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The relationship between international law and legislative, delegated & implementing acts of the European Union

05 February 2018

Is the Commission delegated act on data storage contracts under the Tobacco Products Directive 2014/40/EU in conformity with Article 8 of the WHO Protocol to Eliminate Illicit Trade in Tobacco Products?

In 2012, the World Health Organisation (‘WHO’) adopted a Protocol to Eliminate Illicit Trade in Tobacco Products, which the European Union (‘EU’) ratified on 24 June 2016. This Protocol envisages the development of a tracking and tracing system for tobacco products under the strictest conditions: it must be under the control of the states or organisations that are Parties to the Protocol (Art. 8-2), no tasks may be performed by or delegated to the tobacco industry (Art. 8-12), and the competent authorities of each Party shall interact with the tobacco industry only to the extent strictly necessary (Art. 8-13).

 

In this context, Articles 15 and 16 of Directive 2014/40/EU (the Tobacco Products Directive, or ‘TPD’) envisage an EU system of tracking and tracing for combatting illicit tobacco products, the requirements for which are to be defined by delegated and implementing acts.

 

On 15 December 2017, the European Commission adopted a delegated act determining key elements of data storage contracts to be concluded under the envisaged tracking and tracing system, but without excluding the possibility of tobacco industry involvement as required by the WHO Protocol. The aim of this article is to examine the conformity of this delegated act, and by extension the EU tracking and tracing system, with the WHO Protocol.

 

I.                The conclusion of international agreements

 

The process for concluding international agreements is a mixture of EU law, international law and national law. In 2003 the WHO adopted a Framework Convention on Tobacco Control (‘FCTC’). Some years later in Seoul, at the end of 2012, the parties to the FCTC agreed on a Protocol to Eliminate Illicit Trade in Tobacco Products. This Protocol, established as a mixed agreement, was signed by the EU via two Council decisions in late 2013, paving the way for ratification of the agreement by EU Member States.

 

International law places signatory states under an obligation as to means, i.e. they have to make all efforts to obtain parliamentary authorisation for ratification. As of 1 January 2018, 9 EU Member States (Germany, Austria, Cyprus, Spain, France, Latvia, Lithuania, Portugal and Slovakia) have ratified the Protocol.

 

In April 2014 the EU adopted a new Tobacco Products Directive, replacing the 2001 version by harmonising rules on the manufacture, presentation and sale of tobacco and related products, setting a transposition deadline of 20 May 2016. Via two Council Decisions adopted in June 2016, the EU triggered the entry into force of the Protocol within EU territory as regards the parts coming under its exclusive competences, before depositing a formal instrument of ratification with the Secretary-General of the United Nations the following week. However, until 40 instruments of ratification have been deposited as required by Article 45-1 of the Protocol, the latter will not enter into force in the international legal order. As long as this remains the case, the Protocol cannot form an integral part of EU law.

 

Nevertheless, by virtue of the general principles of customary international law, and more particularly the principle of good faith, every EU Member State is a priori under an obligation not to endanger the object and purpose of the Protocol. Moreover, based on the rules of international law, the 9 EU Member States that have already ratified the Protocol can endorse the implementation of the agreement within their respective territories even in the absence of its entry into force at international level. In any potential legal action involving a Member State that disregards the delegated act in favour of the Protocol, a plea of illegality could be raised, rendering the delegated act inapplicable to that Member State even if said act continued to exist in the EU legal order. The judge in question could ask the EU Court of Justice to give a preliminary ruling on the validity of the delegated act. Equally, any of those 9 Member States might be inclined to file an action against the Commission, seeking the annulment of the delegated act based on a failure to respect international legal obligations and on a violation of Article 216 TFEU.

 

II.             The primacy of international commitments

 

The wording of Article 216-2 TFEU confirms the primacy of international commitments over derived EU law. For such law as described in Article 288 TFEU, the fact that the act (regulation, directive or decision) may be a legislative, delegated or implementing act is immaterial; all such acts come under derived EU law.

 

The question of formal primacy has to be distinguished from the question of material primacy, even though the two are closely linked. A delegated act or implementing act (i.e. non-legislative acts) adopted under the TPD must be in conformity with the TPD (i.e. legislative act), which in turn must be in conformity with the provisions of the Protocol. If it is a question of supplementing non-essential elements or defining uniform conditions of application, there is a presumption of conformity with the basic legislative act.

 

The legal issues become subtler and more delicate when we consider the obligation incumbent upon the EU institutions as an obligation of compatibility rather than conformity. However, on this point legal doctrine as well as case law clearly points towards an obligation of conformity. If the provisions of the proposed delegated and implementing acts comply a priori with the text of the TPD and more precisely Article 15 thereof, this naturally leads us to ask the following question: is Article 15 of the TPD in conformity with the letter and spirit of the relevant provisions of the Protocol?

 

The EU Court of Justice has on several occasions ruled on the validity of the TPD, never finding fault with it (three judgments delivered on 4 May 2016, including two preliminary rulings and an action for annulment. See cases C-358/14, C-477/14 and C-547/14). However, it should be noted that the cases submitted to the Court concerned either the selected legal basis of the TPD or specific provisions (Articles 20 and 23 regarding the issues of menthol and electronic cigarettes). Thus, the Court was not called upon to decide on Article 15 of the TPD and its potential non-conformity with the Protocol, specifically Articles 8-2, 8-12 and 8-13 thereof.

 

These provisions of the Protocol clearly indicate that the tracking and tracing system must be under the control of the State, industry participation must be limited to the extent strictly necessary and responsibilities must not be performed by or delegated to the tobacco industry. As for Article 15-8 of the TPD, it requires tracking and tracing data to be stored by an independent third party with whom tobacco manufacturers and importers conclude a contract.

 

There is no mention in the TPD of the industry prohibition enshrined in the WHO Protocol; therefore, at first sight, nothing a priori prevents the tobacco industry from taking part in tracking and tracing operations. Nonetheless, the presence of the independent third party seems to rule out the latter scenario. Strictly speaking, the way Article 15-8 is drafted does not directly contradict the relevant provision of the Protocol, but it disregards an essential component in the implementation of the legal and technical mechanism for traceability of tobacco products. It is clear that a judge ruling on this issue would, in order to ensure a correct interpretation, have to restore the purpose and integrity of the system envisaged by the Protocol, as judges have had several opportunities to do, particularly in the context of the TPD itself (CJEU Philip Morris Brand SARL e.a. 4 May 2016, C-547/14, ECLI:EU:C:2016.325§70).

 

III.          Launching an action for annulment

 

Regarding the EU’s international commitments, the general rule is that a provision of an international agreement cannot be directly invoked in support of an action for annulment against an EU act. That said, there are two exceptions to this rule. The first concerns the specific character of the agreement invoked; the second is linked to the nature of the provision(s) in question.

 

Concerning the very particular case of World Trade Organisation (‘WTO’) agreements, the Court of Justice can rule on the validity of an EU act in relation to international treaties provided two conditions are fulfilled: the EU has declared itself in favour of applying that specific provision of the agreement, and the EU legal act expressly refers to one or more provisions of that agreement. In addition, invoking an international treaty provision against a rule of derived EU law to obtain the latter’s annulment requires the fulfilment of two cumulative conditions: the text of the agreement does not prohibit such invocation and the relevant provision is actionable, i.e. it poses no difficulty of interpretation for the judge.

 

In this case, neither the general scheme and character of the Protocol nor any specific article thereof prohibits the invocation of any of its provisions in support of an action contesting the legality of an EU act. Likewise, the wording of Article 8 (in particular paragraphs 2, 12 and 13) appears to be sufficiently clear, precise and unconditional so as to exclude any doubt about the nature of the obligations set down and how they should be implemented: the fulfilment of these obligations cannot be entrusted to the tobacco industry either directly or indirectly on the basis of a delegated act.

 

At first sight, the understanding of these provisions can seem somewhat delicate given the use of the term “tobacco industry”, to the extent that the Protocol does not mention it in the definition of terms in Article 1, nor does the Protocol provide a definition allowing for a precise determination of the term’s scope. It therefore suffices to refer to the FCTC which defines the “tobacco industry” as “tobacco manufacturers, wholesale distributors and importers of tobacco products.” This definition is broad enough to encompass a priori all stakeholders and professionals working in the tobacco sector, with the exception of retail distributors of tobacco products.

 

The term “tobacco industry” must however be read in conjunction with the definitions set down in the Protocol, in particular the term “tobacco supply chain” which excludes small-scale growers, farmers and producers. As a result, it can reasonably be deduced that none of the latter form an integral part of the “tobacco industry”.

 

Nonetheless, uncertainty remains with regard to manufacturing equipment, which is not explicitly included within the concept of “tobacco industry”. Based on a strict interpretation, we must conclude that manufacturing equipment is excluded insofar as it is not necessarily exclusive to the tobacco sector. Therefore, it is reasonable to conclude that part of the Protocol could envisage the conclusion of data storage contracts with an independent third party manufacturer of equipment for the tobacco industry.

 

A potential ambiguity on this point is only apparent due to the general scheme of the two international agreements mentioned above and thus does not as such call into question the clarity of the relevant Protocol provision.

 

IV.          The principle of good faith in international law

 

The law of treaties imposes a general obligation upon States that have signed an international treaty to refrain from jeopardising that treaty’s object and purpose pending its ratification and entry into force. This obligation, derived from custom, was codified by the Vienna Convention on the Law on Treaties, which was concluded on 23 May 1969 and entered into force on 27 January 1980, in particular Article 18. However, the latter provision extends beyond the circle of States party to the Vienna Convention due to a customary obligation, most notably the obligation to act in good faith. Therefore, it concerns all States that are members of the international community. The mere fact of not being a party to the Vienna Convention cannot be invoked by a State to justify a failure to respect the legal principle of good faith.

 

Can we therefore consider the European Union as being required under this obligation not to adopt any acts of derived EU law on the grounds of non-conformity with an international agreement? Due to its character as an international organisation, the European Union is not bound by the 1969 Vienna Convention since the latter is only open to States (Articles 1 & 83). Consequently, it is not possible to enforce Article 18 of the Vienna Convention against the EU.

 

Nevertheless, in order to extend the scope of treaty obligations to include international organisations, a Vienna Convention on the Law of Treaties between States and International Organisations, or between International Organisations, was concluded on 20 March 1986 in Vienna. Article 18 of this later Convention incorporates the same wording as that contained in the 1969 Vienna Convention. However, due to an insufficient number of ratifications, the 1986 Convention has not yet entered into force (Article 85).

 

If the EU is not technically bound by this text by virtue of a failure to sign or accept it, should we consider that via Article 18 of the 1986 Convention, the drafters of that provision did nothing more than give written form to a pre-existing customary obligation known in international law as ‘good faith’?

 

For at least 200 years, it has been unanimously acknowledged in the law of treaties, in decisions of international and national courts, in national administrative practice and in legal doctrine that from the moment it signs an international treaty, a State is prohibited by virtue of a ‘pre-conventional’ obligation from adopting any act or pursuing any conduct liable to hinder the achievement of the object and purpose of that treaty, on the basis of customary international law and the principle of good faith.

 

As a result, the European Union (along with its Member States) is, by virtue of having signed the Protocol, provisionally bound by the principle of good faith. The adoption of any legal act that is not in conformity with the EU’s international commitments is likely to render that act inapplicable and expose the EU to legal action at international level.

 

It must also be examined whether or not Article 8 of the Protocol, in particular those provisions prohibiting the tobacco industry from being entrusted with implementing the obligatory tracking and tracing system, are at the core of the Protocol mechanism. In other words, should these legal provisions be regarded as an essential and integral component of the agreement? If so, a failure to comply with them could deprive the Protocol of its object and purpose.

 

To answer this question, we must turn to the preambles of the Protocol and the WHO Framework Convention, these two instruments being interlinked.

 

If the purpose of the FCTC is to protect against the harmful effects of tobacco, the purpose of the more specialised Protocol is to eliminate all forms of illicit trade in tobacco (Article 3). However, as the preambles of both agreements emphasise (recitals 18 and 16 respectively) and as Article 5-3 of the FCTC states explicitly, the implementation of these texts depends on States being vigilant in their dealings with the tobacco industry, so that any national plans to fulfil their obligations are not endangered.

 

In light of the above, the content of Article 8 of the Protocol is inseparable from the Protocol’s objective. Consequently, this provision is essential in terms of achieving the purpose of the agreement. Therefore, the European Union is required, by virtue of the principle of good faith, not to jeopardise the achievement of this legal obligation.

 

V.             The principle of legitimate expectations

 

Embedded in the EU legal order, this principle is the counterpart of the international principle of good faith, although it must be emphasised that its scope is broader and concerns economic operators. The Court of Justice has on several occasions stressed the applicability of the principle of protection of legitimate expectations within the EU legal order as well as the possibility for any economic operator to invoke it against the conduct of an EU institution (CJEU 30 April 2014, Tisza Eromu kft, T-468/08, ECLI:EU: T 2014; 235, pt 321). Moreover, some experts in international law (e.g. Professor Robert Kolb) have used the term “good faith/legitimate expectations” to emphasise the similarity between the two principles.

 

Under the principle of legitimate expectations, assurances provided by the EU administration to an economic operator must be precise, unconditional and consistent. Those assurances must give rise to a legitimate expectation on the part of the economic operator, and must be in compliance with applicable rules (CFI 6 July 1999, Forvass, T-203/97, pt.70). This applies to legislative acts as well as derived acts (delegated acts and implementing acts).

 

The Court of Justice often couples the principle of legitimate expectations together with the principle of legal certainty, given the extent to which they intersect. More precisely, the principle of legal certainty has a broader and more encompassing scope than legitimate expectations. As a result, the latter is one of the constituent elements of legal certainty, which has the purpose of, on one hand, ensuring a high standard of the rule of law and, on the other, guaranteeing the effectiveness of litigants’ rights.

 

As for the relationship between the Protocol and the relevant provision of the TPD, the question of failing to respect the protection of legitimate expectations can be raised. Even if it is possible to call into question the contradiction between the obligations envisaged by each of these texts and the uncertainty as to how economic operators should act, it is more sensible to combine both principles, since the principle of legal certainty implies a need for predictability in terms of the effects of the rule of law. It requires precision, clarity and security for those to whom the law is addressed. The legal uncertainty resulting from the existence of contradictory rules has been condemned by the Court of Justice which has upheld the need for clear, certain legislation, even where the case involved contradictory provisions within the same EU act (CFI Opel Austria/Conseil, 22/01/1997, T-115/94).

 

At the time of writing, the Protocol has received 34 ratifications. Therefore, it will not enter into force until six further ratifications, acceptances, approvals or formal confirmations by signatory States or regional economic integration organisations have been deposited (Article 45-3).

 

For the moment, the Protocol has not yet entered into force within the EU. However, under the rules of international law, the EU institutions are obliged fully to respect the clear, precise and unconditional provisions of the Protocol. Therefore, the principle of independence in the tracking and tracing system, which should be read in conjunction with requirements of public authority control and strict limitation in interaction between those authorities and the tobacco industry, must be implemented by the EU already on the basis of the principles of good faith under international law and legitimate expectations under EU law.

 

The object and purpose of the Protocol cannot be endangered pending the imminent and indisputable entry into force of that agreement; otherwise the implementation of WHO law on combatting illicit tobacco trade in the European Union will be put at risk.

 

Strasbourg, 21 January 2017

 

Christian Mestre

Former Dean of the Law Faculty, University of Strasbourg

Professor of Law, University of Strasbourg & College of Europe Bruges

Lawyer at Racine Law Firm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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