Great Britain and
Ireland are the only members of the European Union with a legal system based on
common law. Civil law prevails in all the other member states. These two
traditions are the basis of quite different ways of approaching EU regulation;
and they lie at the heart of some of the most critical misunderstandings
between - in particular - the UK and the EU. They also go some way to explaining why the UK seems
constantly to struggle with EU bureaucratic rigidity and with what eurosceptics
perceive as undemocratic regulatory incontinence.
Custom and equity are
the two guiding principles of common law: precedent tempered by a sense of what
is “just”, so that while past judgements make up the scripture, they don’t
necessarily override fairness.
Civil law, on the other
hand, owes its origin first to ancient Roman law - developed under the emperor
Justinian - but also somewhat to the canon law of the Catholic Church. These
were the twin influences that fed, under Napoleon, into what became known as the Napoleonic Code which was subsequently adopted in
most of Europe, with variations, updates and rewrites appropriate to each
nation. For our purposes, what is important in the Napoleonic tradition is that
the law is codified in the form of statutes. Under civil law, a judge is
supposed to be able to reach a decision by applying logical deduction to the
written code. If this proves impossible, it is theoretically either the fault
of the judge for not understanding the law properly, or of the legislature for
failing to keep the code up to date.
In common law
countries, courts interpret the law, while in civil law countries judges follow
and apply it. Common law plays out as a gladiatorial contest between opponents;
while civil law works more as an inquisition in which the judge’s role is to
expose the truth. What this means in practice is that the British tend to take
the law literally, probably because its cultural basis is consent - a consent
epitomised with respect to new legislation through acts of parliament but where
judicial interpretation and precedent still hold sway. By contrast, those who
live under forms of civil law work under what distinguished lawyers and codifiers have written down. The Napoleonic
Code (1804) was drawn up by a commission of four eminent jurists. Hence why
Europeans tend to be more comfortable than the British with laws “made in
Brussels”. Brits are simply not used to legislation being drafted by unelected
bureaucrats or specialists; and some therefore
conclude with sniffy condescension that while “we” in the UK
are wedded to democracy those Europeans must necessarily be less so. Eurosceptics are doubtless not alone in
looking askance at the proliferation and seeming intractability of EU “rules”.
and in wondering why the whole of Europe has not risen in arms against the
Brussels bureaucrats.
One answer lies in the
fact that the primacy of “the book” in
the European legal tradition has given rise to a long-established custom of
working through the interstices of the legislative framework whenever it seems
possible and convenient to do so; and
where civil legislation is concerned, legitimate reasons may sometimes be found
for simply ignoring the letter of the law in favour of a higher purpose.
A few words of biblical
context may help us understand the thinking. When, in the Old Testament, the
Israelites demanded “like other nations” to have an earthly king as well as a
heavenly one”, the prophet Samuel acceded to the request on the Lord’s advice,
but only after warning the people that a king would use his power to bend them
to his will. (Samuel Bk1, ch. 8).Thus began a dichotomy between human and
divine authority that led along one path to claims that monarchs and spiritual
leaders were divinely anointed, and along another to what became known as
scholasticism, and subsequently under Jesuit influence as casuistry. The latter
are forms of argumentation and abstract reasoning aimed at achieving a desired
conclusion without trespassing on received dogma. Even today, Roman Catholics
are used to discussing
how and under what circumstances it is permissible to disobey the law. We are in the realm here of a
cultural inheritance whose roots lie deep in the past.
Different attitudes
towards the law are fundamental to understanding why Europeans states seem able
to handle EU legislation even when it
appears not to be in the national interest, while the UK - government as well
as eurosceptics - claims to be powerless against its strictures. While Brits tend to think that EU legislation
is set in stone - however “undemocratic” it may seem - Europeans are used to
working out ways to circumvent it or, at any rate, to avoid some of its
unwelcome consequences. A Spanish phrase
summarises the approach: “La ley se acata pero no se cumple.” - the law
is respected but not (necessarily) obeyed. This particular formulation arises
from the Spanish colonial period when edicts from Madrid were dutifully
acknowledged in the distant colonies of Latin America and thereafter ignored as
“impractical”; but it is an inbuilt cultural characteristic of countries that
have inherited the Catholic-Napoleonic tradition.
How are these
differences between the UK and the EU manifested? Let us start with the issue
of nationalised industries. Maintenance of a level playing field between member
states in matters of commerce is a prime responsibility of the European
Commission (EC) which is supposed to
have wide powers
of regulation.
According to
the EC,
long-term state holdings in corporations are a form of state aid and therefore
constitute unfair competition. Tories famously eschew nationalisation on
ideological grounds, but both UKIP
and strong Labour voices concur that the EU won’t
allow it anyway. An illustration of the earnestness with which EU state aid
regulations are treated as gospel is the government’s
own manual
on the subject published for the enlightenment of officials (downloadable, and
excellent nourishment for masochists). For readers with less tolerant digestive
tracts, an EC
powerpoint
focused on the steel industry provides the essentials of what we are supposed
to believe. Clearly stated in the legislation is a prohibition on state aid for
companies in trouble or for disadvantaged regions. That would seem to put paid to Redcar, Port
Talbot and the entire British steel industry. Too bad that Chinese steel, under
the protection and sustenance of the Chinese state, is being dumped on the
European market at knock-down prices! Too bad for the UK that is because, as
has not escaped
everyone’s attention, so many exceptions to the state-aid prohibition exist that there’s
room enough for tanks to trundle through the legislative gate without touching
the sides, Belgian, French, German and Italian tanks among them.
Germany’s way with the
rules is notably instructive. A study conducted by the TUC in 2012 and
which formed part of a submission to a government committee states that “….over
the period 2010-2012, German industries, including energy intensive industries,
benefitted from a range of reliefs from duties, levies and taxes worth EUR 26
billion, or some EUR 8billion
a year. These reliefs are set to continue for the longer term”. Moreover,
“…they cover a wide range of measures (including) grids, power plants, energy
efficiency, renewables, energy research and compensatory arrangements for
businesses competing at the international level "(my italics). Nor is energy the sole framework for direct
state aid to industry. Buried a little shyly in a long piece in The Economist on German manufacturing is an
admission that the state doles out cash in support of industries that it thinks
are important areas of growth, and offers “extensive” research facilities to small
and medium-sized firms when they need help.
All that seems to be required for
these subsidies to pass ‘go’ is a careful reading of the regulations allied to
a determination to ensure that these don’t interfere with German economic
interests. Even when Germany is caught in a flagrante
breach of the rules, as seems to have occurred with the subsidisation of Deutsche
Post, it somehow manages to avoid
embarrassment or even bothering to respond.
Thanks to the Centre for
Policy Studies, we now know about Germany’s recent gas pipeline
deal with Russia - a development entirely
contrary to EU energy policy but which the EC will doubtless be unable to
prevent. Germany is, after all, the EU’s biggest beast and, like the ghost in
Hamlet, “is as the air invulnerable and the EC’s vain blows malicious mockery.”
Perhaps the most egregious
German subsidy of all concerns exports to the rest of the EU - and, in
particular, to the countries of southern Europe. Here Germany takes sublime
advantage of the European Central Bank’s inter-bank payments settlement system
known as TARGET2. Every time money flows from the banks of one euro member
country to the banks of another, it does so through the TARGET2 system which works as follows. Let’s say a
Greek dealer orders a consignment of luxury cars from Germany. The German
exporter duly dispatches the vehicles while the Greek importer instructs her
local bank to arrange for payment. This is effected via the Greek Central Bank,
which then registers a TARGET2 credit in its accounts in favour of the German
Bundesbank (central bank), after which the latter in turn credits the amount to the bank of the
German exporter. Because the deal is in
euros no foreign exchange is applicable, and no money needs to change hands
because these apparent financial transactions are just computerised entries.
If, for example, the funds are lacking
in Greece to pay the debt (which has been the case), then the Bundesbank simply
registers a claim against the Greek Central Bank.
At the end of February
2016, the Bundesbank’s TARGET2 claims amounted to EUR 605
billion.
Prior to the onset of the financial crisis in 2008, the balance was EUR 71
billion,
while at year end 2006 it was only EUR 5 billion. In other words, as Greece and
other southern European countries descended into critical levels of debt, the Bundesbank’s TARGET2 balances
swelled in parallel. TARGET2 credits have enabled the Bundesbank to finance and therefore subsidise German exports to cash-strapped
Eurozone countries - albeit at some risk to the German taxpayer because if any
of these countries had been “allowed” to default, German citizens would have
had to foot the bill. Hence the German pressure on Greece to knuckle down to
austerity and to flog off state assets.
Admirers of German
efficiency and apparent economic success tend to confuse the country’s
reputation for meticulousness with straightforward dealing. Meticulous the
Germans certainly are, and fine engineers too; but as the recent Volkswagen
scandal has amply demonstrated, straightforwardness is not a characteristic to
which they can fairly lay claim. An objective observer might be tempted to
conclude that the German government favours the national interest above the
interests of her European partners; but then it is to the German electorate not
the EU that Mrs Merkel must answer.
France differs somewhat
from Germany in her approach to dealing with EU regulations, though the objectives are similar. French
nationalism is more overt, and direct state participation in industry more
significant. The country maintains a large state sector, and readily finds
reasons for blocking foreign ownership of French businesses, not simply
those one might expect such as defence or “foundation” industries, but any firm
considered to be a quintessential representative of the nation. When
yoghurt-maker Danone became a takeover target, the government took up arms to defend what the French Prime Minister referred to at the time as “one of our
industrial treasures”; a striking contrast
with the UK government’s response to the takeover of Cadbury. But then
France offers scant respect for “prohibitions” that are deemed not to be in the
national interest, the attitude being that if an initiative is not allowed,
then it will be redefined as “strategic” and therefore allowable after all, or
simply met with a ministerial
shrug of the shoulders and a sotto voce “on s’en fout” (we don’t give a damn). Here we
see casuistry at work - if necessary with a defiant twist - in modern Europe. France has adopted a fiercely nationalistic policy of industrial development and seems
unlikely to change course any time soon.
Whether protectionism
is good or bad is not the subject of this essay. What may be of concern, however,
are the possible long-term consequences of industrial laissez-faire - or an
over-zealous adherence to EU state-aid rules. One consequence is suggested by
the annual Thompson-Reuters report on the
top 100 global innovators, the 2015 edition of which has Japanese and US companies leading the
way with 40 and 35 respectively, while France has ten and Germany four. Among the newcomers are Korea with three and
Taiwan with one. And the UK? None. In the short-term we may not notice much
effect on our standard-of-living of what appears to be a lacklustre level of innovation,
although the UK’s stubbornly
low productivity may well be one; but who knows if in the medium-term we will not end up
as hewers of wood and drawers of water in an economic universe controlled
elsewhere? The UK’s finance sector currently feeds the government with tax
revenues, and the low-paid service sector feeds the employment
statistics; but they do little to foster the development of a vibrant, creative
nation.
Ideology, of course,
plays a role in the UK’s policy - notable since Thatcher - of delivering the
country’s industrial welfare to the vagaries of the market. Ironically, the United States, considered by
some to be the model of free-market thinking, is far less
hesitant
than the UK about protecting strategic industries. But regardless of the
ideology at play, successive UK governments - and the current one not
least - have a history of bowing to EU
regulations more punctiliously than any other major country.
Nothing perhaps more
clearly demonstrates the weirdness of the British attitude to EU regulation
than the Hinkley Point C nuclear power saga.
In 2014, the EC graciously gave the UK permission to proceed with
Hinckley Point despite serious misgivings about pricing and loan guarantees
that bear a striking resemblance to state subsidies. Moreover, the proposed lead builder and operator of Hinckley Point
is to be none other than EDF - a French state-owned utility company. Both the
Austrians and the Germans have objected to what looks like a stitch-up, and in July 2015
they filed a lawsuit against the EC for its decision to override EU competition law against
state aid. In March this year, the plot thickened when it came to
public knowledge that the Information Commissioner has been refusing to reveal details
of the full extent of subsidies planned for Hinkley Point. Unsurprisingly, the
EC’s green light for Hinkley seems not to have been based on the regulations
but on politics. France has taken the UK by the hand and shown that if you have
the clout, the guile and the effrontery (in varying degrees) then rules become
largely a matter of “consumer” choice and of keeping up appearances in case the
hoi polloi (the smaller or more gullible countries) get ideas above their
station. If Hinkley Point goes ahead it
will not be because the Austro-German lawsuit has failed, nor because the EC
benignly looks away, nor even because the UK government wants it to happen.
French self-interest will be the deciding factor - a conclusion as revealing
about the EU as it is humiliating for the United Kingdom.
A word
more about democracy. France, and
Germany among other EU countries have shown themselves willing to prioritise
national interests over formal EU strictures when the two are in conflict.
Their electorates would doubtless interpret this willingness as an example of democracy
in action. In the UK, by contrast, which
makes a noisy virtue of sticking to the rules whether made in Europe or
inherited as part of a sclerotic and unrepresentative
political system, democracy seems to be little more than a smug soundbite, a totem of
self-congratulation. The UK is not more democratic than our European
neighbours. It is considerably less so; and the lazy failure of our political
class to understand Europe, to grasp what it offers with both hands, to prioritise
the national interest within a framework that is far more accommodating than we
are led to believe, should induce us to question not whether we ought to be in
Europe but why any of our politicians deserve our vote.
This piece was first publish in opendemocracy.net.
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