some circumstances. According to Wallace et al. (2005), the social policies of the EU prohibit any form of discrimination against individuals residing in the member nations. To this end, the ECJ gave a ruling to the effect that a caveat on marital discrimination was prohibited. The results affected the social policy of marriage in the region.
Environmental Policy of the EU
The European Court of Justice, as already mentioned in this paper, impacts significantly on socio-political and economic policies used within the EU. According to Arnull (2006), the ECJ has delivered many rulings related to environmental policies. Most of these decisions made by this judicial body have a direct impact on the actual policies used in the EU. The supremacy of the court allows its rulings to have a bearing on the policy in question. The cases brought to this court allow it to interrogate a number of issues touching on environmental policies. For instance, some of the cases presented seek to address the rights of individual member states, cohesion in the legislative process, and the balance between the economy and the environment.
The cases brought before the ECJ encourage discussions on matters touching on environmental policy. Kleinman (2002) opines that given its superiority, the court has the ability to establish precedents. To this end, the various environmental cases determined by the judges are based on the need for precedents to allow for policy formulation. That notwithstanding, the locus of adjudication and interpretation of environmental matters is stipulated in Article 267 of the European Commission Treaty (Kapsis 2013). The article contains reference and infringement procedures as they affect environmental policies in the EU.
Cases relating to the reference procedures primarily seek to ascertain the litigants. In most instances, the EU treaty allows for various litigants to be incorporated into a legal suit. Arnull (2006) argues that the element enhances the legitimacy of the decisions arrived at in a ruling by the court. An example of a legal decision involving a reference procedure is Handelskwekerij G.J. Bier B.V. v. Mines DE Potasses d’Alsace S.A. (Wasserfallen 2010). The case was brought before the court as an appeal from a dispute that emanated from the Court of Appeal sitting at The Hague.
The dispute in Handelskwekerij G.J. Bier B.V. v. Mines DE Potasses d’Alsace S.A. involved the wording of “… the place where a harmful event occurs…” (Wasserfallen 2010, p. 1135). One side of the argument held that the phrase refers to the location of a hazardous event. Another interpretation views the statement as an indication of the place where hazardous occurrences brought about the damage. Wasserfallen (2010) illustrates that the defendant was accused of depositing 10000 tonnes of harmful chemicals into the River Rhine. The consequence was high salinity levels.
The plaintiff in the case was affected by the increased levels of salt content in the water. According to Wasserfallen (2010), the nursery was based in the Netherlands. Owing to the high levels of salt in the water, Handelskwekerij incurred additional expenses. The defendants argued that The Hague based court had no jurisdiction to determine the case. The lack of jurisdiction was brought about by the inability of the judiciary to interpret the location of the hazardous incident. Consequently, an interpretation from the ECJ was sought.
The plaintiff was a French-based company, while the defendant was from Germany. The court ruled that a plaintiff has the right to select the jurisdiction within which a given suit is to be heard and determined (Kapsis 2013). Such situations arise when two states disagree on the ‘wrongfulness’ of a deed and the location where the offence took place. Based on this ruling, the jurisdiction within which similar suits can be heard was expanded. It was seen as an improvement on the environmental policies of the EU, given that other members could now file a suit in any country when they are aggrieved.
Analysis of the Policies
In the two case studies above, the role of ECJ was analysed in relation to its adjudication and interpretation roles. The social policy limiting residency for unmarried partners is an example of discrimination. According to Kapsis (2013), regional integration aims at phasing out such elements of discrimination. Non-discrimination is the best way of attaining a supra-nationalist society. To this end, the ruling made by the ECJ is seen as a promotion of social policy in the EU. On its part, the environmental policy illustrated the ambiguous nature of the legal elements of a regional bloc. The inability to determine the location of a hazardous occurrence creates a scenario where companies can escape punishment for causing intentional harm to the environment. The ruling had significant impacts on the environmental policy of the union.
Case Studies of Taxation Decisions made by the European Court and their Impacts on Integration
In the introduction section, the role of the European Court of Justice was analysed. The analysis was carried out with respect to regional integration, specifically in the European Union. Malherbe et al. (2011) suggest that economic growth acts as a catalyst for regional integration. Consequently, the element of taxation becomes a vital subject of study in evaluating the role of a court of justice. With regards to the European Union, the ECJ has made several rulings on international taxation laws. According to Malherbe et al. (2011), taxation of individuals and companies is seen as a model through which such international practices can be evaluated in the context of regional blocs. The case studies can be used in various jurisdictions around the world to advance the idea of regional integration.
Taxation of Individuals
In the European Union, taxation of individuals is a policy that has been developed to cover a wide array of issues. According to Kleinman (2002), this fiscal practice is regarded as a right to be enjoyed by individuals. As such, citizens from member states are entitled to certain privileges based on these rights. Some of the benefits linked to taxation include pension, property transfer, and income from cross border activities. However, there are instances where such rights have been violated. Under such circumstances, the role of the ECJ is made evident when adjudicating on such disputes.
Transfer of residence
In the EU, individuals from member states enjoy the privilege of moving across borders with minimal impediments. Discrimination on the basis of nationality is discouraged. Kleinman (2002) indicates that non-citizenship in a given member state can be treated as grounds for irregular taxation. Malherbe et al. (2011) cite a case where Luxembourg appeared to violate the principle of equal treatment as envisioned under the European Union laws. The case in reference is C-385/01, de Groot v. Staatssecretaris van Financien.
The legal battle was based on a taxation provision by Luxembourg, which appeared to be inconsistent with EU laws. According to Malherbe et al. (2011), the laws in Luxembourg stated that once an individual transferred their residence to the country, excess income tax will be withheld by the national taxation authorities. However, the EU laws on the free movement of workers prohibit attempts by member states to inhibit such mobility. Article 39 of the EU laws on taxation (as cited in Malherbe et al. 2011) promotes equal treatment of individuals in terms of remuneration. The law renders ineffective any taxation measures that attempt to inhibit or curtail such equality.
With respect to the said case, the European Court of Justice carried out its mandate of interpretation and adjudication within the law. According to Malmberg (2010), Luxembourg’s taxation law was found to contradict EU regulations. The laws stipulate that “provisions which prevent or deter a national of a member state from leaving his state of origin to exercise his right to freedom of movement constitute an obstacle to that freedom” (Malmberg 2010, p. 23). The case was settled on the basis of an earlier precedent. The reference ruling established that withholding tax refunds amounts to infringements on the rights of employees.
Every legal framework limits the extent to which specific freedoms can be exercised. Kleinman (2002) argues that EU laws on taxation do not guarantee neutrality. The idea is developed from the notion that certain countries may have varying taxation brackets. An ambiguous scenario presents itself in cases where an individual moves from a country with progressive taxation to one where similar amounts are placed in different brackets. When such an individual is taxed, instances of inconsistencies with regards to their rights of movement may appear. According to Malherbe et al. (2011), the discrepancies may occur when there are unjustified obstacles or discriminations that hinder the free movement of persons within the EU.
Taxation of companies
The legal provisions of the EU constitution highlight the freedom of companies to establish branches in different states without any form of fiscal discrimination. Malherbe et al. (2011) point out that taxation disputes arise in cases where companies are denied the right to choose their preferred form of establishment within the member states. Other factors that characterise cases brought before ECJ include instances associated with losses and consolidation. In both cases, the taxation framework varies from one area to the other. Consequently, in situations where such laws are seen as inconsistent with the EU provisions, the ECJ is mandated to intervene.
The Treaty on the Functioning of the European Union (TFEU) allows an economic operator in the EU to establish a business within the member states. According to Kapsis (2013), the ECJ has settled disputes based on the tax treatment of permanent establishments of EU companies. Malherbe et al. (2011) cite case 270/83 of Avoir Fiscal where shareholder tax credit was withheld for the subsidiaries of this company based in other member nations. The dispute was based on the fact that the practice encourages the discrimination of companies considered as a non-resident to a particular country.
One of the most common scenarios of discrimination arises in situations relating to the procedural rules of company establishment. Malherbe et al. (2011) make reference to case 330/91, where Commerzbank sought interpretations touching on the terms of tax refunds. The case was based on the laws of the United Kingdom, which granted refunds to companies that were considered to be fiscal residents. Given that Commerzbank was regarded as a non-resident entity, such refunds were not forthcoming. The court found that the UK law was discriminatory and inconsistent with the freedom of establishment sought out in the TFEU.
As already indicated in this paper, freedom of establishment is hindered in cases where companies are faced with the need for loss compensation. According to Malherbe et al. (2011), existing fiscal laws among member states are impediments when it comes to the aggregation of incomes and losses for taxation purposes. Malherbe et al. (2011) point out that there are countries within the EU, where reductions on tax based on losses vary based on the residency of a particular company. Possible scenarios include cases where losses are experienced in companies that have subsidiaries or branches in other states.
The most notable case is that of AMID v. Belgian State. According to Malherbe et al. (2011), the legal dispute 141/99 involved a tax disagreement where a Luxembourg company based in Belgium incurred losses and needed to compensate its members. However, once the compensation was effected, the Belgian government double-taxed the Luxembourg profits in a bid to avoid incurring their side of the losses. The adjudicative role of the ECJ, as illustrated, makes it possible to safeguard the gains made through the various policies in the EU.
The Impacts of the European Court’s Cases on Integration
The adjudicating role of the European Court of Justice has enhanced integration in the EU. The assimilation is evident in the cases outlined. Malherbe et al. (2011) argue that regional integration is a key element of globalisation. Separately, Kapsis (2013) holds that globalisation is inevitable. As such, regional integration should be supported.
Based on the cases analysed in this section, it appears that the ECJ relies on the theory of law to promote integration. Globalisation depends on trade. The dependency explains the need for a uniform taxation regime. Through its rulings, the ECJ has highlighted the importance of exercising individual rights in the absence of discrimination based on links to a particular member state (Malherbe et al. 2011). Regional integration promotes supra-nationalism. The move is an attempt to phase out individual nationalism among countries. Separately, the freedoms of movement and establishment outline the supra-nationalism idea promoted by the EU. Member states that enact laws that inconsistent with those of the union are seen as deterrents to the integration.
The ECJ plays its role as an interpreter of the law to address legal ambiguities that hinder the actualisation of the freedoms enshrined under TFEU. Malherbe et al. (2011) opine that ECJ has helped to shape policy in the EU. The scenario is observed in cases where certain EU member states are forced to change some of their laws to achieve consistency and harmony. A good example is in the UK where the law regarding consolidation of losses was changed after a defining ruling was delivered by the court. Without the ECJ, the integration of the EU would have been difficult.
Conclusion
In the current paper, the author analysed how a court can be used to enhance the formulation and implementation of policies. The role of the court was discussed in the context of the theory of integration and the European Union. According to Wasserfallen (2010), regional integration is realised with the help of policy frameworks agreed upon between member states. The theory of neo-functionalism becomes relevant to the establishment of various agencies that are tasked with the responsibility of handling the said policies. In the paper, the European Court of Justice was depicted as an agency that can enhance policies associated with the European Union.
The ECJ plays an important role in resolving conflicts in the EU. In light of this, Davis (2005) opines that the policy framework used to govern a given region can be strengthened used legal means. The court of justice enhances the EU policies through the rulings delivered in the various cases brought before it. For instance, the frameworks touching on the environment and social affairs were changed as a result of the rulings arrived at in different cases. The rulings appeared to settle the ambiguous areas in the European Union’s laws and treaties.
The discussion in this essay depicts ECJ as a key policymaker given the role it plays through the rulings delivered. According to the theory of neo-institutionalisation, the integration process is realised through the establishment of institutions meant to promote policy adoption. Wallace et al. (2005) hold that neo-institutionalisation envisions a scenario where centralised institutions are able to provide the necessary leadership when it comes to the realisation of the various goals of a regional bloc. The European court is seen as an affirmation of these sentiments.
The element is illustrated in the manner through which this judicial arm of the EU has various advanced policies of this union. Neo-institutionalisation enhances the integration process. The ECJ acts as a model through which policies relating to integration processes are enhanced. Research on this issue needs to evaluate how such institutions can play more roles in realising the objectives of integration.
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