Implementation, Implementation, Implementation

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Whenever conferences in Brussels and elsewhere focus on the EU’s energy transition, EU climate goals, the completion of the single market or regulating AI, there are now regular calls at the end of the discussions to ‘meet the implementation challenge.’

In a union of 27 Member states, this is a major challenge. The EU is not a centralised state. Nor does its Council President or the President  of the Commission have supreme powers. You have to work hard to get an agreement in the EU, with advocacy and negotiation but above all a sense of common purpose.

So it’s not surprising that the EU institutions – Commission, Parliament and Council– like setting targets. They can at least agree on them fairly easily as they are in general to be achieved by a date in the future which can easily be pushed back if things get difficult on the way.

But EU ministers and officials are more reluctant to spell out what what needs to be done in detail to reach the agreed targets. After all, they say, the texts of the agreed acts, regulations or directives normally set out what’s to be done and who is responsible for doing it. Everyone has to live up to their responsibilities.

This is easier said than done. Commission proposals may aim to establish clarity about who does what by when. But frequently the final drafting of the texts agreed in negotiation with Council and Parliament doesn’t provide this clarity. Sometimes it reflects genuine uncertainties in the analysis of the problems which the legislation aims to resolve. It may not for example be possible to predict accurately how technologies and markets will develop. Given frequent political pressure to adopt a proposal, the texts may also paste over continuing political disagreements which negotiations have failed to resolve.

Uncertainties and continuing disagreements may be inevitable. But there should surely be no excuse for not fully implementing legislation which has been agreed on.

One part of the implementation problem is that Many EU ministers and even some officials may be unaware of how EU law is made and how it is enforced. If the EU is to maintain confidence in its decision-making processes, it needs to bring more clarity to the implementation process, with a sharper definition of responsibilities and better respect of deadlines.

This article focuses on areas where there should be significant improvement if implementation is to be successful.

Definition of terms

It’s worth reminding everyone first of all of the obvious fact that the EU is a union based on law as derived from the EU Treaties, in particular the TFEU (The Treaty on the Functioning of the European Union).

Article 288 of the TFEU defines the main types of EU legal instruments, among which Regulations and Directives are the principal means of enacting EU policy.

EU Regulations have a ‘direct effect ‘insofar as on entry into force they immediately become part of all 27 national laws, including the precise texts agreed between Council and Parliament. EU Directives on the other hand must be transposed by Member states into national law but where they have some flexibility to adapt the implementing provisions of the Directives to national conditions. (However even where a Directive has not yet been transposed, its provisions may still have the status of applicable law).

An EU Act is not an act

The Commission’s recent use of the term ‘Act’ for some of its proposals does not mean that the Act has full value under EU law unless all or part of it is actually reflected in formal proposals for regulations and/or directives. Good examples of this are the Digital Markets Act and Digital Services Act. However beyond regulations and directives (and subsidiarily Commission decisions) an Act may contain proposals for other initiatives which don’t have the force of EU law.

In my view, the use of the word ‘Act’ is misleading as it gives the impression – both in English and in other languages- that action is being directly implemented by the Act, whereas in practice a lot more needs to be done before you can say that.

The obligations described in Regulations and Directives are often not very constraining

In principle an EU legal instrument attributes specific rights or obligations to governments, public or non-governmental institutions, companies or individuals. To have practical effect, obligations need to be specific and constraining.

Unfortunately the effect of some EU legal texts is weakened by expressions such as ‘The Member state shall ensure that…’ or ‘shall make every effort to…’ This usually reflects a lack of agreement between the Member states and/or between them and the European Parliament as to how binding an obligation should be.

The result is what I will disrespectfully call ‘aspirational legislation’ , that is legislation which describes hoped-for outcomes which would be ‘nice to have’ but which don’t reflect solid political agreement to impose constraining rights and obligations.

This sort of legislation gives the superficial impression of being hard law but is obviously difficult to implement. In my view the EU institutions should prohibit the use of expressions like ‘shall ensure that…’ from legal texts. No legislation is better than bad legislation. 

Deadlines for implementation 

Another area of concern is the issue of deadlines set in Regulations and Directives, both on their entry into force and subsequently for compliance with their provisions.

Compliance with new legislation often requires time to allow for structural or organizational changes which necessary before the specific provisions of the legislation can be implemented.

However deadlines for compliance cannot be established simply on the basis of the strength of political pressure from individual Member states or lobbying by private interest groups. They must reflect the ambition and common purpose set out in the initial policy decisions which called for action within a clear time horizon. For example, expecting a tangible economic impact of a measure by 2030 but then setting the deadline for compliance by market actors for end 2028 or later is simply not credible.

So it is crucially important for the EU institutions to set deadlines which may be ambitious but which are also achievable and are transparent to all those affected by them.

Ensuring compliance

The Commission is of course guardian of the EU treaties and is primarily responsible for ensuring that Member states and other actors comply with EU legislation.

Frequently too, Regulations and Directives stipulate that the Commission should regularly review and report on their enforcement. The Commission monitors in particular the transposition of directives into national law. Where necessary, it will also open infringement procedures against individual Member states which have not met the deadlines for transposition and subject them to fines following continued non-compliance.

As far as regulation is concerned, monitoring and enforcement is shared between the Commission, EU regulatory and executive agencies, national authorities and national courts. Usually a regulation stipulates that a Member state designate a competent national authority to supervise and enforce at national level the rules set out in the regulation. Exceptionally too, the Commission has direct enforcement powers in areas such as competition and state law.

The upshot of the shared enforcement of EU law in most areas is that it is a challenge to ensure timely and uniform enforcement across the 27 Member states. Effective enforcement is patchy, reflecting in particular the varying levels of resources and political commitment in the different Member states.

If there is a lesson here for implementation of effective implementation, there should in my view be some defined gradation in what levels of enforcement should be progressively achieved over time. It would seem essential to focus effort throughout the Member states on a core subset of the rights and obligations imposed in a regulation which guarantee that the major aims of the regulation are met. Enforcement of other provisions of the regulation could be programmed on a longer timescale.

Imposing obligations which change conduct but limit the administrative burden

A considerable percentage of EU legislation aims to raise standards, for example on product safety and quality, on environmental standards or protection of minorities and individual rights. Another important apart of EU law is designed to impose or incentivise the achievement of overall targets such as reduction of CO2 emissions or reduction of dependence on certain categories of imports.

It is impossible here to go into all the ins and outs of the specific obligations which have been imposed in these different sectors of the economy and society. However, in the interests of more effective and impactful implementation of EU legislation, it would seem to me that one of the most costly and ineffective ways to meet EU targets is to impose heavy reporting obligations on governments and companies. Instead of encouraging them to use their scarce resources to comply with the underlying objectives of the regulation or directive, they are forced into the inevitably bureaucratic exercise of producing plans, updating them and reporting on results. In addition, the Commission and other monitoring bodies are obliged to use their equally scarce resources to assess the plans and reports instead of concentrating on lack of enforcement in key areas where problems arise.

If there is anything which would encourage more effective enforcement and achievement of EU policy goals, it would in my view be a move towards selective but rigorous and exemplary intervention to sanction those who are not moving, or not moving fast enough to achieve agreed EU targets. For example task forces of Commission and national auditors could carry out unannounced inspections, followed up if necessary by heavy fines. These would have a significant deterrence effect on non-compliance while leaving governments and companies room to use their resources in an effective manner to contribute to achieving EU objectives.

Implementing EU single market law in network industries

Effective implementation of EU law to complete the single market is key to European ambitions, as demonstrated clearly in the Letta and Draghi reports. This is particularly important in relation to network industries such as energy, telecoms and financial services.

In my view, the major challenge here is that the political agreements reached so far take as a given that the EU dimension of sectoral policies is for the most part limited to cross-border communications between national networks and national regulatory frameworks. The EU dimension doesn’t create a new framework. It is simply an add-on.

Energy

In energy, it is understandable that national regulators and system operators are under legal obligations at national level to protect national consumers and guarantee national system adequacy.  But,  as market integration and interconnection across Europe is progressing rapidly, there should logically be a better in balance in law between the national and EU level. 

For the moment, the implementation of EU energy legislation is, with the best intentions in the world, very complicated and slow. It is true that bodies have been set up at EU level to promote the move towards a more integrated and interconnected EU energy market. Successive liberalisation directives have established ENTSO-E and ENTSO-G , organisations[1] which aim to coordinate the plans of TSO’s operating at national level with a view to wider European-wide integration. However the formal and principal task of ACER – the highly respected and influential agency established under the Third Liberalisation Package- is not related to EU-wide integration but to complementing and coordinating the work of national energy regulators. It participates in the creation of EU network codes but its main focus is still on the definition of the terms and conditions for the creation and operation of cross-border infrastructure. Again, the point of departure is consolidation of nationally regulated national markets with an EU add-on.

Formed before ACER, but strengthened alongside it, the Council of European Regulators (CEER) aims to protect consumer interests and facilitate the creation of a single EU energy market.

CEER and other bodies have certainly made considerable efforts to promote a single market. Market coupling across Europe is a major achievement.

But progress in creating a single EU integrated energy market also requires a strong consensus between the Commission, ACER, national systems operators (TSO’s and DSO’s) as well as among the national energy regulators who regulate them. Negotiations in the context of the Florence Forum (for electricity) and the Madrid Forum (for gas) have achieved some results but on a very long timescale. Discussions on EU-wide network codes on congestion, on connection and on balancing have been going on for many years without so far any final conclusion. Without agreement on them, the ambitions of the EU’s 2025 Grid Package will be difficult to realise in full.

What can be done to unlock the benefits of an integrated interconnected EU energy market?

In the first place, the objectives of ACER, and potentially CEER as well, need to be repositioned. Their primary aim should be to create a single EU energy market and their secondary aim should be to coordinate the work of national energy regulators, not vice versa.

Secondly, agreement on measures needed to create a single EU energy market should not be made conditional on prior voluntary agreement between systems operators which then need to be endorsed by ACER and the Commission. After all, TSO’s (Transmission Systems Operators) and DSO’s (Distribution Systems Operators) have commercial as well as public interests to safeguard. ACER, with the support of the Commission, needs to drive the process so that agreements on network codes can be reached before acceptable deadlines.

Telecoms

Similarly to the energy sector, the EU dimension of telecoms policies is fairly narrowly defined. National regulators take care of their relevant markets (which are mostly still national) and telecoms companies,  which are  nevertheless of international scale, orient their strategies in function of conditions within national markets within the EU as well as within those outside it. 

At the same time there has been significant progress in moving towards implementation of a European-wide framework for telecoms and digitally-based operations. BEREC (The Body of European Regulators for Electronic Communications) has as a primary aim the promotion of an effective (European) market in the telecoms sector , harmonising rules and more harmonised enforcement, as well as providing assistance to the Commission and national regulatory authorities in implementing the EU regulatory framework. The work of ETSI (The European Telecommunications Standards Institute) has also contributed positively to the creation of a more integrated EU-wide telecoms market. Other trans-European successes are the Roaming Regulation and the Open Internet Regulation (‘Net Neutrality’) which, while enforced at national level, contribute to more harmonisation and the creation of a genuine single market.

In addition it is expected that the Digital Networks Act (DNA), which aims to update and modernise the existing EU Telecommunications Code, will further help integrate EU-wide markets. 

However not all Member states are willing to cede competence to the European level in key areas such as spectrum policy. The current controversy surrounding the draft DNA highlights the reality that delays in completing the single market in the sector are not in principle a problem of slow implementation of agreed policies but of continued disagreement on policy choices among the Member states, disagreement which frequently reflects the diverging interest of national incumbents.

Yet as Enrico Letta has underlined, there is a cost to not scaling up its telecoms sector and frustrating a unified spectrum policy.

Financial Services

The establishment of the European Securities and Markets Authority (ESMA) and of the European Insurance and Occupational Pensions Authority) certainly constitutes progress towards EU-wide harmonisation of supervisory rules and enforcement with respect to financial institutions, insurers and pension funds.

But the progress towards an EU Capital Markets Union and recently towards a Savings and Investment Union –is regarded with more circumspection by governments and national regulatory authorities who fear that European-wide supervision of institutions will result in a weakening of the control by their own supervisory authorities on their domestic financial institutions.

At the same time there is an obvious fragmentation of financial regulation across the EU, with the consequent difficulty in promoting intra-EU cross-border investment and the creation of an integrated European pool of capital. To fulfil the single market ambition, there is also a need in my view to go beyond issues of harmonisation to the issue fo  how regulation of European financial markets can be designed to make markets work better for businesses and households. 

Implementation of EU legislation as well as  plans for further integration of the EU’s single market are confronted with a wide range of obstacles, ranging from areas where there is no underlying political support for EU legislation to others where the legal texts are poorly drafted and responsibilities for implementation are not clearly defined. This article highlights areas where improvements can be made and problems avoided. The EU’s decision-making processes will only remain credible of implementation of legislation is shown to be effective. There are  no policy areas which are as important as the efforts to complete the single market and to achieve the energy and climate transition. It is time to act, in the real sense of the word, to make implementation bite. 

[1] Joined now by a similar body for operation of hydrogen networks.