In the Queen's Speech there were a couple of mentions of Europe. The main one of interest was the Government’s new European Union (Approval of Treaty Amendment Decision) Bill. I've endeavoured to make this blog as a-political as possible and to try to explain what this particular Bill means and the Parliamentary procedure it requires.
This Bill has been introduced into the House of Lords first, where Second Reading is scheduled to take place on 23 May. The Bill webpage on Parliament’s website can be found here: h
ttp://services.parliament.uk/bills/2012-13/europeanunionapprovaloftreatyamendmentdecision.html .This Bill is to ratify, for the UK’s part, the EU Decision that would amend the EU treaties to authorise the Eurozone Member States to establish a permanent ‘stability mechanism’ (bailout mechanism) for the Eurozone. This treaty amending Decision was agreed by unanimity by the European Council in March 2011. The European Council is the EU body comprising the heads of all EU Member State governments.
Under the relevant provision of the EU treaties (Article 48(6) of the Treaty on European Union) these European Council Decisions only enter force after being ‘approved’ (ratified, essentially) by all EU Member States.
In the UK, the European Union Act 2011 governs the ratification procedure. This Act can be found here:
http://www.legislation.gov.uk/ukpga/2011/12/pdfs/ukpga_20110012_en.pdf .The European Union Act provides that all such amending Decisions must be approved by an Act of Parliament (hence this new Bill).
Furthermore, the 2011 Act provides that such an amending Decision must also:
· be approved by a referendum; OR
· meet the ‘exemption condition’; OR
· meet the ‘significance condition’
The exemption condition is that the Act approving the EU Decision says the Decision does not fall within section 4 of the European Union Act. Section 4 of the 2011 Act covers certain types of treaty changes that transfer power from the UK to the EU.
The Government’s position is that this amending Decision on the permanent Eurozone bailout mechanism does not fall within section 4 of the European Union Act, and the proposed Bill states this in clause 1(3). In this case, a referendum would not be required for UK ratification.
The European Union Act also requires the Government to lay a statement before Parliament setting out its opinion (with reasons) on whether the proposed amending Decision falls within section 4 of the 2011 Act. This statement was laid in October 2011 and can be found here:
http://www.fco.gov.uk/resources/en/pdf/global-issues/international-institutions/EU-Act-2011-statement-131011The basis for the Government’s opinion that this amending Decision does not fall within section 4 is that the new EU treaty provision it would insert would not apply to the UK. The treaty provision in question would say:
“
The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
While the UK (as a non-Eurozone Member State) would not be among those countries establishing the bailout mechanism, this treaty provision does not expressly exclude the UK from participation in the mechanism established. Furthermore, it seems the new EU treaty provision itself (in contrast, perhaps, to the bailout mechanism set up) may indeed apply to the UK.
The Eurozone countries are actually in the process of establishing the relevant permanent bailout mechanism, which they have called the European Stability Mechanism (ESM). The mechanism itself will be established on the basis of a new treaty outside the EU treaties, between the Eurozone countries. This will require separate ratification in Eurozone states (not the UK). The ESM would not be underwritten by the UK (while it remained outside the Eurozone). Of course, the ESM might be replaced in future by a different bailout mechanism established by the Eurozone countries.
Currently there are two European bailout mechanisms for the Eurozone.
The first is the European Financial Stability Facility (EFSF), which is underwritten just by Eurozone countries. The treaty establishing this always made clear that the EFSF was time-limited.
The second is the European Financial Stabilisation Mechanism (EFSM). This is based on Article 122(2) of the Treaty on the Functioning of the European Union (TFEU), one of the EU treaties, and binds the UK under EU law. Its bailouts are underwritten by the EU Budget, and hence part-underwritten by the UK. EFSM bailout decisions are taken by qualified majority voting (QMV) in the Council of the EU, meaning the UK cannot veto them. The EFSM was established by an EU Regulation based on Article 122(2) TFEU – please find this Regulation attached. The EFSM was agreed by the previous Labour Government in its final days in office.
The EFSM Regulation is not time-limited and so, under Article 122(2) TFEU, there must be a proposal by the European Commission and a supportive qualified majority of Member States in the Council to repeal it.
When the proposal, in principle, for a permanent Eurozone bailout mechanism, and EU treaty change to authorise this, was agreed by the European Council in December 2010, a political agreement was reached that the permanent mechanism would replace both the EFSF and EFSM, and, from that point, Article 122(2) TFEU (binding the UK) would no longer be used “to safeguard the financial stability of the euro area as a whole”.
At that point, however, the permanent mechanism was intended to enter effect in mid-2013. As such, the December 2010 European Council agreed that the EFSM would continue until June 2013. Since then, due to the severity of the Eurozone crisis, the Eurozone has decided to bring the ESM (the permanent mechanism) into effect from July 2012 (though whether the relevant national ratifications will happen in time for this is not clear). It is presently unclear, though, when the EFSM will be repealed.
The December 2010 political agreement that Article 122(2) TFEU will not be used “to safeguard the financial stability of the euro area as a whole”, when the permanent bailout mechanism takes effect, has been reiterated in recital (4) of the preamble to the proposed treaty amendment EU Decision that is the subject of the new Government Bill. However, preambles are not themselves legally binding, unlike, say, an amendment to Article 122(2) TFEU would have been.
It seems unlikely that the new Bill will enter the House of Commons until after the summer recess. It is quite likely that following the results of the French election and the impending Irish referendum to ratify this treaty change, that the treaty change itself will fall and thus there will be no need for the UK Parliament to do any further work on this matter.
As ever with politics, this proposed change has been overtaken by events. The next few weeks in the Eurozone will herald some massive changes in Europe - and some massive opportunities for the UK to change her relationship with the European Union.
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