Elisabetta Rotondo, Kemp Little LLP:
What do ICT standards, data protection and financial services have in common? They are examples of what arguably is becoming a trend by the EU institutions to use regulations, rather than directives, as the preferred form of harmonising legal instrument.
In this post, Elisabetta Rotondo of Kemp Little LLP looks at the reasons why regulations may be preferable for the EU institutions and also warns of the dangers that the use of a regulation poses for the approach to ICT standards that the UK has adopted. For a more detailed overview of the issues and arguments, please see Elisabetta’s in-depth article on the use of regulations.
In financial services we have seen MIFIR and EMIR, in ICT standards the European Standardisation Regulation (SR) was adopted on 4 October 2012 and in data protection, it is proposed to replace Data Protection Directive 95/46/E with a regulation.
Why might a regulation be seen as preferable to the EU institutions?
A regulation possesses some inherent advantages over a directive. According to Article 288 of the Treaty on the Functioning of the European Union, a regulation which has been adopted and published is immediately binding throughout the EU without the need for transposition into national law by each member state, that is, it is “directly applicable”. A directive on the other hand, may allow for differing approaches to implementation between member states. This is because it is merely “binding as to the result to be achieved upon each member state”. Therefore, where the EU is seeking to create identical rights and obligations which are uniformly applied and are almost immediately binding in all member states without the delay or the risk of divergent approaches, it is clear that regulations possess a clear and key advantage over directives.
However, this is not the only potential benefit. Unlike directives, which are only capable of vertical direct effect, regulations are capable of both horizontal and vertical direct effect and as such individuals are able to bring actions against other individuals based on rights flowing from the regulation. This broader and deeper reach of regulations over directives means they can be more effectively policed by the national courts to ensure both that member states have complied with their obligations in relation to the regulation and that the rights and obligations created by the regulation are enforced against individuals.
Implications of the regulation approach
Whether or not there is a trend towards using regulations for the above reasons (and others), one thing is clear. Where the EU institutions have made a deliberate choice of a regulation as a method of harmonising laws, it means that any measures adopted by member states which put obstacles in the way of the effective achievement of the aims of those regulations may, depending on the circumstances in each case, risk falling foul of those regulations. Member states must therefore be particularly cautious when implementing supplementary legislation or indeed when legislating in an area covered by a regulation to give full effect to the regulations.
In all cases, member states must be mindful of the primacy of EU law which arguably requires national courts to:
- Interpret national law in so far as possible in accordance with the provisions of EU regulations.
- Where this is not possible, disapply any national legislation which is not compatible with directly applicable provisions of EU law.
This duty requires member states to give effect to and to comply with the whole of a regulation.
Problems with UK government policy and the European Standardisation Regulation
In previous posts, I have highlighted the potential conflict between the UK government’s open standards policy for mandating royalty-free ICT standards in public procurement and the SR, see:
It appears as if the UK government has chosen a more restrictive approach than that required by the SR, which requires standards to be mandated on a royalty-bearing basis unless the licensor chooses to license them for free (see Annex II, SR). While it remains to be seen whether the UK government’s approach would be interpreted as conforming with the SR in a court of law, the UK government should be mindful that it is by no means certain that is on the right side of its duties in relation to the SR. If it is found that it is not compliant, any legislation based on the premise set out in its open standards consultation could be disapplied. In addition, the UK government should also be aware of the possibility that individuals may seek to claim the direct effect of the provisions of the SR or to claim damages against the UK for breach of statutory duty.
Yes regulations allow strict compliance rather than outcome focus, although directives have proved very flexible tools if often that flexibility is used rather at odds with the stated objectives from time to time, sadly the latest being the proposed web accessibility directive. It is also possible for both SRs and directives to range from completely harmonising to setting out minimum requirements. However your last section appears to be confusing very different things – again. The European SR does not mandate standards – at all. It sets out the minimum requirements for their creation and referencing.
The UK policy is a public procurement policy – not an industrial policy at all as you seem to keep implying – and they have a desire to avoid unnecessary legal , financial and technical issues in public procurement by preferring unencumbered standards. Do the standards they are likely to use fall well within those defined in the SR – yes. Do they fulfill the WTO requirements – yes.
Stating a preference for a given standard or type of standards in procurement is clearly legitimate in both the public procurement directives and in the SR. Indeed one must use standards or specifications and not brands under the public procurement directive. So no issues apply at all unless there is a choice of standards for a given purpose. It is facile in the extreme to suggest that either no choice should be made or that the encumbered standard should be allowed and the unencumbered standard should not be allowed. As long as the basis of that choice is both transparent and relevant – legal, technical and financial issues clearly are relevant and the policy is published – there is no apparent basis for any objection. All this does is ensure that wider issues are considered – such as interoperability and lock in and affect on the supply chain and down stream users – when undertaking separate procurements and that when equivalence is considered all the relevant issues are included for that assessement.
Again this is clearly legitimate as otherwise only single monolithic procurement for any given activity would be legitimate as you would not be allowed to ensure that one procurement was coordinated with another.
The Commission has been at pains to point out the legitimacy of national interoperability frameworks within the EIF that do very similar things. Indeed NIFs are recommended by the Commission.
Many thanks for your comment which raises some interesting arguments in favour of the validity of the UK’s approach, which the article acknowledges may be a valid one.
I did however want to query one point you make. Please could you clarify your interpretation of the last paragraph above, as it states that the SR “requires standards to be mandated”, that is, to me, it does not seem to imply that the SR mandates standards and actually agrees with the point you make – it is about how standards are mandated.
Chris Knuckey
(Practical Law Public Sector)