Free International University of Moldova

1. Understanding the European Union

1.1 The development of the European Community1.2 Treaties establishing the European Union

1.3 The Community legal system

1.4 The Community finances

1.1 The development of the European Community

The history of modern European integration was launched in the late 1940s in the wake of the second World War. Six years of conflict had left a demand for politic and economic reconstruction as a devastated Western Europe sought ways to rebuild its economy and to prevent future wars. Much of Europe lay in ruins, communications were broken, food and fuel were in short supply and industry was geared to the needs of war. The continent also faced a future between the superpowers, a developing Cold War creating a dividing line between Europes war-ravaged nations. It took the complete collapse of Europe and its political economic decline to create the conditions for and give a new impetus to the idea of a new European order. The method of construction chosen, namely the voluntary integration of different nations, had never before been tested in human history. It involves (in its conception), by means of instruments voluntarily adapted by all, the gradual creation of imperceptible, but innumerable, links between the nations taking part in the experiment.

In overall terms, moves towards unification in Europe since the Second World war have created a confusing mixture of numerous and complex organizations that are difficult to keep track off. For example, the Central and Eastern European countries and the Soviet Union (with Cuba, Mongolia, and Vietnam had been integrated through the Council for Mutual Economic Assistance (CMEA, often called COMECON). This was a markedly different form of economic integration from the other types of integration. The CMEA was begun in 1949 to promote economic cooperation among the member countries as a Soviet counterpart to the Marshall Plan. There are many other organizations appeared at that time, such as OECD (Organization for Economic Cooperation and Development), WEU (Western European Union), NATO ( North Atlantic Treaty Organization), the Council of Europe, the European Union (which started life as the European Coal and Steel Community, the European Atomic Energy Community and European Community) coexist without any real links between them. The number of member countries in these various organizations ranges from 19 (WEU) to 40 (Council of Europe).

This variety of institutions only acquires a logical structure if we look at the specific aims of these organizations, these can be divided into three main aims:

The Euro-Atlantic organizations

The Euro-Atlantic organizations came into being as a result of the alliance between the United States of America and Europe after the Second World War. It was no coincidence that the first European organizations of the post-war period, the OEEC (Organization for European Economic Cooperation), founded in 1948, was created at the initiative of the United States. The US Secretary of State at the time, George Marshall, called on the countries of Europe in 1947 to join forces in rebuilding their economies and promised American help. This came in the form of the Marshall Plan, which provided the foundation for the rapid reconstruction of Western Europe. At first, the main aim of the OEEC was to liberalize trade between countries. In 1960, when the United States and Canada became members, a further objective was added, namely to promote economic progress in the this World through development aid. The OEEC then became the OECD.

In 1949, NATO was founded as a military alliance with the United States and Canada. In 1954, the Western European Union (WEU) was created to strengthen security cooperation between the countries of Europe. It brought together the countries that had concluded the Brussels Treaty (United Kingdom, France, Belgium, Luxembourg and the Netherlands) with the addition of the Federal Republic of Germany and Italy. Portugal, Spain and Greece are now members of the WEU. The organization offers its members a platform for close cooperation on security and defence, and thus serves both to strengthen Europes political weight in the Atlantic alliance and to establish a European identity in security and defence policy.

The Council of Europe and OSCE

The future common to the second group of European organizations is that they are structured to enable as many countries as possible to participate. At the same time, there was an awareness that these organizations would not go beyond customary international cooperation.

These organizations include the Council of Europe, which was founded as a political institution on 5 May 1949. Its Statute does not make any reference to moves towards a federation or union, nor does it provide for the transfer or merging of sovereign rights. Decisions on all important questions require unanimity, which means that every country has a power of veto, the same set/up is to be found in the United Nations (UN) Security Council. The Council of Europe is therefore designed only with international cooperation in mind. Numerous conventions have been concluded by the Council in the fields of economics, culture, social policy and law. The most important and best known of these is the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) of 4 November 1950. The Convention not only enabled a minimum standard for the safeguarding of human rights to be laid down for the member countries, it also established a system of legal protection which enables the bodies established in Strasbourg under the Convention under the Convention (the European Commission on Human Rights and the European Court of Human Rights) to condemn violations of human rights in the member countries.

This group also includes the Organization for Security and Cooperation in Europe (OSCE), founded in 1994 at the Conference on Security and Cooperation in Europe. The OSCE is bound by the principles and aims set out in the 1975 Helsinki Final Act and the 1990 Charter of Paris. Alongside measures to build up trust between the countries of Europe, these aims also include the creation of a safety net to enable disputed to be settled by peaceful means. As events of the recent past have shown, Europe, still has a long way to go in this respect.

The European Union

The third group of European organizations comprises the European Union, which itself has grown out of the European Coal and Steel Community, the European Atomic Energy Community and the European Community.

The feature that is completely new in the EU and distinguishes it from the usual type of international association of States is that the Member States have ceded some of their sovereign rights to the EC at the center an have conferred on it powers to act independently. In exercising these powers, the EC is able to issue sovereign acts which have the same force as laws in individual States.

The foundation stone of a European Community was laid by the French Foreign Minister, Robert Schuman, in his declaration of 9 May 1950, in which he put forward the plan he had worked out with Jean Monnet to pool Europes coal and steel industries. He made history by putting to the Federal Republic of Germany, and to other European countries who so wished, the idea of creating a community of pacific interests. In so doing he extended a hand to yesterdays enemies and erased the bitterness of war and the burden of the past. In addition, he set completely new process in international relations by proposing to old nations together to recover, by exercising jointly their sovereignty, the influence which each of them was incapable by exercising alone.

Schuman, thus, opted for the functional method of European Integration, rather than for the constitutional method, which would be based on the constitution of a federation. That meant that the European States, which had just regained their national sovereignty following the Second World War, did not need to give it up immediately and its entirety for the benefit of a federal European State. They merely needed to renounce the dogma of the indivisibility of sovereignty and therefore certain parts of sovereignty in certain clearly defined areas. In return they would gain the right of inspection of those affairs of their partners which were placed under common management and would to that extent enlarge their own sovereignty.

It was therefore a question of progressively reducing the existing contradiction between European integration and national independence.

In his declaration of 1950, Robert Schuman proposed the creation of a common market in two important economic sectors which had until then been used for military purposes, namely the coal and steel sectors; it would be a matter of integrating Germany economically and politically into a European Coal and Steel Community with France an other willing countries. He advocated some transfer of sovereignty to an independent High Authority which would exercise the powers previously held by the States in those sectors and the decisions of which would bind those States. That was to say that the cooperation of the Member States in those sectors should be completely different from that already existing within the traditional international organizations. The choice of coal and steel was not fortuitous. The Strategy was to reconcile German economic recovery and French national security, the plan was designed to overhaul the French economy, which had shown signs of serious sickness well before the damage and dislocation of World War II. In the early 1950s those sectors were the basis of a country's power. In addition to the economic benefits to be gained, the pooling of French and German resources in coal was to mark Franco-German reconciliation. Beyond the coal and steel community, Robert Schuman envisaged the creation of a common market for all products, on a scale comparable to that the United States, in which the conditions would be fulfilled for rapid and regular economic expansion through economies of scale, better division of labor and the improved use of new production techniques. Even beyond economic integration he envisaged political integration, by means of the European countries, through the creation in stages of a European Federation. But that was to be achieved gradually through concrete achievements or, to use the building image, by means of brick upon brick to make up the community edifice.

Although the appeal from the French Minister for Foreign Affairs was addressed to all European countries, only five Germany, Italy, Belgium, the Netherlands and Luxemburg gave a favorable reply. Therefore, only six States signed the treaty establishing the European Coal and Steel Community (ECSC) in Paris on 18 April 1951.

The Europe of six began its construction on 25 July 1952, the date of entry into force of the ECSC Treaty. The United Kingdom, on the other hand, wanted a European free trade area, to be set up, which did not involve and waiving of national sovereignty. Customs duties would, of course, be abolished between member countries, but the latter would remain autonomous with regard to commercial policy vis--vis third countries. Denmark, Norway, Iceland, Austria, Portugal and Switzerland supported that argument.

On 24 October 1950 the French Minister of Defense Rene Pleven, made a declaration to the National Assembly similar to the by R. Schuman. Against a backcloth of the Korean War and worsening tension between East and West, he proposed, as a solution to the problem of German rearmament, the creation of a European army answerable to the political institutions of the united Europe. Surprising proposal was immediately accepted by the Governments of the Six and led to the signing in Paris of the Treaty establishing the European Defense Community. That undertaking was somewhat at variance with R. Schuman's idea of progressing little by little. As defense, like foreign policy, was logically amongst the last aspects of the construction of Europe.

What would have become of that Community if the French National Assembly had not refused on 31 August 1954, to ratify the Treaty establishing it on the grounds that it regarded the abandonment of a national army as a serious infringement of French sovereignty? Probably, that Community along with the European Political Community, the draft of which was adopted on 10 March 1953 by the ad hoc Assembly set up by the ECSC Member States, would have proved to be premature as long as the de facto solidarity which Robert Schuman and his adviser Jean Monnet considered necessary for the advent of European political union was missing.

On the other hand, the functioning of the common market in coal and steel showed that economic integration was possible and worthwhile and that it should extend to all products. Thus, the Ministers for Foreign Affairs of the Six, meeting in Messina from 1 to 3 June 1955, discussed the possibility of creating a common market embracing all products and a separate Community for nuclear energy. They instructed a committee of experts, chaired by the Belgian Minister for Foreign Affairs, Paul-Henri Spaak, to prepare a report on the matter. The committee presented its report on 21 April 1956 and its conclusions were approved by the Intergovernmental Conference in Venice on 29 May 1956. The Ministers for Foreign Affairs then decided to initiate negotiations between the six countries with a view of creating a European Energy Community (EEC) and a European Atomic Energy Community (EAEC). Only ten to sign the Treaties establishing the two new communities.

British attempts at creating a vast European free trade area between the European Economic Community and the other Member States of the OECD failed during the autumn of 1958 owing to intractable differences of opinion between France and the United Kingdom. In 1959 it has been created European Free Trade Association (EFTA), to which the United Kingdom, Norway, Sweden, Denmark, Austria, Portugal, Iceland and Switzerland acceded, with Finland joining at a later date.

Having been impressed, however, by the early successes of the European Community, it was not long before the British Government was rethinking its refusal to play an active role in the work of European unification. It was aware that the United Kingdom could not maintain its political influence if it played a preponderant role onto in the Commonwealth. Nor could EFTA, the objectives of which were economic - as opposed to the European Community, which also had political aims, allow it to impose its influence. So in August 1961m the United Kingdom submitted an initial official appreciation to become a full member of the European Community. That example was followed by two other EFTA member countries, namely Denmark ad Norway, and also by Ireland.

Accession of those countries initially met with the opposition of the President of the French Republic, General de Gaulle who, being extremely distrustful of the United Kingdoms application for accession, declared, right in the middle of the negotiations in 1963, that he wished to discontinue them. The second British application for accession, in 1967, with Ireland, Denmark and Norway were yet again associated, was not examined for much time owing to Frances misgivings. The issue of the accession of those countries could not be resolved until following General de Gaulles resignation in April 1969. After laborious negotiations, the Treaties of Association were finally signed on 22 January 1972. The accession on the United Kingdom, Ireland and Denmark took effect on 1 January 1973, following favorable referendum (Ireland and Denmark) and ratification by the national parliaments. Only Norways accession was prevented, after 53.49% of the Norways population opposed accession to the European Community in a referendum.

Once democracy was restored in Greece, Portugal and Spain, those countries submitted applications for accession to the European Community, in 1975 in Greeces case and in 1977 in the other two cases. Greece acceded to the Community on 1 January 1981, and Spain and Portugal on 1 January 1986.

With the signature of the single European Act, in June 1987, the Twelve decided to complete their internal market on 31 December 1992. One year before that date, in December 1991, they decided in Maastrict to develop within the single market an economic and monetary union, a judicial and internal affairs policy and a common foreign and security policy, thus transforming the European Economic Community into a European Union (EU).Since the 1st January 1995, the Europe of Twelve became the Europe of Fifteen, with the accession of Austria, Finland and Sweden, the people of Norway having again voted against membership of the Union by a majority of 52.8%.

The case of withdrawal of a Community Member State has never occurred and is difficult to imagine. However, even though it is not specifically provided for in the Treaty it is certainly possible, under conditions to be negotiated between the outgoing State and the others. The example of Greenland, although partial and special, bears witness to that. Greenland had been integrated into the EC in 1973 by virtue of its links with Denmark. The small population of Greenland was, however, most distrustful in particular of the Communitys fisheries policy, as fishing was the islands main economic activity. Having voted by a small majority in a referendum to withdraw from the Community, the Danish Government and the EC agreed, in February 1984, to allow Greenland to leave the Community as from 1 February 1985 and to grant it the status of overseas territory associated with the EC. A similar solution could be found, if a Member State of the European Union decided to withdraw from it. It could, for example, find itself in the European Economic space, which brings together, since the 1 January 1994, the Member States of the EFTA, minus Switzerland.

The European construction can and one day certainly will accommodate other European countries, notably those of Central and Eastern Europe, which were separated from it until the end of the 80s by an impassable wall, but which, following the demolition of the latter, see it as a strong, functional refuge. The European Union has already declared its intention to welcome these countries and Cyprus, but, before it can do so, it must solve its institutional problems, which become more and more acute after each new enlargement. It has to be emphasized here that any State wishing to accede to the Community has to be prepared to adopt, and be capable of adopting, during a given transition period, all the Community law which constitutes the various policies examined in this work.

1.2 Treaty agreements establishing the European Union

TreatyIn forceSummary

1.European Coal and Steal (ECSC) Treaty

(Treaty of Paris, 1951)1952A sector-specific Treaty of limited application. First of the founding Treaties

2.European Economic Community (EEC) Treaty

(Treaty of Rome, 1957)1958Concluded on the model of the ECSC Treaty but with a broader range of objectives

3.European Atomic Energy Community (EAEC) Treaty (Rome, 1957)1958A sector-specific Treaty of limited application

4.Treaty establishing a Single Council and a Single Commission of the European Communities (Merger Treaty, 1965)1967Created a single institutional framework serving all three Communities

5.European Elections Act (1976)1978The basis for the first (1979) and subsequent European Parliamentary elections

6. Single European Act (1986)1987Amended and expanded the EEC Treaty. Introduced measures for the completion of the Internal Market and extended the scope of qualified majority voting

7.Treaty on the European Union (Maastricht Treaty, 1992)1993Established the European Union, amended and expanded the EEC Treaty, created the co-decision procedure, codified the EC, CFSP and JHA pillars

8.Treaty of Amsterdam (1997)1999Amended the Maastricht and EEC Treaties. Extended codecision, added new employment title to Treaties and incorporated the Schengen accord into the EEC Treaty

9.Treaty of Nice2000Not in force

The first European Treaty, the one establishing the European Coal and Steel Community (ECSC), was signed in Paris in 18 April 1951 and entered into force on 25 July 1952. Its main objective was to eliminate the various barriers to trade and to create a common market in which coal and steel products from the Member States could move freely in order to meet the needs of all Community, inhabitants, without discrimination on grounds of nationality. Capital and workers in both sectors should also circulate freely. In order that all this could be achieved, the Treaty laid down certain rules on investment and financial aid on production and prices, on agreements and concentrations of businesses ad on transport and Community institutions, including a High Authority and a special Council of Ministers, the decisions of which would be binding on all Member States. Ambitious despite its restricted scope, the ECSC Treaty introduced a European Assembly and a European Court of Justice. The intentions of the founders of the ECSC were, indeed, that it should be an experiment, which could gradually be extended to other economic spheres, culminating in a European Federation.

The ECSC Treaty was concluded for 50 years, when it will expire in the year 2002, the specific rules covering these two sectors will be incorporated into the EEC Treaty.

The Treaty establishing the European Atomic Energy Community (EAEC, EUROATOM) was signed in Rome on 25 March 1957 and came into force on 1 January 1958. Its aim was to create a common market for nuclear materials and equipment, establish common nuclear legislation, introduce a common system for suppliers of fissile materials, introduce a system for supervising the peaceful use of nuclear energy and common standards for nuclear safety and for health and safety protection of the population and workers against ionizing radiation. The key elements in this Treaty were, however, the coordination of the research programmes of the Member States and a joint research programme, implemented in a Joint Research Centre, which was to develop technology and stimulate nuclear production in Europe.

Signed at the same time as the Euroatom Treaty the European Economic Community (ECC) Treaty signed in Rome on 25 March 1957, it provided detailed plans for the creation of a common market among its signatories. That involved:

a) The achievement of a customs union entailing, on the other hand, the abolition of customs duties, import quotas and other barriers to trade between Member States, on the other hand, the introduction of a Common Customs Tariff (CTT) vis--vis third countries.

b) Implementation, harmonization of national policies of four basic freedoms: freedom of movement of goods, of course, but also freedom of movement of salaried workers, freedom of establishment and freedom to provide services by independent persons and companies and, finally, freedom of capital movement.

An important amendment to the Treaties establishing the European Communities took lace on 1 July 1987 with the coming into force of the Single European Act. Supplementing in particular the EEC Treaty, the Single Act committed the Community to adapt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992. At the same time it consecrated the European Council, European cooperation on foreign policy and social and economic cohesion, between Member States. Lastly, it confirmed the Communitys competence in numerous fields: social, environmental, research and technology.But it is the Treaty on European Union (TEU), signed in Maastricht on 7 January 1992 that marked a new stage in the process of creating an ever-closer union among the peoples of Europe. The Union is founded on the European Communities and supplemented by new policies, and forms of cooperation. According to Article B of the Treaty, the Union sets itself the following objectives:

To promote economic and social progress which is balanced and sustainable, in particular through he creation of an area without internal frontiers, through the strengthening of economic and social cohesion and through the establishment of economic and monetary union, including ultimately a single currency.

to assert its identity on the international scene, in particular through the implementation of a common foreign and security policy, including the eventual framing of a common defense policy, which might in time lead to a common defense.

to strengthen the protection of the rights and interests of the nationals of its Member States through the introduction of a citizenship of the Union.

to develop close cooperation on justice and home affairs.

to maintain in full the acquis communautaire and build on it with the aim of ensuring the effectiveness of the mechanisms and the institutions of the Community.

The Treaty of the EU separates the European construction into three pillars or edifices, distinguished mainly on the basis of the decision-making process:

The main pillar, which is the European Community (namely the ECSC, the European Atomic Energy Community (EAEC) and the EEC);

The two other pillars remain largely intergovernmental, namely the second pillar dealing with Common Foreign and Security Policy (CFSP) and the third pillar dealing with Co-operation in Justice and Home Affaires. These other two pillars have lower institutional capacity. There is normally no majority voting, the Commission plays a lesser role and the common positions or joint actions adopted do not constitute Community law.

EUROPEAN UNION

First pillar:

EUROPEAN COMMUNIES

EC

- Single market and measures law

-Trade policy

-Democracy xenophobia

NEW OR AMENDED

-Fighting terrorism

-Economic and monetary union

-Trans-European networks

-Disarmament

-Research and environment

-Europes security framework

-External borders

EUROATOM ECSCSecond pillar:

COMMON FOREIGN AND SECURITY POLICY

-Foreign policy

-Cooperation between judicial

-Agricultural policy

-Peacekeeping

- Police cooperation

-Aid to non-member countries

-Fighting drugs and the arms trade

PROVISIONS ON: SECURITY POLICY

-Criminal acts against children,

-EU citizenship

-Drawing on the WEU: questions

-Consumer protection

-Financial aspects of defense

-Social policy

-Immigration policyThird pillar:

JUSTICE AND HOME AFFAIRs CO-OPERATION

-Customs union and

-Cooperation, common positions authorities in civil and criminal

-Sectoral policy

-Human rights

-Combating racism and

-Fighting organized crime

Trafficking in human beings

-Education and culture concerning the security of the EU

-Health

-Long-term:

-Asylum policy

Even within the main edifice - the European Community - the TEU has brought about profound changes, since it has renovated certain community policies and has instituted several others, such as education and youth, culture, public health and consumer protection.

On June 1997 at Amsterdam, the Heads of State and Government of the fifteen countries of the EU revised the Treaty on European Union.

The Treaty of Amsterdam establishes a more democratic Europe, emphasizing the respect of human rights and of democratic principles by the Member States. It also makes clear progress on matters relating to the free movement of its citizens, while enabling the war on organized crime to be waged more effectively.

The Treaty of Amsterdam has four main objectives:

To place employment and citizens rights at the heart of the Union. While confirming that the Member States bear primary responsibility for employment, the new Treaty gives centre-stage to the need for them to act together to find solutions to unemployment, which is the number one problem in Europe today.

The sweep away the last remaining obstacles to freedom of movement and to strengthen security, by consolidating and communitarising the cooperation of the Member States in the field of Justice and Home affairs;

To give Europe a stronger voice in world affairs by making the European Council (heads of State or government) responsible for defining common strategies to be implemented by the Union and the Member States and by designating a High Representative for the CFSP (the Secretary General Council) and a Policy Planning and Early Warning Unit under his responsibility;

To make the Unions institutional structure more efficient with a view to enlarging the Union, particularly towards the eastern European countries which are knocking at the Unions door.

The Amsterdam Treaty has taken steps towards meeting this last objective, notably through the extension of the co-decision (Parliament/ Council) procedure and of the majority voting in the Council, but a new amendment of the TEU or a new Treaty would be necessary in order to complete the reform of the institutions and make it possible for them to work in the context of more than twenty Member States.

Since the citizens have the rights and obligations deriving from the European Treaties, they can rightly claim the transparency of these texts. The Unions basic Treaties are very difficult to read and understand, which is hardly likely, to mobilize public opinion in their favour. The Treaty of Amsterdam, which includes consolidated versions of the two main Treaties, the one on the European Union (TEU) and the one establishing the European Community (TEC), with a new numbering of their articles, gives a beginning of the solution of their problem.

The Treaty of Nice which was signed on 26 February, 2001 should mark the end of a prolonged phase of adjustment for the EU. Concluding the Intergovernmental Conference held in 2000 at Nice, focusing on the three issues left over from Amsterdam size and composition of the Commission, weighting of votes in the Council and possible extension of qualified majority voting (QMV)- as well as other necessary amendments to the Treaties arising as regards the European institutions in connection with the above issues and in implementing the Treaty of Amsterdam. A generally accepted aim of re-weighting was to ensure that any winning coalition under QMV will represent a reasonable majority of the population and that decisions cannot be blocked by too small a minority. Yet the basic goal was achieved: the possible institutional obstacles to enlargement were removed. There was an agreement to have one Commissioner per Member State as of 2005 and a reduction to an unspecified number less than that of the Member States once there are 27 countries in the EU, a complex system of reweighting of votes with a triple threshold for qualified majority a limited extension of qualified-majority voting, and some relaxation of the conditions for enhanced cooperation. It is not possible to foresee exactly how the new arrangements may work, and they may be modified before they come into force.

1.3 The Community legal system

In the image of the European construction, the cement is the will of the different nations to live peacefully together, the building plans are the treaties and the bricks are the legal acts adopted by the Parliament and the Council. These legal acts may be undertaken by the competent institutions with legal effect only if they are empowered to do so by the European Treaties (principle of attribution of powers). Article 249 of the EC Treaty provides for five forms of legal act, each with a different effect on the Member States legal systems: some are directly applicable in place of national legislation, while others permit the progressive adjustment of that legislation to Community provisions.

The Regulation has a general scope, is binding in all its elements and is directly applicable in each Member State. Just like a national law, it gives rise to rights and obligations directly applicable to the citizens of the European Union. Regulations enter into force on a date which they lay down or, where they do not set a date, on the twentieth day following their publication in the Official Journal of the European Communities. The regulation substitutes European law for national law and is therefore the most effective legal instrument provided for by the EC Treaty. As European laws, Regulations must be complied with fully by those to whom they addressed (individuals, Member States, European institutions).

The Directive binds any Member State to which it is addressed with regard to the result to be achieved, while allowing the national authorities jurisdiction as to the form and methods used. It is a sort of Community framework law and lends itself particularly well to the harmonization of laws. It defines the objective or objectives to be attained and leaves it to the Member States to choose the forms and instruments necessary for complying with it. Since the Member States are only bound by the objectives laid down in directives, they have some discretion, in transposing them into national law, in taking into account of special national circumstances. They must however, ensure fulfillment of the obligations arising out of the Treaty or resulting from action taken by the institutions of the Community (Art. 10 ETC). Although they are generally published in the Official Journal, Directives take effect by virtue of being notified to the Member States to which they are addressed. The latter are obliged to adopt the national measures necessary for implementation of the Directive within time-limits set by it, failing which they are infringing Community legislation.

The Decision id binding on the addressees it indicates, who may be one, several, or even all the Member States or one or more natural or legal persons. This variety of potential addresses is coupled with a variety in the scope of its contents, which may extend from a quasi regulation or a quasi directive to a specific administrative decision. It takes effect on its communication to the addresses rather than on its publication in the Official Journal. In any case, according to the Court of Justice, a decision can produce direct effects creating for the individuals rights that national jurisdictions must safeguard1.

In addition to these legal acts, the effects of which are binding on the Member States, the Community institutions and, in many cases, the citizens of the Member States, the Council and the Commission can adopt Recommendations suggesting a certain line of conduct and opinions assessing a current situation or certain facts in the Community or the member States. These instruments enable the Community institutions to adopt positions in a non-binding manner, i.e. without any legal obligations for the addressees- Member States and/or citizens. Furthermore, the Council and the European Parliament adopt Resolutions, which are also not binding, suggesting a political desire to act in a given area.

While Resolutions and opinions are published in the C series (communications) of the Official Journal of the European Communities (OJ), binding acts and recommendations- as well as common positions and joint actions of the common foreign and security policy and of justice and home affairs (Art.12, 13 and 31 of TEU) are published in the L series legislation of the OJ. It is the binding instruments that constitute Community law, that is, the law adopted by the institutions in order to pursue the objectives of the European Treaties, giving certain rights and obligations to the citizens and obliging the Member States to adapt their legislation and/ or the administrative practices.

Community law is uniformly and entirely valid throughout the Community and cannot be invalidated by the individual law of one Member State. It ensures from the Treaties and the constant decisions of the Court of

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1. Judgement of 6 October 1970, case 9/70, Grad, ECR 1970, p.838

Justice that this law has precedence over national law, even the constitutional law, of the Member States, whether it predates or postdates Community legislation. In fact, the Member State have definitively transferred sovereign rights to the Community they created, and they cannot subsequently go back on that transfer through unilateral measures which are incompatible with the concept of the Community.

1.4 The Community financesThe conventional international organizations such as the UN or the OECD are financed by contributions from their member countries. In most instances their financial requirements amount to staff and operational expenditure: if they are entrusted with operational tasks, their financing is generally provided on an a la carte basis by those member countries, which decided on those tasks. It is virtually never a question, in such organizations, of financial transfers or even of financial compensation. The European Community, on the other hand, although it is not a federation, pursues certain federal objectives, and its expenditure in the main corresponds to a transfer of resources from the national to the supranational level. Indeed, since 1970, the Community controls its own resources.

The first European tax was introduced with the creation of the ECSC. Article 49 of the Treaty of Paris stipulates that the High Authority (now the Commission) is empowered to procure the funds it requires to carry out its tasks by imposing levies on the production of coal and steel. It may itself determine the mode of assessment and the amount of that tax. The levies are assessed annually on the various ECSC products according to their average value, the rate thereof shall not, however, exceed 1 percent. The system applied in this connection by the Commission is similar to the VAT system. The levy is applied to undertakings in the steel and coal sector. Since 1994, the Commission has gradually reduced the levy, thus leading to its total elimination when the ECSC Treaty expires (23 July 2002)1. After the expiration of the Treaty, the assets of the ECSC in liquidation should revert to the Communities revenue and be administered by the Commission2.

Provision had been made in the EEC Treaty (Article 201) for replacing the Member States initial contributions (determined on a scale according to GNP shares or other criteria) by own resources after establishment of the Common Customs Tariff (CCT). The transfer of customs revenue to the Community budget by Decision of 21 April 1970 was the logical outcome of the attainment, provided for in the Treaty, of a genuine customs union3. In such a union the country of import of goods from a third country is not always the country of final destination of those goods. The revenue from customs duties is therefore often collected in a country other than the country of destination or of consumption. Only the payment of that revenue to the customs union, in this instance to the Community, makes it possible to neutralize that effect.

As customs duties are being progressively abolished or reduced under the General Agreement on Tariffs and Trade (GATT) and the various tariff concessions granted to the least developed countries, for that reasons it was decided, in 1970, to use a proportion of the value added tax (VAT) as an additional source of Community financing. That tax, which has a uniform basis of assessment, affects all citizens of the European Union and takes fairly accurate account of the economic capacity of the Member States, as it is levied at the consumption level. The uniform base, which was adopted for calculating the proportions of the VAT yield which countries, must pay to the EU, is made up of all taxable supplies of goods and provisions of services in the Union. It therefore does not depend on the amount of the VAT itself, the rates of which vary from Member State to Member State. Customs duties on products within the province of the ECSC Treaty now constitute Community own resources. A new own resource was added to the others, grounded on an additional base representing the sum of the member States GNPs at market prices. Each Member State contributes to this fourth resource (21.4% of total revenue) in accordance with its wealth. A 1996 Regulation improved implementation of the own resources collection system by making it more transparent and strengthening the provisions to combat fraud4.

In order to give tangible form to the Maastricht commitments, particularly as regards economic and social cohesion, the creation of an environment stimulating Europes competitiveness and development of Community action on the external front, the Commission proposed the doubling of the financial allocation in 1997 compared to its 1992 level (Delos package II). The European Council, meeting in Edinburgh on 11 and 12 December 1992, agreed to raise the ceiling on own resources from 1.20 % of the Communitys GNP in 1993 to 1.27% in 1999. A Council Decision of 31 October 1994 fixed the level of own (Community) resources available for the period 1995-1999 and the structure of the Community financing system1. In its Agenda 2000 outlook and position document of 15 July 1997, the Santer Commission asserted that the financing system of the Community had worked satisfactorily and did not need any adjustments to the Member States contributions. Accordingly, the 1.27 % GNP ceiling could suffice to finance, until 2006, the development of common policies, including the common agricultural policy, the cohesion effort and the cost of enlargement. __________________________________________________________________________________________

1. Commission Decision 2983/94/ECSC, OJ L315, 08.12.1994

2COM (97) 506, 8 October 1997

3.Council Decision 70/243, OJ L 94, 28.04.1970

4.Council Regulation 1552/89, OJ L 155, 07.06.1989The Commission had taken account of a number of factors, in particular the economies obtainable under the agricultural guideline, the effect of greater concentration of structural expenditure on the most needy regions, the fruits of economic growth and the benefits of budgetary discipline in the context of economic growth and the benefits of budgetary discipline in the context of economic and monetary union.

As far as Community expenditures are concerned, we should note that they have increased between the early eighties and the early nineties from 1.7 to 2.4% of all public expenditure in the Member States. They still represent, however, little more than one percent of the cumulative Gross Internal Product of the Member States. More than 90% of the receipts of The European Union are redistributed to the Member States and serve to finance the objectives of the various common and Community policies. Thus, out of a total of EUR 97 billion (41.6%) were allocated to the common agricultural policy, EUR 39 billion (40.2%) to structural measures including the Structural Funds, EUR 5.8 billion (6%) to other internal policies, roughly the same amount to external action of the Union (6%), EUR 4.5 billion (4.6%) to administrative expenditure and the remaining amount to reserves including guarantees2. It is interesting to note that the guarantee of the Community budget covers lenders when the Community floats an issue under one of its financial instruments, such as the balance of payments facility or the financial assistance for certain non-member countries. A Guarantee Fund for external actions is designated to reimburse the Communitys creditors in the event of default by the recipient of a loan given or guaranteed by the Community in a non-member country3.

Table 1.2 The EU Budget for 2000Income

___________________________________________________________________________

1. Council Decision 94/728, OJ L 293, 12.11.1994

2. Decision 1999/105, OJ L39, 12.02.1999

3. Council Regulation 2728/94, OJ L 293, 12.11.1994 and Council Regulation 1149/99, OJ L 139, 02.06.1999

Expenditures

The General Budget of the European Union

The EU is endowed with revenues, which it is empowered to discharge for certain specified functions, including institutional administration and policy-related expenditure. These revenues (capped at a limit of 1.27 % of EU GNP) are generally referred to as the General Budget of the European Union. The pattern of the EUs budgetary revenues and expenditures has changed over time. For the first decade expenditures were modest- less than 0.1 % of EU GDP. It was roughly evenly distributed among administration, agriculture, research and energy and aid for developing countries. The introduction of the Common Agricultural Policy in 1968, whereby a guaranteed price system for farm products was established, transformed this situation. Not only did total expenditure rise dramatically, the great bulk of that expenditure was absorbed by agricultural policy. Today, the EU budget totals nearly 100 billion Euro with commitment appropriations of 96.93 billion Euro in 1999. This now represents 1.11% of EU GDP and about 2.5% of the total expenditure of the EU member states.

These budgetary funds (which are of the same order of magnitude as a large UK government department) emanate from three sources. First, the duties that member states collect on imports into the EU are paid centrally. These consist principally of general customs duties, agricultural tariffs and levies on sugar imports. Second, a proportion of VAT receipts levied by member states is paid over to the EU. Between 1986 and 1994 this was equivalent to 1.4% of VAT revenues raised on 55% of GDP at market prices. Since 1995 (and until 2002), the proportion of VAT receipts paid over has been reduced to 1.0% raised on a lower total of 50% of GNP. Third, since 1988, the difference between what is raised from the first two revenue sources and what is required to meet EU expenditure is raised from member states in proportion to their national income. In 1999 the projected proportions from these three resources were as follows: VAT, agricultural and sugar levies (38%), customs duties (15,5%), and GNP resources (46.5%).

Since 1988 expenditure has been divided into six broad categories:

1. Agriculture;

2. Structural operations;

3. Internal policies (with multi-annual allocations);

4. External (or other policies);

5. Repayments and administration;

6. Monetary reserves.

The annual increases of expenditure on each category have to be contained within an agreed rate of increase. Political priorities have been reflected in allowing the rates of increase to differ between categories. For example, since 1988 Categories 2, 3 and 4 have been allowed to expand more rapidly than others. Nonetheless, European Union expenditure is still dominated by agriculture and in particular, for price guarantee purposes. While the amount spent on agriculture (including the Agricultural Guidance Fund) had been reduced to 45.6% of total commitment appropriations by 1999, this is only approached by spending on structural operations (excluding the EAGGF), which accounted for 34.8% of total spending in 1999. Key areas such as education and the environment and other internal policies such as research claim only 5.9% of the budget, and external policies (and action) a comparable 6.0%. Equally, while it is often argued that the EU is excessively bureaucratic, it should be noted that only 4.5% of the EU budget is spent on administration, which is probably not excessive for any organization of its size. Two-thirds of this expenditure goes to the European Commission. In 1999, 1.2% of the EUs budget was directed towards category 6 (monetary reserves). These reserves are used for a variety of purposes, including emergency aid.

General references on the EU and suggested readings:

1. DINAN Desmond, Ever Closer Union: an Introduction to European Integration, 2nd ed., Macmillan, Basingstoke, 1999, pag 1-3.

2. DEGRYSE Christophe, Dictionnaire de lunion Europeenne. Politiques, institutions, programmes, De Boeck/Universite, Bruxelles, 1998.

3. PASCAL Fontaine, A new idea for Europe: The Schuman declaration 1950-2000, 2nd ed., European documentation, Luxembourg, 2000, pag 5-7;

4. MOUSSIS Nicholas, Guide to European Union policies, European Study Service, Brussels, 1999

5. PELKMANS Jacques, European Integration. Methods and economic analysis, Addison Wesley Longman, Harlow, Essex, 1997.

6. EUROPEAN COMMISION, How does the European Union work? Office for official Publications of the European Communities, Brussels, 1996.

7. Moussis Nicholas Access to European Union, European Study Service, 2001, pag 7-9; 12-16; 23-28;

8. EUROPEAN POLICY CENTRE, Making Sense of the Amsterdam treaty, Institute of European Affairs, 1997.

9. EUROPEAN COMMISSION, Treaty of Amsterdam: what has changed in Europe, Luxembourg, 1999

10. DRUESNE Gerard, Droit et Politiques de la Communaute et de lUnion europeenne 5e ed, PUF, Paris, 1998.

11. LAFFAN Brigid, The Finances of the European Union, Macmillan Press, Basindstoke, 1997.

12. Richard Welford, Kate Prescott, European Business, 4 th edition, , 2001, pag 69,86-87;

13.European Commission, LEurope des quinze: chiffres cles, 1996, pag 4;

14. European Parliament, Office for official publications of the European Communities, Luxembourg, March 2000, pag 12;

15. Edward Best, The Treaty of Nice: Not Beautiful but itll do, Eipascope (2001), pag 2-9;

16. Meunier, Sphie and Kalypso Nocolaidis, Trade Competence in the Nice Treaty, ECSA Review, Vol.14, No.2, Spring 2001

http://europa.eu.int/http://europa.eu.int/scadplus/Glossary of EU terminology

http://europa.eu.int/eur-lexFull text legislative information

2. The structure and functions of European Institutions

2.1 The European Commission

2.2 The Council of the European Union

2.3 European Parliament

2.4 Court of Justice

2.5 Other EU Institutions (Economic and Social Committee, Committee of the Regions, the European Investment Bank, the Court of Auditors)2.6 Institutional reform: future challenges

Table 2.1 The Institutions of the EU

European Council

15 Heads of State

or Government and

the President of the

Commission

Council of the EU

15 ministersEuropean Court of Justice

15 Judges

Committee of the Regions

222 membersEuropean Parliament

626 membersEconomic and Social Committee

222 members

Court of Auditors

15 membersEuropean Commission

20 members

European Central BankEuropean investment Bank

Votes in the

Council of MinistersPercentage

of total votesPercentage of total

populationMembers of the Commission

Germany1011.3621.962

France1011.3615.632

Italy1011.3615.392

United Kingdom1011.3615.752

Spain89.0910.532

Belgium55.682.721

Greece55.682.811

Netherlands55.684.161

Portugal

55.682.661

Austria44.542.161

Sweden44.542.371

Denmark33.411.411

Ireland33.410.971

Finland33.411.371

Luxembourg22.270.111

Having considered a brief history of European integration and the role of integration theories in helping us to understand pathways and progress, attention should now be turned to the organization of the EU and to the institutional arrangements of the Community pillar. Much recent attention has been paid to the EU as a governance system and an understanding of its basic elements is a fundamental requirement for European businesses. Those firms hoping to influence the decision-making process (through lobbying) require a detailed understanding of the openings for dialogue and of the centers of executive and legislative authority. Those firms operational in the European business environment should at least understand how EU rules, regulations and directives, many of which govern their activity and behavior, are issued and from which centers of power. In order to understand the workings of the EU it is necessary to outline the role and activities of each of four governing institutions with a role in the initiation, enactment, interpretation and application of Union law.

2.1 The European Commission

The Commissions role and function

The role and responsibilities of the European Commission place it firmly at the heart of the European Union's policy-making process. Its three basic tasks are to initiate EU action, to act as guardian of the treaties and to operate as manager and executor of the Unions policies and of international trade relationships.

As an institution it is headed by twenty civil servants representing the fifteen member states who are chosen to represent the interests of the EU rather than individual countries. The Council and the European Parliament need a proposal from the Commission before they can pass legislation. EU laws are mainly upheld by Commission action, the integrity of the single market is preserved by Commission policing, agricultural and regional development policies are sustained, managed and developed by the Commission as is development cooperation with the countries of Central and Eastern Europe, Africa, the Caribbean and Pacific. Research and technological development programmes, vital for the future of Europe, are orchestrated by the Commission.

The Commission, in close collaboration with the European Council, frequently provides the impulse towards further integration at the crucial moments when it is needed. Decisive initiatives in recent years have been launching the strategy which culminated in the completion of the single market in 1993, the Commission's role in drawing up a blueprint for economic and monetary union and its drive to strengthen economic and social cohesion between the regions of Europe.

Although not controlled by the member states, the Commission is at least appointed by them. Each member state must be represented by at least one Commissioner, but no member state may have more then two nationals. Prior to the next enlargement, the largest nations Germany, France, Italy, the UK and Spain send two Commissioners and the smaller states one each. Commission members are appointed by common agreement of the member states to serve a five year term, which is renewable. The President of Commission is appointed by common agreement among the member heads of state and is subject to the approval of the European Parliament. Prior to the recent appointment of Italian, Romano Prodi, the most recent was the former Prime Minister of Luxembourg, Jacques Santer (1995-1999), whose predecessor was the former French Finance Minister, Jacques Delors (1985-95).

At the start of 1999, the Commission was organized into twenty-four directorates-general (divisions) and a number of specialist units and support services.

Table 2.2 Directorates-General, Services and Special Units of the European Commission

Directorates-General

DGIExternal Relations: Commercial policy and relations with North America, the Far East, Australia and NZ

DGIAExternal Relations: Europe and New Independent States, CFSP and External MissionsDGIBExternal Relations: Southern Mediterranean, TOP and Near East, Latin America, South and South East Asia and North-South Co-operation

DGIIEconomic and Financial affairs

DGIIIIndustry

DGIVCompetition

DGVEmployment, Industrial Relations and Social Affairs

DGVIAgriculture

DGVIITransport

DGVIIIDevelopment

DGIXPersonal and Administration

DGXInformation, Communication, Culture and AudiovisualDGXIEnvironment, Nuclear Safety and Civil Protection

DGXIIScience, Research and Development

DGXIIITelecommunications, Information Market and Exploitation of Research

DGXIVFisheries

DGXVInternal market and financial Services

DGXVIRegional Policies and Cohesion

DGXVIIEnergy

DGXVIIICredit and Investments

DGXIXBudgets

DGXXFinancial Control

DGXXICustoms and Indirect Taxation

DGXXIIEducation, Training and Youth

DGXXIIIEnterprise Policy, Distributive Trades and Tourism

DGXXIVConsumer Policy and Consumer Health ProtectionSevices and Special Units

Secretariat-General

Legal service

Forward Studies Unit

Inspectorate-General

Spokesmans Service

Conference Service

Statistical Office

Translation Service

Informatics Directorate

Publications Office

Humanitarian Office

EAEC Agency

Accession Task Force

The Commission meets once a week to conduct its business, which may involve adopting proposals, finalizing policy papers and discussing the evolution of its priority policies. Commissioners are expected to give full support to all policies, even when they are adopted by a majority.

The Commission's democratic legitimacy is being increasingly strengthened by more determined and thorough Parliamentary vetting of the President and his colleagues. The full Commission has to be approved by the European Parliament before its members can take office. They can be required to resign / by a parliamentary vote of censure a power that has never yet been used.

With its staff of 16 000, the Commission is the largest of the Union's institutions. The employment total, however, is modest, given the wide range of its responsibilities and also bearing in mind that one-fifth work in the translation and interpretation services. Their work is essential to the Commission which must be able to reach all of the citizens of the Union in their own languages.

The Commission is not an all-powerful institution. Its proposals, actions and decisions are in various ways scrutinized, checked and judged by all of the other institutions, with the exception of the European Investment Bank. Nor does it take the main decisions on Union policies and priorities this is the prerogative of the Council and, in some cases, of the European Parliament.Legislative initiator

The legislative process begins with a Commission proposal Community law cannot be made without one. In devising its proposals, the Commission has three constant objectives: to identify the European interest, to consult as widely as is necessary and to respect the principle of subsidiary. The European interest means that a legislative proposal reflects the Commission's judgment of what is best for the Union and its citizens as a whole, rather than for sectoral interests or individual countries. Consultation is essential to the preparation of a proposal, the Commission it listens to governments, industry, trade unions, special interest groups and technical experts before completing its final draft.

Subsidiarity is enshrined in the Treaty on European Union and is applied by the Commission in such a way as to ensure that the Union takes action only when it will be more effective than if left to individual Member States. Once the Commission has formally sent a proposal for legislation to the Council and the Parliament, the Union's law-making process is very dependent on effective cooperation between the three institutions.

The Commission does not have an exclusive right of initiative in the two areas of intergovernmental cooperation covered by the Treaty on European Union common foreign and security policy and cooperation on justice and home affairs. But it can submit proposals in the same way as national governments and it participates in discussions at all levels.

Guardian of the Treaties

It is the Commission's job to ensure that Union legislation is applied correctly by the Member States. If they breach their Treaty obligation, they will face Commission action, including legal proceedings at the Court of Justice. In certain circumstances, the Commission can fine individuals, firms and organizations for infringing Treaty law, subject to their right to appeal to the Court of Justice. Illegal price-fixing and market-rigging cartels have been a constant object of its attention and the subject of very large fines in late 1994, one group of firms were fined a record ECU 248 million. The Commission also maintains a close scrutiny over government subsidies to industry and certain kinds of State aid must, by Treaty, receive its assent.

Manager and executor

The Commission manages the Union's annual budget (ECU 92.453 billion in 1999) which is dominated by farm spending allocated by the European Agricultural Guidance and Guarantee Fund and by the Structural Funds, designed to even out the economic disparities between the richer and poorer areas. Its executive responsibilities are wide: it has delegated powers to make rules which fill the details of Council legislation; it can introduce preventive measures for a limited period to protect the Community market from dumping by third countries; it enforces the Treaty's competition rules and regulates mergers and acquisitions above a certain size.

The Union's effectiveness in the world is enhanced by the Commission's role as negotiator of trade and cooperation agreements with other countries, or groups of countries. More than 100 have such agreements with the Union including the developing countries of Africa, the Caribbean and Pacific which are covered by the Lome Convention, and those of Central and Eastern Europe and the former Soviet Union which receive important technical assistance under the PHARE and TACIS programmes. The countries of the southern Mediterranean are also benefiting from a European development aid effort.

2.2 The Council of the European Union Table 2.3 Composition of the Council

One representative of each Member State at ministerial level,

With composition varying according to the subject discussed, for example:

General Affairs Council

Economic and Financial

Transport Council

Agriculture Council

Affairs

(ECOFIN) Council

Permanent Representatives Committee

Special Committee for Agriculture

Coreper I and II

Working groups

General Secretariat (approximately 2 200 officials)

Tasks

Drawing up

Coordination of

BudgetaryAppointmentsExternal

legislation

economic policy

control

relations

Function and organization

The Council of the European Union, usually known as the Council of Ministers, has no equivalent anywhere in the world. The Council of the European Union is the main decision-making institution of the European Union. Here, the Member States legislate for the Union, set its political objectives, coordinate their national policies and resolve differences between themselves and with other institutions. It has four main elements: the Councils of Ministers themselves, the Permanent Representatives (COREPER), the Presidency and the Secretariat General.

It is a body with the characteristics of both a supranational and intergovernmental organization, deciding some matters by qualified majority voting, and others by unanimity. In its procedures, its customs and practices, and even in its disputes, the Council depends on a degree of solidarity and trust, which is rare in relations between States.

Its democratic credentials should not be in doubt. Each meeting of the Council brings together Member States' representatives, usually ministers, who are responsible to their national parliaments and public opinions. Nowadays, there are regular sessions of more than 25 different types of Council meeting: General Affairs (Foreign Affairs Ministers), Economy and Finance, and Agriculture meet monthly; others such as Transport, Environment and Industry meet two to four times a year.

The Presidency of the Council rotates between the Member States every six months: January until June, July until December. The Presidency's role has become increasingly important as the responsibilities of the Union have broadened and deepened. It must:

1. Arrange and preside over all meetings;

2. Elaborate acceptable compromises and find pragmatic solutions to problems submitted to the

Council;

3. Seek to secure consistency and continuity in decision taking;Decision-making in the Council

In the Community pillar of course, the main function of the Council of the European Union is to formulate law. The Council receives legislative proposals from the Commission and may turn those proposals into legal Acts. Once the Commission has proposed a new measure, it is considered and amended by the European Parliament and the Council of the EU together, with the two bodies now acting (in most cases) as co-legislators. A proposal can not become law without the approval of the Council. Depending on the subject matter of proposals, decisions are taken either by unanimity or on the basis of majority voting. This is predetermined by treaty provision.

Pillar One covers a wide range of Community policies (such as agriculture, transport, environment, energy, research and development) designed and implemented according to a well-proven decision-making process, which begins with a Commission proposal. Following a detailed examination by experts and at the political level, the Council can adopt the Commission proposal, amend it or ignore it.

The Treaty on European Union increased the European Parliament's say through a co-decision procedure, which means that a wide range of legislation (such as internal market, consumer affairs. trans-European networks, education and health) is adopted both by the Parliament and the Council.

In the vast majority of cases (including agriculture, fisheries, internal market, environment and transport), the Council decides by a qualified majority vote with Member States carrying the following weightings:

Table 2.4

Germany, France, Italy and the United Kingdom:10 votes

Spain:8 votes

Belgium, Greece, the Netherlands and Portugal:5 votes

Austria and Sweden:

4 votes

Ireland, Denmark and Finland:3 votes

Luxembourg:2 votes

Total87 votes

When a Commission proposal is involved, at least 62 votes must be cast in favour. In other cases, the qualified majority is also 62 votes, but these must be cast by at least 10 Member States. In practice, the Council tries to reach the widest possible consensus before taking a decision. Those policy areas in Pillar One which remain subject to unanimity include taxation, industry, culture, regional and social funds and the framework programme for research and technology development.

For the other two pillars created by the Treaty on European Union common foreign and security policy (Pillar Two) and cooperation in the fields of justice and home affairs (Pillar Three), the Council is the decision-maker as well as the promoter of initiatives. Unanimity is the rule in both pillars, except for the implementing of a joint action which can be decided by qualified majority. The objectives of the common foreign and security policy are to define and implement an external policy covering all foreign and security aspects.

Cooperation in justice and home affairs aims to achieve the free movement of persons inside the Union; promote measures of common interest in the fields of external border control, asylum policy, immigration policy; and fight against terrorism, drug trafficking and other serious forms of international crime.

The European Council

The European Council and the Council of Ministers are related but separate entities. The Council is composed of one representative at ministerial level from each member state with several different councils operational (councils for agriculture, transport and employment). By meeting on subject matter basis, or by policy area, it is ensured that the appropriate ministers from the government of each member state address those policy proposals that would naturally and necessarily come under their ministries consideration. Members of the European Council may also constitute the Council of Ministers- after all, they are representatives of each member state at ministerial level authorized to commit the government of that member state- but invariably they meet not to adopt formal legal texts but to resolve otherwise intractable problems and to lead the Community at the highest political level.

Since 1974, Heads of State or Government have met at least twice a year in the form of the European Council or 'European Summit'. The President of the European Parliament is invited to make a presentation at the opening session. The European Council has become an increasingly important element of the Union, setting priorities, giving political direction, providing impetus for its development and resolving contentious issues that have proved too difficult for the Council of Ministers. The European Council also deals with current international issues through the common foreign and security policy (CFSP), a mechanism devised to allow the Member States to align their diplomatic positions and present a united front.

The European Council submits a report to the European Parliament after each of its meetings and an annual written report on the progress achieved by the Union.

Organization

Each Member State has a national delegation in Brussels known as the Permanent Representation. These delegations are headed by Permanent Representatives, who are normally very senior diplomats and whose committee, called Coreper, prepares ministerial sessions. Coreper meets weekly and its main task is to ensure that only the most difficult and sensitive issues are dealt with at ministerial level and shall be responsible for preparing the work on the Council and for carrying out the tasks assigned by the Council. Coreper is also the destination of reports from the many Council working groups of national experts. These groups make detailed examinations of Commission proposals and indicate, among other things, areas of agreement and disagreement. Coreper itself sits in two parts: Coreper Part 1, which is composed of the Deputy Permanent Representatives and examines technical questions on the whole, and Coreper Part 2, which is composed of the Ambassadors themselves and deals with political questions on the whole.

After examining an issue Coreper either submits a report to the Council, preparing the ground for its discussions by drawing attention to the political aspects which warrant particular attention, or, if unanimous agreement has been reached between the Parliament Representatives and the Commission representative, recommends that the Councils work is much lighter owing to Corepers intervention.

The work of the Agriculture Council is prepared by senior Brussels-based representatives of Member States meeting weekly in the Special Committee on Agriculture. The Secretariat-General provides the intellectual and practical infrastructure of the Council at all levels. It is an element of continuity in the Council proceedings and has the custody of Council acts and archives. Its Legal Service advises the Council and committees on legal matters. The Secretary-General is appointed by the Council acting unanimously.

The Council is making strong efforts to make more of its work accessible to the citizen votes on legislative matters, as well as the explanations of these votes, are now automatically made public.

The public has also been given some rights of access to Council documents and some Council discussions are transmitted audiovisual. Other attempts to improve transparency include briefings for journalists and the provision of background notes on subjects under discussion.

In addition, the Council's Press Service produces comprehensive press releases following Council meetings which are available on demand and through databases.

2.3 The European ParliamentThe European Parliament sees itself as the guardian of the European interest and the defender of citizens rights, the largest multinational parliament in the world, representing the 370 million citizens of the Union. Its primary objectives are like those of any parliamentto pass good laws and control the executive power. Now more than ever before, it is in a much better position to do both because its responsibilities have been gradually widened and its powers strengthened first by the Single Act of 1987, then by the Treaty on European Union of 1993, and, in 1997, by the Treaty of Amsterdam.

Naturally, the Parliament sees itself as the guardian of the European interest and the defender of the citizens' rights. Individually, or as a group, European citizens have the right to petition the Parliament and can seek redress of their grievances on matters that fall within the European Union's sphere of responsibility. The Parliament has also appointed an ombudsman, Mr. Jacob Magnus Soderman, to investigate allegations of misadministration brought by citizens.

The European Parliament attaches a high priority to maintaining links with national parliaments through regular meetings between speakers and chairpersons and between parliamentary committees. These contacts are further enlivened by discussions of Union policies in major conclaves known as 'parliamentary assizes'.

The most important powers of the European Parliament fall into three categories:

Legislative power;

Power over the budget;

Supervision of the executive.

Legislative power

Originally, the Treaty of Rome (1957) gave the Parliament only a consultative role, allowing the Commission to propose and the Council of Ministers to decide legislation. Subsequent Treaties have extended Parliament's influence to amending and even adopting legislation so that the Parliament and Council now share the power of decision in a large number of areas.

The consultation procedure requires an opinion from the Parliament before a legislative proposal from the Commission can be adopted by the Council. This applies, for example, to the agricultural price review.

The cooperation procedure allows Parliament to improve proposed legislation by amendment. It involves two readings in Parliament, giving members ample opportunity to review and amend the Commission's proposal and the Council's preliminary position on it. This procedure applies to a large number of areas including the European Regional Development Fund, research, the environment and overseas cooperation and development.

The co-decision procedure shares decision-making power equally between the Parliament and the Council. A conciliation committee made up of equal numbers of Members of Parliament and of the Council, with the Commission present seeks a compromise on a text that the Council and Parliament can both subsequently endorse. If there is no agreement. Parliament can reject the proposal outright. The co-decision procedure applies to a wide range of issues such as the free movement of workers, consumer protection, education, culture, health and trans-European networks. The Treaty of Amsterdam extends this procedure in particular to employment, freedom of establishment, equal pay for men and women, etc.

Parliament's assent is required for important international agreements such as the accession of new Member States, association agreements with third countries, the organization and objectives of the Structural and Cohesion Funds 0 and the tasks and powers of the European Central Bank.

Budgetary powers

The European Parliament approves the Union's budget each year. The budgetary procedure allows Parliament to propose modifications and amendments to the Commission's initial proposals and to the position taken by the Member States in Council. On agricultural spending and costs arising from international agreements the Council has the last word, but on other expenditure for example, education, social programmes, regional funds, environmental and cultural projects Parliament decides in close cooperation with the Council. In exceptional circumstances, the European Parliament has even voted to reject the budget when its wishes have not been adequately respected. Indeed, it is the President of the Parliament who signs the budget into law.

Monitoring of expenditure is the continuous work of the Parliament's Committee on Budgetary Control which seeks to make sure that money is spent for the purposes agreed and to improve the prevention and detection of fraud. Parliament makes an annual assessment of the Commission's management of the budget before approving the accounts and granting it a 'discharge' on the basis of the Annual Report of the Court of Auditors.

Supervision of the executive

The Parliament exercises overall political supervision of the way the Union's policies is conducted. Executive power in the Union is shared between the Commission and the Council of Ministers and their representatives appear regularly before Parliament.

Parliament has an important role every five years in appointing the President and members of the Commission. It exercises detailed scrutiny through a close examination of the many monthly and annual reports which the Commission is obliged to submit to the Parliament. Members may also put written and oral questions to the Commission nearly 5 500 in 1997 and they regularly interrogate Commissioners at Question Time during plenary sessions and at meetings of parliamentary committees. Parliament can, by a two-thirds majority of its members, pass a motion of censure and thereby compel the Commission to resign as a body (Article 201 EC), five motions of censure have so far been tabled (most recently in January 1999).

The President in office of the Council presents his or her programme at the beginning of a presidency and gives an account of it to Parliament at the end of that period. He or she also reports on the results of each European Council and on progress in the development of foreign and security policy. Ministers attend plenary sessions and take part in Question Time and in important debates. They must also respond to written questions. At the beginning of each meeting of the European Council, the President of Parliament presents the institution's main positions on the topics to be discussed by the Heads of State or Government. This speech often sets the tone for the important discussions of the day.

2.4 The Court of JusticeThe Union, like the European Communities on which it is founded, is governed by the rule of law. Its very existence is conditional on recognition by the Member States, by the institutions and by individuals of the binding nature of its rules. The role of the Court is to provide the judicial safeguards necessary to ensure that the law is observed in the interpretation and application of the Treaties and, generally in all of the activities of the Community.

The success of Community law in embedding itself so thoroughly in the legal life of the Member States is due to its having been perceived, interpreted and applied by the citizens, the administrative authorities and the courts of all of the Member States as a uniform body of rules upon which individuals may rely in their national courts. The decisions of the Court have made Community law a reality for the citizens of Europe and often have important constitutional and economic consequences.

The Court may be called upon to decide cases brought by the Member States, by the Community institutions and by individuals and companies. It ensures uniform interpretation of Community law throughout the Community by close cooperation with national courts and tribunals through the preliminary ruling procedure. The Court of Justice worked alone until 1 September 1989 when the Council attached to it a Court of First Instance in order to improve the judicial protection of individual interests and to enable the Court of Justice to concentrate its activities on its fundamental task of ensuring uniform interpretation of Community law. The Court of First Instance now has jurisdiction to deal with all actions brought by individuals and companies against decisions of the Community institutions and agencies. Its judgments may be subject to an appeal brought before the Court of Justice but only on a point of law.

The Court of Justice is composed of 15 judges and 9 advocates general appointed by common accord of the Member States for a renewable term of six years. Their independence must be beyond doubt and they must be qualified for the highest judicial offices in their respective countries or be jurists of recognized competence. The judges elect the President of the Court from among their number for a term of three years. The President directs the work of the Court and presides at hearings and deliberations. The Court is assisted by the advocates general whose task is to deliver independent and impartial opinions on cases brought before it.

Table 2.5 Composition of the European Court of Justice

Governments of the Member States appoint the 15 Judges and 8 (9) Advocates- General by common accord for a term of six years

Types of proceeding

Actions for failure to fulfill under obligations under the Treaties: Actions for annulment and actions

on grounds of failure to act

Cases referred from national

courts for preliminary

rulings

Commission of Member State

(Article 226)brought by a Community institution or a

Member State in connection with an

illegal act or failure to act

(Article 230 and 232)to clarify the meaning and scope of

of Community law (Article 234)

The Court of First Instance has 15 judges appointed by the Member States for the same renewable term of office. This Court also elects its President, however there are no advocates general. The Court of Justice may sit in plenary session or in chambers of three or five judges. It sits in plenary session when it so decides or if a Member State or an EU institution which is a party to the proceedings so requests. For its part the Court of First Instance sits in chambers of three or five judges. It may sit in plenary session for certain important cases.

Broadly speaking two types of cases may be brought before the Court of Justice:

either direct actions may be brought directly before the Court by the Commission, by other Community institutions or a Member State. Cases brought by individuals or companies challenging the legality of a Community act are brought directly before the Court of First Instance. If an appeal is lodged against a decision of the Court of First Instance it is dealt with by the Court of Justice according to a procedure similar to that of other direct actions;

or preliminary rulings may be requested by courts or tribunals in the Member States when they need a decision on a question of Community law in order to be able to give a judgment. The Court of Justice is not a court of appeal from the decisions of national courts and can only rule on matters of Community law. Having given its decision the national court is bound to apply the principles of Community law as laid down by the Court in deciding the case before it.

In a direct action the language of the case is chosen by the applicant whereas in preliminary rulings the Court of Justice uses the same language as the national court, which referred the case. Thus any of the Community's languages may be used. Written exchanges are an important part of the Court's procedures, both for pleadings and for the submission of observations. After the end of the written phase, cases are argued orally in open court.

Following the hearing, the advocate general delivers an impartial and independent opinion in open court on the arguments submitted and on the interpretation of the relevant rules before recommending a decision for adoption by the Court. Although the advocate general's opinion is not binding upon the Court, his or her advice is extremely persuasive and is most often followed by the Court.

The judges consider the case in closed deliberation and then deliver judgment in open court. The text of the judgment includes the reasoning upon which it is based and copies of the text are available in all 11 official languages. Since 1954 almost 10 000 cases have been brought before the Court of Justice which has delivered some 4 507 judgments.

2.5 Other EU Institutions (Economic and Social Committee, Committee of the Regions, the European Investment Bank, the Court of Auditors)

The economic and Social Committee

The role of the Economic and Social Committee, founded by the Treaty of Rome in 1958, is consultative; its membership is drawn from a broad cross-section of society and the economy. Some represent employers and workers (the 'social partners'), while the daily activities of others range from farming to commerce, transport, the professions, cooperatives, mutual, small and medium-sized enterprises and environmental and consumer protection. Members belong to one of three groups of roughly equal size; employers (Group I), workers (Group II) and various interests (Group Members are leading representatives of civil society who carry out their role with a conscious determination to bring the EU institutional machinery closer to the people.

The Treaty requires the Commission and the Council to refer draft legislation in specified policy areas to the Committee and leaves them free to choose whether to do so on other matters. Since 1972, the Committee has also had the right to issue opinions on its own initiative on any matter of Community interest. The most recent amendment to the Treaty on European Union, adopted in Amsterdam, now allows the European Parliament to consult the Economic and Social Committee too. No European law of any significance has been adopted without the Committee's voice being heard. Since it was set up, the Committee has adopted more than 3 000 opinions, all of which have been published in the Official Journal of the European Communities.

Draft opinions are drawn up by reporters and tripartite study groups, passed for discussion and amendment to one of nine 'sections', bodies which resemble parliamentary committees, and then submitted to one of the monthly meetings of the full Committee. Adoption is by a straight majority by requiring its members to find common ground on each issue and to resolve conflicts of interest between economic and social groups, the Committee makes a useful contribution to consensus building.

Given the involvement of its members in the Union's daily economic life, the Committee is well qualified to contribute directly to the growth and development of the single market. At the request of the European Parliament, the Commission and the Council, it keeps the single market under review and draws attention to malfunctions. Twice a year, it holds a single market forum, which brings together correspondents from the Member States to review developments. The forum enables the Committee to act as a permanent monitoring unit. It points out things that have been left undone and draws attention to misinterpretations and foot-dragging likely to prevent the free circulation of goods, capital, services and people. It also recommends remedies to Community decision-makers.

The Economic and Social Committee maintains good relations with its international, national and regional counterparts. These are important channels for involving civil society in the construction of Europe, and bringing Europe closer to the public. The Committee regularly stages wide-ranging symposia on the citizen's Europe. It is also in regular contact with socioeconomic bodies in the African, Caribbean and Pacific States. More occasionally, meetings are held with partners from, for instance, the Mediterranean regions and countries which wish to join the EU.

Committee of the Regions

The Committee of the Regions is the European Union's youngest institution whose creation reflects Member States' strong desire not only to respect regional and local identities and prerogatives but also to involve them in the development and implementation of EU policies. For the first time in the history of the European Union, there is now a legal obligation to consult the representatives of local and regional authorities on a variety of matters that concern them directly.

Created as a consultative body by the Treaty on European Union, the Committee has emerged as a strong guardian of the principle of subsidiarity since its first session in March 1994. Subsidiarity is enshrined in the Treaty and means that decisions should be taken by those public au