Discretion and Accountability: The ESMA Judgment and the Meroni Doctrine. Bruges European Economic Research (BEER) Papers 30/2014

This paper assesses the effectiveness of the Meroni doctrine in the light of the recent judgment in the ESMA case. The first part explains in detail the problem of delegation of powers in the EU from the perspective of the principal-agent theory and complements it with the analysis of the trade-off between different levels of independence and accountability of agencies. A simple economic model is developed to illustrated the relationship between the independence and accountability of an agency. It shows that it is the accountability mechanism that induces the agent to act, rather than the extent of his independence. The paper also explains the inter-temporal interactions between the principal and the agent on the basis of the incentives in place for the different players. The second part is devoted to analysis of the functioning of ESMA in the context of its delegated powers. After the presentation of main aspects of the regulatory framework establishing ESMA, the paper continuous with an analysis and interpretation of the discretionary powers of ESMA. The rather rigid position of the Court of Justice in relation to the Meroni doctrine seems to be unsuitable to delegation of complex regulatory tasks. This is particularly evident in the case of financial markets. Finally, the judgment does not examine in any detail whether and how the principals - i.e. the EU and Member States - are best able to evaluate the quality of ESMA decisions and regulations and whether there are different but more effective accountability mechanisms.

Ending uncertainty: recapitalisation under European Central Bank supervision. Bruegel Policy Contribution 2013/18, 17 December 2013

Estimates of the recapitalisation needs of the euro-area banking system vary between €50 and €600 billion. The range shows the considerable uncertainty about the quality of banks’ balance sheets and about the parameters of the forthcoming European Central Bank stress tests, including the treatment of sovereign debt and systemic risk. Uncertainty also prevails about the rules and discretion that will applyto bank recapitalisation, bank restructuring and bank resolution in 2014 and beyond. The ECB should communicate the relevant parameters of its exercise early and in detail to give time to the private sector to find solutions. The ECB should establish itself as a tough supervisor and force non-viable banks into restructuring. This could lead to short-term financial volatility, but it should be weighed against the cost of a durably weak banking system and the credibility risk to the ECB. The ECB may need to provide large amounts of liquidity to the financial system. Governments should support the ECB, accept cross-border bank mergers and substantial creditor involvement under clear bail-in rules and should be prepared to recapitalise banks. Governments should agree on the eventual creation of a single resolution mechanism with efficient and fast decision-making procedures, and which can exercise discretion where necessary. A resolution fund, even when fully built-up, needs to have a common fiscal backstop to be credible.

How much does EU citizenship cost? The Maltese citizenship-for-sale affair: A breakthrough for sincere cooperation in citizenship of the union? CEPS Liberty and Security in Europe No. 64, April/2014

How much does European citizenship cost in the EU? This was the question that has raised so much controversy over the Maltese citizenship-for-sale programme. The outright selling of Maltese nationality to rich foreigners led to unprecedented responses by the European Parliament and European Commission. This paper examines the affair and its relevance for current and future configurations of citizenship of the EU. It studies the extent to which member states are still free to lay down the grounds for the acquisition and loss of nationality without any EU supervision and accountability. It provides a comparative overview of member state schemes and the exact price for buying citizenship and a residency permit in the EU. It is argued that the EU’s intervention on the Maltese citizenship-for-sale affair constitutes a legal precedent for assessing the lawfulness of passport-for-sale or golden migration programmes in other EU member states. The affair has also revealed the increasing relevance of a set of European and international legal principles limiting member states’ discretion over citizenship matters and providing a supranational constellation of accountability venues scrutinising the impact of their decisions over citizenship of the Union. The Maltese citizenship-for-sale affair has placed at the forefront the EU general principle of sincere cooperation in nationality matters. Member states’ actions in the citizenship domain cannot negatively affect in substance the concept and freedoms of European citizenship. That notwithstanding, the European institutions’ insistence on the need for Maltese nationality law to require a ‘genuine link’ in the form of an effective residence criteria for any rich applicants to benefit from the fast-track naturalisation poses a fundamental dilemma from the angle of Union citizenship: what is this genuine link really about? And what is precisely ‘habitual’, ‘effective’ or ‘functional’ residence? It is argued that by supporting the ‘real connections’ as the most relevant standard, the European institutions may be paradoxically fuelling nationalistic misuses by member states of the ‘genuine link’ as a way to justify restrictive integration policies on the acquisition of nationality.

Mutual Recognition: economic and regulatory logic in goods and services. Bruges European Economic Research (BEER) Papers 24/June 2012

Mutual recognition is one of the most appreciated innovations of the EU. The idea is that one can pursue market integration, indeed "deep' market integration, while respecting 'diversity' amongst the participating countries. Put differently, in pursuing 'free movement' for goods, mutual recognition facilitates free movement by disciplining the nature and scope of 'regulatory barriers', whilst allowing some degree of regulatory discretion for EU Member States. This BEER paper attempts to explain the rationale and logic of mutual recognition in the EU internal goods market, its working in actual practice for about three decades now, culminating in a qualitative cost/benefit analysis and its recent improvement in terms of 'governance' in the so-called New Legislative Framework (first denoted as the 2008 Goods package) thereby ameliorating the benefits/costs ratio. For new (in contrast to existing) national regulation, the intrusive EU procedure to impose mutual recognition is presented as well, with basic data so as to show its critical importance to keep the internal goods market free. All this is complemented by a short summary of the scant economic literature on mutual recognition. Subsequently, the analysis is extended to the internal market for services. This is done in two steps, first by reminding the debate on the origin principle (which goes further than mutual recognition EU-style) and how mutual recognition works under the horizontal services directive. This is followed by a short section on how mutual recognition works in vertical (i.e. sectoral) services markets.

Citizenship Deprivation: A Normative Analysis. Liberty and Security in Europe No. 82, 19 March 2015

Most critical analyses assess citizenship-deprivation policies against international human rights and domestic rule of law standards, such as prevention of statelessness, non-arbitrariness with regard to justifications and judicial remedies, or non-discrimination between different categories of citizens. This report considers instead from a political theory perspective how deprivation policies reflect specific conceptions of political community. We distinguish four normative conceptions of the grounds of membership in a political community that apply to decisions on acquisition and loss of citizenship status: i) a ‘State discretion’ view, according to which governments should be as free as possible in pursuing State interests when determining citizenship status; ii) an ‘individual choice’ view, according to which individuals should be as free as possible in choosing their citizenship status; iii) an ‘ascriptive community’ view, according to which both State and individual choices should be minimised through automatic determination of membership based on objective criteria such as the circumstances of birth; and iv) a ‘genuine link’ view, according to which the ties of individuals to particular States determine their claims to inclusion and against deprivation while providing at the same time objections against including individuals without genuine links. We argue that most citizenship laws combine these four normative views in different ways, but that from a democratic perspective the ‘genuine link’ view is normatively preferable to the others. The report subsequently examines five general grounds for citizenship withdrawal – threats to public security, non-compliance with citizenship duties, flawed acquisition, derivative loss and loss of genuine links – and considers how the four normative views apply to withdrawal provision motivated by these concerns. The final section of the report examines whether EU citizenship provides additional reasons for protection against Member States’ powers of citizenship deprivation. We suggest that, in addition to fundamental rights protection through EU law and protection of free movement rights, three further arguments could be invoked: toleration of dual citizenship in a political union, prevention of unequal conditions for loss among EU citizens, and the salience of genuine links to the EU itself rather than merely to one of its Member States.

Social Investment and State Capacity. CEPS Working Document No. 419/February 2016

This paper looks at the difference between the levels and nature of social policy expenditure in northern and northwest European countries and the countries of southern, central, and eastern Europe, and examines the relationship between social investment and state capacity in these country groupings. The authors show that southern and eastern countries have a much greater preference for ‘compensating’ rather than ‘capacitating’ social policy spending. Furthermore, the state capacity in these countries is lower, which generates less state revenue. Based on these observations they conclude that low state capacity and low state revenue go hand in hand with the preference for capacitating social policies, as these policies involve less delegation and discretion than social investment policies. This paper shows that high state capacity is probably a necessary precondition for effective social investment policies, although some limited alternative paths do exist.

Why Belgium Needs a Special Operations Command. Security Policy Brief No. 70, April 2016

The setting up of a Special Operations Command (SOCOM) constitutes a key element of the ongoing Belgian defence reforms. This Policy Brief aims to put the present demand for special operations forces in its historical context and engage in the discussion on how to structure and employ this special instrument of policy. Building on the legacy of the paracommando regiment, the future Belgian SOCOM constitutes a critical capability within an adaptive force structure. This new entity must be able to deliver results in a variety of unconventional missions that require high readiness, intellectual flexibility and maximum discretion or surprise. At the same time, special operations forces do not constitute a substitute for having a comprehensive security policy. They function best when used as force multipliers alongside other instruments of power towards joint effect. As the proverbial tip of the spear, they must lead the way for Belgian defence regeneration in general.

Commission on the Loose? Delegated Lawmaking and Comitology after Lisbon

The Treaty of Lisbon has altered the institutional mechanism of the European Union. The introduction of formal hierarchy of legal acts has important implications for the balance of power among the EU institutions. This paper argues that the Commission is likely to enjoy some discretion in delegated lawmaking while remaining in the shadow of the legislators’ activism. The Commission has also successfully positioned itself to diminish the influence of comitology committees on the adoption of implementing acts, though a new layer of complexity was added. The possible outcomes of this new institutional battle are analysed in the context of the new challenges to the Community method. Some important inferences of this institutional shift for the debate on the democratic deficit in the EU are also drawn up.