Abstract
The policies developed by governments for the national economy and their implementation fall under far-reaching restrictions imposed by EU law. These follow from substantive legal provisions as well as from the legal principles of necessity and proportionality, the latter applied in the context of the Member States justifying the violation of their EU legal obligations by national policy instruments. This chapter investigates the legitimacy of subjecting patriotic Member State economic policies to the requirements arising from the principles of necessity and proportionality, especially those which demand that national measures meet certain regulatory qualities. In order to achieve this, it looks at patriotic economic developments in Hungary after 2010 and their subsequent treatment under EU law in the different avenues available for the enforcement of EU obligations.
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Notes
- 1.
The governance of the Single Market is under pressure to address the possibility of local opposition rooted in the political determination that the institutions of local capitalism must be protected, Weaver (2015).
- 2.
Inter alia, para. 42, Case C-262/09, Meilicke, EU:C:2011:438.
- 3.
Under EU law, national policies which interfere with the private sphere can be declared—in contravention of a national government’s original assessment—as completely unnecessary if the state, in general, seems to have sufficient legal powers at its disposal to address future events and to ensure compliance with the general interest objective in question (para. 11, Case 3/88, Commission v Italy, EU:C:1989:606), and when the obligation or restriction imposed is irrelevant to the general interest aim pursued (para. 45, Case C-298/99, Commission v Italy, EU:C:2002:194), or when there is no reasonable basis for such intervention (para. 107, Case C-309/99, Wouters, EU:C:2002:98).
- 4.
In other words, the restriction introduced in the private (economic) sphere was not excessive; see para. 14, Case C-351/90, Commission v Luxembourg, EU:C:1992:266.
- 5.
This latter requirement can be particularly restrictive and burdensome for national policymakers, who must comply ex ante in the policy development phase with this ex post determined and applied benchmark; see, inter alia, para. 48, Case C-296/12, Commission v Belgium, EU:C:2014:24. When a national measure is adequately targeted and precisely regulated, and the discretion made available for decision-making is duly delimited, demands in EU law for alternative national solutions may, however, be more confined; see, for example, para. 53, Case C-503/99, Commission v Belgium, EU:C:2002:328.
- 6.
Paras. 54–55, Joined Cases C-197/11 and C-203/11, Libert, EU:C:2013:288 A measure is appropriate when it is justified by or corresponds to factual circumstances; paras. 39–40, Case C-451/03, ADC Servizi, EU:C:2006:208. A measure must be based on relevant facts, which means that the practical problems listed must be directly connected to the measure; paras. 32 and 36, Case C-514/03, Commission v Spain, EU:C:2006:63.
- 7.
Para. 33, Case C-330/03, CICCP, EU:C:2006:45.
- 8.
Para. 38, Case C-282/12, Itelcar, EU:C:2013:629.
- 9.
Para. 46, Case C-296/12, Commission v Belgium, EU:C:2014:24. During their implementation, national policies cannot be justified by just any general interest aim which authorities deem suitable in the given circumstances; see para. 69, Case C-375/12, Bounaich, EU:C:2014:138.
- 10.
Para. 32 Case C-260/04, Commission v Italy, EU:C:2007:508.
- 11.
Para. 57, Case C-326/12, van Caster, EU:C:2014:2269.
- 12.
Para. 37, Case C-282/12, Itelcar, EU:C:2013:629.
- 13.
Para. 44, ibid.
- 14.
Paras. 19–20, Case C-54/99, Eglise de Scientologie, EU:C:2000:124.
- 15.
Para. 44, Case C-282/12, Itelcar, EU:C:2013:629.
- 16.
Paras. 49–52, Case C-503/99, Commission v Belgium, EU:C:2002:32. The use of discretion in the implementation of national policy must be based on objective, non-discriminatory conditions known in advance to the persons concerned ‘in such a way as to adequately circumscribe the exercise of the national authorities’ discretion; para. 57, Joined Cases C-197/11 and C-203/11, Libert, EU:C:2013:2888.
- 17.
Para. 40, Case C-282/04, Commission v the Netherlands, EU:C:2006:608.
- 18.
See, inter alia, para. 69, Case C-436/00, X and Y, EU:C:2002:704.
- 19.
See, inter alia, para. 50, Case C-493/09, Commission v Portugal, EU:C:2011:635 and para. 17, Case C-101/94, Commission v Italy, EU:C:1996:221.
- 20.
See Case C-299/02, Commission v the Netherlands, EU:C:2004:620. See the similar demand in the context of quality regulation in national markets, Case C-351/90, Commission v Luxembourg, EU:C:1992:266.
- 21.
See, inter alia, para. 43, Case C-171/02, Commission v Portugal, EU:C:2004:270.
- 22.
These limitations can be interpreted as enabling national governments to explain and justify their policies on the basis of the actual facts and providing an opportunity to have them confirmed under EU law despite having a purpose or effect of restricting the fundamental freedoms, Snell (2012, pp. 433–434).
- 23.
Increasing state involvement, which often involved reinstating state ownership in certain aspects of markets or in specific markets, was one of the central policy directions. See, in particular, Act 2011:CXCVI on national assets. See also the measures which protect business information in certain public service markets, such as the 2016 modification of Act 2012:CLIX on postal services (Art. 53(4)) and the modification in that same year of Act 2009:CXXII on the more efficient operation of publicly owned business enterprises (Art. 7/I(1)–(3)).
- 24.
For a general discussion, see Bernitz and Ringe (2010) and the Special Issue of the Journal of European Public Policy, 2012.
- 25.
- 26.
The symbolic triple infringement procedures initiated against Hungary in 2012 (IP-12-24) evinced a realisation at the EU level that Hungary was not afraid of moving away from its EU commitments if doing so was dictated by its interests. Its intention to prioritise domestic interests over EU obligations was made particularly visible in the recent infringement case concerning the payment of excise duties for the production of ethyl alcohol (pálinka) by private individuals; Case C-115/13, Commission v. Hungary, EU:C:2014:253.
- 27.
Export-oriented sectors and/or sectors exposed to cross-border interdependencies.
- 28.
See the general analysis by Rosamond (2012, pp. 326–328). Hungary’s practices fall very much in line with Clift’s previously introduced definition of ‘economic patriotism’ (Clift 2013), according to which individuals and economic operators with considerable connections to local territory are favoured by domestic policies.
- 29.
Economic regulation was—often intentionally—made highly volatile and uncertain, and a number of individual legal measures limited competition and/or favoured certain, predominantly domestic economic operators over others; see OECD Economic Survey (2014, 2016) and Council Recommendation (2014, 2015). Giving nearly unlimited political and policy discretion to the executive in matters related to economic policy was a core development; see the example of the treatment of mergers which were deemed beneficial to the national interest under Art. 24/A of Act 1996:LVII on competition, the powers available under Act 2006:LIII, infra note 33, or the powers made available in the planning process for commercial premises, infra note 54. Rolling back the possibility of mounting legal challenges to such economic policies was part of the government’s toolkit. The suspension of the Constitutional Court’s power to review fiscal matters was a huge blow to the principle of legal protection in Hungary (Act 2010:CXIX). The deciding of individual administrative cases through legislation which precluded judicial review was another important regression; see the provisions on the treatment of mergers which were deemed beneficial to the national interest under Art. 24/A of Act 1996:LVII and the provisions of Act 2006:LIII, infra note 33. Another issue was the limitation of the availability of legal challenges to protect the rights of individuals. See, for example, Act 2006:LIII, under which public and private investment projects which were declared ‘specifically relevant to the national economy’ could be exempted by government decree from having to obtain certain otherwise necessary public authorisations and licenses, decrees that cannot be challenged in court.
- 30.
Act 2011:CLV.
- 31.
Act 2011:CLVI, Act 1993:XCVI and Government Regulation 55/2011.
- 32.
Action brought on 10 April 2014 in Case C-179/14, Commission v. Hungary, O.J. 2014, C 202/12.
- 33.
See ECtHR, E.B. (No. 2) v. Hungary, Appl. No. 34929/11, judgement of 15 January 2013, which rejected the application but made the criticism that there was no choice involved for individuals, as was promised in the legislation.
- 34.
Acts 2010:C and CI.
- 35.
Act 2011:CXCIV.
- 36.
Act 2012:CXXIV.
- 37.
Decision 3194/2014 of the Constitutional Court.
- 38.
ECtHR, Vékony v. Hungary, Appl. No. 65681/13, judgement of 13 January 2015.
- 39.
Act 2014:XCV.
- 40.
Act 2014:XCIV.
- 41.
Act 2011:CXXV.
- 42.
Act 2012:CXLIV. The measure was upheld by the Constitutional Court in Decision IV/03576/2012.
- 43.
Act 2013:CLXXXV.
- 44.
Act 2013:CXXVI.
- 45.
See the aforementioned tobacco industry healthcare contribution, the taxes imposed on operators of slot machines, and the 51 per cent tax on the vouchers market. The media market was also affected by a progressive tax (see the provisions of Act 2014:LXXIV on the so-called advertisement tax).
- 46.
Act 2014:LXXIV. See also the retail surtax investigated in Case C-385/12, Hervis, EU:C:2014:47.
- 47.
http://nol.hu/gazdasag/erzsebet_utalvany_utan_szep_kartyat_is_elfogadhat_a_tesco-1315548 (last visited 25 February 2016).
- 48.
Act 2012:CLVII.
- 49.
http://tldr.444.hu/2015/11/30/az-elelmiszerpiacot-akartak-atrendezni-a-plazastoppal (last visited 22 February 2016). The decisions taken by the minister were made public only after a FOI request by investigative journalists.
- 50.
See the 2004 OECD economic survey.
- 51.
Some of Hungary’s more general illegal practices in the energy market are addressed in infringement no. 20142271 concerning obligations under the Third Energy Package.
- 52.
Arts. 104(4), 104(4a), 104(4b), 108/A and 109 of Act 2008:XL on natural gas supply, and Arts. 140(4) and 140(5) of Act 2007: LXXXVI on electricity.
- 53.
Regulation 7/2015 of the Ministry for National Development.
- 54.
Directive 2008/98/EC on waste, O.J. 2008, L 312/3. The infringement procedure was closed when Hungary eventually implemented the directive, Order in Case C-310/12, Commission v. Hungary, EU:C:2013:556.
- 55.
Art. 81 of Act 2012:CLXXXV.
- 56.
See Act 2013:LIV.
- 57.
Act 2012:CLXXXV.
- 58.
Vj/67/2014. See, in particular, Act 2014:XCIX which excluded the applicability of the competition act concerning illegal conduct in public procurement procedures conducted in the years 2012–2013.
- 59.
See paras. 147–174, Case C-179/14, Commission v. Hungary, EU:C:2016:108.
- 60.
Directive 2006/123/EC on services in the internal market, O.J. 2006, L 376/36.
- 61.
Paras. 46–47, 54–67, 69, 81–88, 89–90, 91, 92–94, 102–107, 116–116, Case C-179/14, Commission v. Hungary. For example, the interest of sufficient integration into the local economy, the availability of sufficient experience and infrastructure, and the availability of sufficient guarantees to satisfy consumers and creditors.
- 62.
Ibid.
- 63.
SUPRA See Act 2012:CIII. In particular, the interest of realising social policy through State institutions and not the market, and the redistribution (here, more like rechannelling) of incomes to finance social policy aims, such as education.
- 64.
Other progressive indirect taxes which the government introduced were addressed by the Commission under EU State aid law, which made it possible to strike down infringements much more quickly. See Varju and Papp (2016).
- 65.
Paras. 31–44, Case C-385/12, Hervis, EU:C:2014:47.
- 66.
See paras. 37–42, 50–64, 67–70, 74–91, 93–100, Case C-98/14, Berlington. EU:C:2015:386.
- 67.
Vékony v. Hungary, Appl. No. 65681/13.
- 68.
Paras. 40–41, Case C-49/16, Unibet EU:C:2017:491.
- 69.
Paras. 42 and 46, ibid.
- 70.
Para. 46, ibid.
- 71.
Para. 43, ibid.
- 72.
Paras. 44–45, ibid.
- 73.
Paras. 46–47, ibid.
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Varju, M., Papp, M. (2019). Member State Economic Patriotism and EU Law: Legitimate Regulatory Control Through Proportionality?. In: Gerőcs, T., Szanyi, M. (eds) Market Liberalism and Economic Patriotism in the Capitalist World-System. International Political Economy Series. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-05186-0_7
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