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The OMC and Democratic Legitimacy:
Legal Limits of EU Employment
Regulation
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Student number: 11119411 E-mail: hsheidisuorsa@gmail.com
University of Amsterdam International and European Law
European Union Law Master thesis 13 453 words
Author: Supervisor:
Heidi Suorsa dr. Ronald van Ooik
Acknowledgements
I would like to thank my supervisor, dr. Ronald van Ooik, for his insightful and honest, but always fair feedback. His knowledge and attention for detail never fail to astound me. Furthermore, I am
thankful for the input provided by my second reader, dr. Laurens Ankersmit, at my master thesis presentation. Both have contributed to my writing performance immensely.
I thank my classmates in the track European Union Law at Amsterdam Law School for being the best motivation (and competition) I could have asked from this past year. I foresee them becoming
the best and the brightest in the legal field.
I am thankful for the unconditional support of my family and friends, in Finland, the Netherlands, and elsewhere. Special thanks go to Sjoerd who’s patience this thesis might have tried the most.
Finally, I would like to thank the four-legged family members who have helped get through frustrations at different parts of this project and life, at different parts of theirs.
Thank you, Lilly, Justus, and Lumi! -
I. Abstract
Since the introduction of the European Employment Strategy (EES) and the Open Method of Coordination (OMC) in the 1990s, these soft modes of employment governance have seen a growing criticism for their lack of democratic legitimacy. Nonetheless, now more than 20 years later both remain intact, mainly due to a persisting paradigm that suggests that soft modes of governance are the best alternative for coordinating member states' employment policies, in the absence of other options. Such an approach takes for granted that other alternatives do not exist without entertaining that possibility, an idea this thesis refutes. This thesis addresses that gap in legal scholarship by exploring hard law alternatives for the replacement of the current OMC framework. The research is limited to a legal analysis of hard law options, aiming to discover whether the EU treaties as they currently stand allow for the adoption of binding OMC measures, or whether such acts would require treaty change. Ultimately, the thesis identifies the paradox, that the way the OMC is implemented today, can hardly constitute an excellent political compromise between hard law and no member state cooperation at all, since hard law is likely to be less intrusive than soft law, by virtue of the legal limits posed by the EU treaties.
II. List of abbreviations
CJEU Court of Justice of the European Union
CSR country specific recommendations
ECB European Central Bank
EES European Employment Strategy
EP European Parliament
EU European Union
EUBS European Unemployment Benefit Scheme
NRP National Reform Programme
OLP ordinary legislative procedure
OMC Open Method of Coordination
SGP Stability and Growth Pact
SLP Special Legislative Procedure
TEU Treaty on European Union
Table of contents
1. Introduction………..………..1
1.1. Research puzzle and problem definition………...2
1.2. Methods of analysis………...3
1.3. Outline………...4
2. The nature of soft governance in the context of employment and social policy………...7
2.1. EU employment and social policy before the crisis………....…..8
2.1.1. Background of the European Employment Strategy……….……..…...8
2.1.2. Introducing the Open Method of Coordination………..9
2.2. Soft modes of governance post-crisis………..10
2.2.1. Coupling social policy with economic goals………10
2.2.2. Functioning and institutional framework……….12
2.3. Conclusions……….14
3. The democratic legitimacy of soft governance………...15
3.1. Defining European democracy………16
3.1.1. Input legitimacy………....16
3.1.2. Throughput legitimacy………...17
3.1.3. Output legitimacy……….18
3.2. Democratic legitimacy of soft governance in European employment policy………….19
3.2.1. Representation of citizens……….19
3.2.2. Facilitating participatory democracy………..21
3.2.3. The effectiveness of soft modes of governance………...22
3.3. Conclusions……….25
4. Replacing the OMC with hard law: Legal alternatives and limits………..26
4.1. The EU’s competence in the field of employment………..27
4.1.1. Aim and content of the OMC measures in the field of employment………….29
4.1.2. Choosing the appropriate hard law instrument………..……...29
4.2. Choosing the legal basis………..31
4.2.1. Soft modes of employment governance (Art. 148 TFEU)...32
4.2.2. Binding incentive measures (Art. 149 TFEU)...33
4.2.3. Flexibility clause (Art. 352 TFEU)...35
4.3. Democratic legitimacy of binding employment OMC measures………....36
4.3.1. Input legitimacy………....38
4.3.2. Throughput legitimacy………..………...39
4.3.3. Output legitimacy……….40
4.4. Conclusions……….41
5. The conclusions………....….42
5.1. Suggestions for further research………..43
1. Introduction
According to the European Commission, the European Employment Strategy (EES) created 10 million jobs in the period 1997-2002. Since 1997 the EES, governed by the soft law tool called 1 the Open Method of Coordination (OMC), has aimed at reaching full employment in Europe. 2 Today, this commitment towards the creation of a “social dimension” of European integration has culminated in the Europe 2020 strategy. As a social Europe materializes, we see an increase in new modes of governance such as the OMC, as opposed to familiar hard law alternatives like regulations and directives. The appeal of the OMC derives from its intergovernmental and3 voluntary nature, which appears suitable for sensitive areas like social policy. As a result, modes of soft governance have been introduced in several policy areas where the European Union (EU) enjoys little or no competence, such as unemployment, social inclusion, and pensions. However, 4
1 Karen M. Anderson, Social Policy in the European Union (London: Palgrave, 2015), 117. 2Id. 115.
3 Adrianne Héritier, “New Modes of Governance in Europe: Policy Making without Legislating,” Reihe
Politikwissenschaft Political Science Series 81 (March 2002): 3.
4 Nina Büttgen, “EU Employment Governance Revisited: Towards an Innovative Legal Framework for
the early endorsement of ‘soft governance’ has later transformed into growing criticism on several grounds, including democratic legitimacy, pushing for a transformation of how EU social and employment policy is governed. This thesis aims to analyze whether the soft law instrument 5 of the OMC, as it functions in the EU today, is the most democratically appropriate means of governing employment policy at EU level and whether there are legal hard law alternatives.
1.1. Research puzzle and problem definition
The non-legally binding means of governance upon which soft governance relies is based on an iterative review of the member states’ abilities and efforts to respond to guidelines and recommendations issued by the Council of the European Union (the Council) and the Commission. Formally, the targets are based on policy learning and best practice, and6 compliance is monitored by peer-review. Although failure to act on the basis of measures of soft 7 governance often lack legal ramifications, the political consequences are manifested in the mechanism for naming and shaming. The performance of the member states is ranked and8 compared annually. However, some research suggests that the OMC is an inefficient means of coordinating member states’ policies. Empirical study has shown that the impact and influence of the OMC in the member states are mostly uneven and often marginal. 9
However, if the OMC measures do influence member states’ employment policies, one must ask: are soft modes of governance democratically legitimate means of tackling unemployment in the EU member states? If the rationale behind soft law underestimates the will
of the member states to perform well and maintain their public image and as a consequence make uncharacteristic policy-decisions, the democratic credentials of soft governance must be studied.
5 Jonathan Zeitlin, Introduction: “The Open Method of Coordination in Question,” in The Open Method of
Co-ordination in Action: The European Employment and Social Inclusion Strategies, ed. Jonathan Zeitlin, Philippe Pochet and Lars Magnusson (Brussels: Peter Lang, 2005), 23-24.
6 Martina Prpic, European Parliament, Open Method of Coordination - At a glance (2014), accessed April
26, 2019,
http://www.europarl.europa.eu/EPRS/EPRS-AaG-542142-Open-Method-of-Coordination-FINAL.pdf, 1.
7 Anderson, Social Policy, 115-116. 8Ibid.
9 Mikkel Mailand, “The uneven impact of the European Employment Strategy on member states’ social
The focus of such research must be on the institutional framework of soft governance and the 10
consequences of the involvement of individual institutions over others. Furthermore, if the current mode of soft governance in employment policy is deemed undemocratic, we are still left with the dilemma of whether it is the most suitable alternative nonetheless. Therefore, this thesis studies the legal issues behind the competences to adopt hard law, or the lack thereof, of the EU in the field of social policy, and in particular, employment.
1.2. Methods of analysis
The nature of the research requires the utilization of multiple methods. As the research topic falls at the intersection of law and social sciences, the research is interdisciplinary by nature. Broadly speaking, the research is conducted on a socio-legal basis. More specifically, the thesis is written according to a critical evaluative framework. The analytical value builds up as it progresses, intending to arrive at normative conclusions based on objective research.
The aim is to create legal meaning to concepts borrowed from the social sciences in order to provide a well-rounded understanding of this issue which exists, not in the vacuum of one discipline, but a much broader spectrum. For instance, the thesis departs from a historical account of the primary turns and events in social and employment policy. To some extent, the thesis will provide a comparative account of the democratic credentials of the OMC vis-à-vis the democratic credentials of hard law. The parameters of such comparison will be primarily the democratic accountability of the institutions involved in the different processes, weighed against a predetermined definition of democracy. Thus the discussion is here limited, to avoid engaging redundantly with the debate on academic deficits in the EU. Furthermore, a legal analysis is carried out in order to explore legal alternatives for the replacement of the OMC with hard law. For this purpose, a legal basis test as introduced by the Case Titanium Dioxide, is carried out based on a textual interpretation of the Treaties. 11
10 See Fabien Tarpan, “Soft Law in the European Union - The Changing nature of EU Law,” European
Law Journal 21, no. 1 (2015).
Rik de Ruiter, “Full disclosure? The Open Method of Coordination, parliamentary debates and media coverage,” European Union Politics 14, no. 1 (2013): 111.
11 CJEU, C-300/89, Commission of the European Communities v. Council of the European Communities,
The OMC has been adopted in several policy areas. However, due to considerations of feasibility and logic, the research will be limited to EES-related OMC measures aimed at reaching full employment. Furthermore, it goes beyond the aims of this thesis to engage in the debate on the taxonomy of EU soft law measures. At this point, it suffices to know that soft law in the EU has been introduced for a variety of reasons, such as clarifying hard law or creating incentives for the member states to take action in specific fields. Finally, this thesis focuses on policy-making processes at EU level, excluding to the most part from consideration the influence of OMC measures at national level.
1.3. Outline
Following this introduction, the thesis commences with a descriptive account of the relevant notions involved in the research, most importantly, the EES and the OMC. Chapter 2 provides an overview of the nature, framework, and institutional structure of the OMC in the context of the EES. The aim is to provide all information necessary to at a later stage, determine the democratic credentials of this form of governance. In order to capture the sense of development that soft law has undergone, this will be carried out chronologically by differentiating between pre- and post-financial crisis soft law governance. First, the essence of the progress of the EES will be captured by discussing the development and change it has undergone, in order to show whether it still serves the purpose for which it was created in the 90s. Second, the purpose and reach of the OMC must be discussed, specifically concerning its coming into being in the legislative landscape of the EU in the 90s. Focus is to be placed on the involvement of the EU institutions, as well as other relevant parties, in the early OMC. The second section of the second chapter focuses on how the post-financial crisis soft law has changed the nature of soft governance by linking social policy to economic interests, and how this affects the functioning of soft law.
Chapter 3 defines the concept of democracy to create parameter of comparison against which the democratic merits of soft governance are subsequently assessed. The chapter progresses from a descriptive to an analytical evaluation of democratic legitimacy. The first section of the chapter defines democracy in terms of input, throughput, and output legitimacy. Each type of democratic legitimacy is approached individually and defined by narrowing them
down to a set of characteristics or requirements, which are satisfied when characterized in the policy-making process at hand. The second section of the chapter applies these predefined criteria to the policy-making process of soft law in the field of employment, as identified in chapter 2. The chapter will reveal whether soft law is a democratically legitimate means of governing employment policy.
Chapter 4 introduces the alternative means of governing social and employment policy at EU level - hard law. It entertains the legal possibilities of such action on the basis of the EU treaties. This is first approached by evaluating the possibility of coordinating this area by means of hard law. The chapter proceeds with a legal assessment of the existence of EU competence in social policy and in particular, employment. For example, Art. 149 TFEU prohibits harmonization in the field of employment, but does this prohibition encompass coordination? Moreover, when Art. 5 TFEU prescribes employment policy be coordinated through guidelines, does it constitute a suggestion or an exhaustive rule? This is followed by an evaluation of the political will to coordinate such matters at EU level, and whether political reluctance is likely to hinder the coordination of domestic employment policies at EU level. The second step is to give the ordinary legislative procedure (OLP) as defined in Art. 294 TFEU the “democratic reading,” which already was identified in the first section of chapter 2. Again, this analysis encompasses an evaluation of input, throughput, and output legitimacy. The outcome of the analysis will determine whether, from the perspective of democratic legitimacy, hard law is the more appropriate alternative.
Chapter 5: The conclusions, finally answers the question of whether the OMC is a democratic solution to unemployment in EU Member States or whether legal hard law alternatives provide a more appropriate option. Furthermore, it concludes whether the limits of EU competences nonetheless make soft law the only available option for cooperation in the field of employment at EU level, meaning that the Treaties as they currently stand allow the replacement of the OMC measures with hard law, or such action would require treaty change. The chapter is concluded by suggestions for further research to subsequent this thesis. Suggestions are based in particular on limitations of this thesis, recognizing the fact that a
broadened scope and increased interdisciplinarity would enhance the reliability of the results arrived at in this research.
2. The nature of soft governance in
the context of employment and
social policy
This chapter discusses the materialization of a social Europe in terms of the changing legal landscape in which interaction between the EU and the member states takes place in the context of employment and social policy. The two-fold aim of the chapter is 1) to capture the element of progress in European social policy and 2) to set the stage for a comparative analysis of the democratic merits of the soft law and hard law later. The chapter commences with a brief overview of the concepts and mechanisms which according to some marked the beginning of European social cooperation - the European Employment Strategy (EES) and the Open Method of Coordination (OMC). It then proceeds to reflect on the ways that these modes of governance have transformed due to the financial crisis into the soft law which today governs the relationship between the EU and the member states’ social policies. The focus lies with the growing ambition of the social project and its changing institutional framework, and the way this has affected the reach of soft law.
2.1. EU employment and social policy before the crisis
The focus of this thesis, and in particular this chapter, lies with the development of soft law in employment policy, and to some extent, social policy. Important to note is that the EU already has implemented several hard law instruments in this field before the financial crisis. Secondary legislation (within the meaning of Art. 288 TFEU) in employment and social policy has mostly been implemented for negative integration, meaning the removal of obstacles of intra-EU migration. Prior to the financial crisis (2008) the EU adopted nearly 50 pieces of secondary legislation in the field of employment, most of which are in force, albeit in a revised form. 12 However, most of the secondary legislation in the field of employment or social policy aim at removing legislative or administrative barriers of integration in the member states, thus facilitating negative integration. In the absence of hard law instruments facilitating positive13 integration, meaning the collectively applicable rule-making and application of common standards in the member states, the EU has found recourse in the development of ‘new modes of governance,’ a phenomenon that will be discussed next. 14
2.1.1. Background of the European Employment Strategy
In 1993 the White PaperGrowth, Competitiveness, Employment addressed the economic issues in Europe which arose from a lack of coordination of member states’ labor policies. The paper 15 brought to attention the need for a balancing of deregulation and need for increased training, education, and a flexible working environment to enhance Europe’s position as a growing global economy. The 1994 Essen Summit took a step further in the call for a standard European16 employment policy by addressing the potential adverse effects the EMU could have on member
12 For a complete list of secondary legislation see: Secretariat-General (European Commission), EU
Social Law Main Legal Texts 2017, (Luxembourg: Publications Office of the European Union, 2017,) 41-49.
13 Fritz Scharpf, “The Joint-Decision Trap Revisited,” Journal of Common Market Studies 44, no. 4 (2006):
854.
Büttgen, “EU Employment Governance Revisited,” 184.
14 Dimitri Tsarouhas, “The Open Method of Coordination and Integration Theory: are there lessons to be
learned?” Paper prepared for the 11th European Union Studies Association Biennial Conference, (California, USA, 23-25 April, 2009): 14-15.
Büttgen, “EU Employment Governance Revisited,” 184.
15 European Commission, Growth, competitiveness, employment - The challenges and ways forward into
the 21st century: White paper (Brussels, Luxembourg, 1994).
states’ social and labor policies. The proposed solution was the coordination of member states17 employment policies at EU level. 18
The promotion of employment policy became a treaty-based objective with the adoption of the Treaty of Amsterdam in 1997, which included a treaty chapter on employment, now Title IX of the TFEU, subsequently establishing the EES. Since then, the promotion of employment 19 policy has been understood as entailing non-legal obligations for the member states to among other things “upgrade workers’ skills, activate groups with weak attachment to the labour market (youth, women, older workers), and encourage job growth.” The Lisbon Strategy of 2010,20 headed by the OMC, envisaged the EES to be the tool for how Europe was to become “the most competitive and dynamic knowledge-based economy in the world.” 21
Despite much initial enthusiasm, the EES has been subject to much criticism due to the OMC by which it has been governed since its coming into being. However, as will be discussed 22 at a later stage of this chapter, it appears that the soft governance of employment policy encompasses far more today than it did in its early days. Therefore, it is now relevant to assess the nature of the OMC which has been the instrument of choice for the EES since the beginning.
2.1.2. Introducing the Open Method of Coordination
The OMC was introduced as a new mode of governance in connection to the EES in the 1990s. 23 Introducing the OMC created concrete means of tackling issues falling outside the formal competences of the Union, or where there was a lack of political will to cooperate. Such areas include employment and social policy areas not covered by Art. 153 TFEU. The OMC got its 24 formal recognition in 2000 when it was named the means to achieve the Lisbon Strategy 2010
17 European Council, Presidency conclusions - Meeting on 9 and 10 December 1994 in Essen, published
by the European Parliament in 1998, accessed April, 26, 2019,
http://www.europarl.europa.eu/summits/ess1_en.htm.
18Ibid.
19 European Union, Treaty of Amsterdam Amending the Treaty on European Union, The Treaties
Establishing the European Communities and Related Acts, (Luxembourg, 1997) Art. 19. Anderson, Social Policy, 115.
20 Anderson, Social Policy, 115. 21Id. 116.
22 Prpic, European Parliament, Open Method of Coordination, 2.
23 Damian Chalmers, Martin Lodge, “The Open Method of Co-ordination and the Welfare State” ESRC
Centre for Analysis of Risk and Regulation Discussion paper no. 11 (June, 2003): 2-4
goals. The EU had recognized that certain divergences and incoherence in member states’25 policies hampered economic development and contradicted the objectives of the Lisbon Strategy. Thus, soft governance in the form of the OMC was introduced in order to steer member states’ 26
policies by means of soft law towards common EU objectives. 27
In this context, the OMC was characterized by intergovernmental agenda-setting by the Council and monitoring of member state compliance by the Commission. Agenda-setting 28 manifests itself in guidelines and objectives implemented by the Council. Subsequently, in country specific recommendations (CSR’s) the Council and the Commission evaluate the individual follow-through of the guidelines by member states individually. The outcome of the 29 evaluation is finally ranked in order to display exceptionally good or bad performance by the member states. None of the instruments used are legally binding. Thus, the functioning of the OMC is entirely dependent upon the naming-and-shaming mechanism, meaning that no member state wants to be the worst performer. This mechanism excludes the involvement of the European Parliament and the Court of Justice of the European Union (CJEU).
The institutional framework of soft law governance in the field of employment has remained relatively unchanged. However, its enforcement mechanisms and involvement of civil society have developed considerably. Thus, section 2.2. will proceed to evaluate these changes.
2.2. Soft modes of governance post-crisis 2.2.1. Coupling social policy with economic goals
By 2005 the OMC measures implemented in connection to the Lisbon Strategy 2010 had failed to show any meaningful results. It was concluded that the objectives of the Lisbon Strategy had30 been too ambitious and that the means of achieving those goals had been too weak. The 31
25 Anderson, Social Policy, 81-82. 26Id. 114-115.
27 Chalmers, Lodge, “The Open Method of Co-ordination” 3-4.
28 Milena Büchs, New Governance in European Social Policy: The Open Method of Coordination,
(Hampshire: Palgrave Macmillan, 2007), 30.
29 Council of the European Union, “How the European Semester works,” last reviewed November, 21,
2018, accessed April, 26, 2019,
https://www.consilium.europa.eu/en/policies/european-semester/how-european-semester-works/.
30 Anderson, Social Policy, 119.
Chalmers, Lodge, “The Open Method of Co-ordination” 5.
absence of sanctioning mechanisms or incentives for the member states to take action became the weakness of the OMC. Over the next five years, and riding the wave of the financial crisis, the OMC was renewed for the Europe 2020 Strategy. 32
A renewed European cycle was introduced in 2011. The aim was to increase the 33 opportunity for the EU to interact with the member states regularly and across different policy fields. Not only are CSR’s today based on the Europe 2020 Strategy, but they may also address34 other coordination programs such as the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure (MIP). By coupling economic goals with social ones,35 social issues are brought to the core of the functioning of the EU, meaning that not only do the CSR’s now address social policy, but also economic considerations.36 From a procedural perspective, social interests have now been coupled with economic ones in a much more concrete manner than before. Case in point, the first cycle of the European Semester was characterized by austerity measures. 37
It has been argued that the coupling of social and economic considerations under soft law might undermine the social aspect of soft governance by giving social issues an “economic reading.” However, it can also be considered to strengthen the position of social policy as a38 new priority. Where the EU has had limited to no means by which to enforce non-compliance with soft law before the crisis, there is now the possibility of imposing financial sanctions to the member states for poor performance concerning member states’ budgetary policies. Here it39 becomes relevant to discuss how the renewed post-crisis soft governance functions in practice.
32 Paul Copeland, Mary Daly, “The European Semester and EU Social Policy,” Journal of Common
Market Studies 56, no. 5 (2018): 1001.
33Ibid.
Anderson, Social Policy, 79.
34 Anderson, Social Policy, 79.
35 Sonja Bekker, Saskia Klosse, “The changing legal context of employment policy coordination: How do
Social Policy Issues Fare after the Crisis?,” European Labour Law Journal 5 no. 1 (2014): 8.
36 Ibid.
37 Anderson, Social Policy, 75.
38 Bekker, Klosse, “The changing legal context,” 16. 39 Copeland, Daly, “The European Semester,” 1009.
2.2.2. Functioning and institutional framework
The perhaps most important addition to the soft governance of employment policy is the European Semester. It entails an iterative review of policy goals and their implementation in the member states on an annual basis. The Semester is based on a predefined timetable, which sets 40 the pace of the interaction between the member states and the EU. In this context, the EU 41 means the Council and the Commission.
The timetable of the European Semester is the following. In the first phase in January and February, the Council sets broad policy guidelines. This stage has also extended some influence42 to the European Parliament, which now can instigate a dialogue with other EU institutions and individual member states, regarding economic matters relating to the European Semester. It 43 also publishes its own opinion on employment guidelines. In March, the Commission issues 44 draft recommendations to the member states based on an in-depth policy review of macro-economic imbalances. The recommendations are published either with the review or45 later with the CSR’s.
The second phase, which spans from April to July, is initiated by the member states which first submit their Stability and Convergence Programs and their National Reform Programs (NRP’s). The former relates to member states budgetary strategies, while the latter46 relates more to social policy and employment, illustrating the coupling of economic and social interests. In May, the Commission issues draft CSR’s that are forwarded to the Council. The47 48 Council usually agrees with the Commission's proposal and finally implements them. Finally, when the Council has adopted the recommendations, the member states are invited to implement them. 49
40 Anderson, Social Policy, 119. 41Ibid.
42 Council of the European Union, “How the European Semester works.” 43Ibid. 44Ibid. 45 Ibid. 46 Ibid. 47 Ibid. 48 Ibid. 49 Ibid.
The third and final stage mainly takes place at national level and spans from July until the end of the year. The purpose is to allow member states to take the time to implement EU recommendations when drawing up their budgetary plans for the coming year. However, as50 previously mentioned, the member states are, in theory, not obliged to implement the recommendations.
In addition to the mechanisms related to the European Semester, which increasingly allow economic and social interests to overlap, soft governance has enforcement mechanisms which to some extent are unique for social policy. Most of the previously mentioned such as benchmarking, best practice, and naming and shaming, are still relevant today. The Commission has created a platform dedicated specifically for this purpose - the European Social Scoreboard. 51 The scoreboard ranks member states’ efforts and compliance with the EU’s soft measures in social policy. This way, laggards are flagged, and ambitious welfare states get recognition for their efforts. In this sense, the OMC has significant practical effects.
Furthermore, the previously mentioned increased interconnectedness of economic and social interests has expanded the possibilities of sanctioning member states for non-compliance with the OMC measures. The three main mechanisms with separate economic targets which today are linked to social goals are the SGP, MIP, and the Two-Pack. These all allow the 52 sanctioning of member states after persistent non-compliance with targets set in recommendations. To what extent the ground of sanctioning may overlap with social targets is53 still quite unclear.54 On the one hand, employment and economic targets are undeniably interlinked since employment policy “finds itself sandwiched between social policy and economic policy”. On the other hand, the EU lacks the competence to regulate employment in55 some respects. Inter alia, Art. 153(5) TFEU prohibits EU interference in matters relating to pay.
Thus, it seems that sanctions based on the SGP, MIP or the Two-Pack are possible where there 56
is an overlap of economic and employment/social interests due to the interconnectedness of the
50 Ibid.
51 Anderson, Social Policy, 120.
52 Bekker and Klosse, “The Changing Legal Context,” 8-9. 53Ibid.
54Id. 17.
55 See Büttgen, “EU Employment Governance Revisited,” 184, Figure 6.1. 56 Bekker and Klosse, “The Changing Legal Context,” 7.
fields, as long as those sanctions do not violate limitations posed by the treaties. Nonetheless, this means that there can be a considerable level of accountability of member states towards employment and social goals to be achieved deriving from soft law, and OMC measures in particular.
2.3. Conclusions
Introducing the European Semester, has increasingly interlinked economic and social interests in soft modes of governance. The soft governance of employment policy has expanded its functioning to more EU institutions, to broader policy fields, and it has increased the opportunity to enter into dialogue with the parties which govern its functioning. Compliance is formally voluntary. However, non-compliance is still undesirable and can now result in sanctioning, begging the question of how voluntary it is. All these changes have aimed at addressing the relative lack of effectiveness of soft governance, the OMC in particular, and the criticism on a lack of democratic legitimacy. The next step is to assess whether the amendments have been successful in addressing these concerns by evaluating the democratic legitimacy of the policy-making process described above.
3. The democratic legitimacy of
soft governance
This chapter is divided into two parts; the first dedicated to a descriptive definition of democracy and the second dedicated to an analytical application of the definition into soft law in the context of employment and social policy. The purpose of the first part is to identify the variables of governance which contribute to democratic legitimacy by differentiating between input, throughput, and output legitimacy. These three concepts are addressed separately and defined using elements that set the requirements for their fulfillment. The second part aims to determine whether soft law is a democratically legitimate means of coordinating employment policy by applying the definition of the first part into the context of social policy and soft governance as discussed in chapter 2. Again the three cornerstones of democratic legitimacy will be evaluated individually with an employment and social policy focus. The purpose is to evaluate the
democratic credentials of soft governance in the field of (social and) employment policy, to later determine whether there are more appropriate alternatives.
3.1 Defining European democracy 3.1.1. Input legitimacy
Input legitimacy refers to how the EU takes into account the will of its citizens either through representation or participation. The concept is most commonly used to assess the democratic 57 legitimacy of majoritarian EU institutions such as the European Parliament or the Council since their very functioning is rooted in the representation of their citizens due to inter alia elections or dialogue with civil society. 58
This thesis defines input legitimacy as 1) effective representation of citizens and 2) relatable politics. The first requirement refers to the representative democracy prescribed by Art. 10 TEU. According to Art. 10(2) TEU the democratic legitimacy of the Council draws from the accountability its members hold towards their parliaments or citizens. Thus, the effective representation of citizens in the Council is dependent mainly on national procedure. This suggests that the representative democracy which can be facilitated directly at EU level is limited to the European Parliament, which is directly elected by the EU citizens and therefore represents its constituents.
The second element of input legitimacy refers to the possibility and probability of mobilization of the masses, which necessitates that the politics at EU level are relatable. This can be understood as the participatory democracy prescribed by Art. 11 TEU. Individuals have to be able to engage in European politics and interact with the EU institutions in order to influence the policy-making process, which necessitates an understanding of the said process and the issue at hand. As long as individuals experience that the process is too complicated or that the issues do not concern them, it is unlikely that a political mobilization of the masses will happen, adversely affecting the likelihood that a participatory democracy will materialize. Even more fundamentally, the general public must be aware of the policy-making in the relevant field.
57 Vivien A. Schmidt, “Democracy and Legitimacy in the European Union,” in The Oxford Handbook of the
European Union, ed. Erik Jones, Anand Menon and Stephen Weatherill (Oxford: Oxford University Press, 2018), 662-663.
These arguments overlap with the first element of representation since it also suggests inter alia that it decreases the probability of individuals voting in European Parliament elections.
3.1.2. Throughput legitimacy
Throughput legitimacy is a concept that has developed more recently to fill the theoretical void left by the concepts input and output legitimacy. This thesis defines throughput legitimacy as a 59 policy process which 1) is open and transparent, and 2) can hold its actors accountable. As a theory, throughput legitimacy assumes that a democratically legitimate policy-making process allows the general public to follow the process without hindrance and ensures that the relevant EU institutions can be held accountable for their decisions. 60
If input and output legitimacy suggest that policy-making should happen by the people,
for the people - throughput legitimacy adds that it should take place with the people. The first61 requirement for throughput legitimacy is, therefore, that the policy-making process should be transparent and open, in order to facilitate interaction between the EU and the general public. This means that individuals should be inclined to organize themselves in interest groups and initiate dialogue with policy-makers. Throughput legitimacy is, therefore, a theoretical concept that can address both majoritarian as well as non-majoritarian institutions. The materialization of interest groups and their proper functioning is dependent on transparency and access to information about their particular interests. In practice, this means that the general public should be informed on the workings and decision-making, as well as the agendas of all EU institutions as quickly and effectively as possible. Again, there is an overlap with input legitimacy as it prescribes participatory democracy by facilitating the mobilization of the masses. Scholars often refer to this phenomenon as the materialization of a demos. However, in contrast to input legitimacy, which mainly refers to the institutional set-up and public visibility of policy-making efforts leading up to the policy-making process, throughout legitimacy refers to transparency throughout the process.
59 On the introduction of input and output legitimacy see: Fritz Scharpf, Demokratietheorie zwischen
Utopie und Anpassung (Konstanzer Universitätsreden, 1970).
60 Schmidt, “Democracy and Legitimacy,” 670.
The second element of throughput legitimacy is accountability. EU institutions should be held responsible for the process going into decision-making and the outcome. An absence of accountability undermines the first element of interaction with civil society, as it would incentivize such action on behalf of the EU institutions. Accountability can be increased either in a less binding manner such as peer-reviewing or, for example, employing a more invasive judicial review.
3.1.3. Output legitimacy
Output legitimacy is the concept developed for evaluating whether the result of the policy-making process effectively accommodates the needs and the will of the people. As 62 opposed to input legitimacy, this concept is most commonly used in the context of non-majoritarian institutions such as the European Central Bank (ECB), the CJEU, and most importantly, the Commission, as these are more independent by nature and thus have no formal obligation to decide on the basis of majoritarian rule. 63
The European Citizens’ Initiative (ECI) is essential for the analysis of output legitimacy since it is the formal mean for EU citizens to “approach the Commission with a request inviting it to submit a proposal for a legal act.” Recommendations are listed as a legal act under Art. 64 288 TFEU, suggesting that EU citizens may instigate a dialogue with the Commission on CSR’s. An empirical evaluation of the frequency that European Citizens’ Initiatives are addressing the OMC would go beyond the purposes of this thesis. At this point, it suffices to acknowledge that carrying out such a dialogue is a legal possibility. It must, however, be borne in mind that initiatives are rejected when the proposed legal act goes beyond the competences of the Commission as laid down in the treaties. 65
Output legitimacy is perhaps the most challenging concept to define since it cannot be easily narrowed down to a specific set of elements. It merely sets the stage for a comparative analysis of expectations versus outcome, the metric of comparison being dependent mainly on
62 Catherine Bernard, Steve Peers, European Union Law (Oxford: Oxford University Press, 2017), 4-5. 63 Schmidt, “Democracy and Legitimacy,” 663.
64 European Parliament, The Council, “Regulation No 211/2011 on the citizens’ initiative”, OJ L 65/1,
16.2.2011, preamble 1.
input and output legitimacy, as well as effectiveness. For example; to what extent has the EU 66 been capable of adequately delivering on its social programs?
It can be concluded from this section that this thesis defines a democratic policy-making process as one which effectively allows the general public to be represented by the inclusion of institutions which represent the EU citizens, which through transparency and accountability facilitates the materialization of interest groups and their interaction with the EU, and finally which can produce an outcome that effectively accommodates the will of the people and accommodates the concerns voiced by the general public throughout the process. This definition will now be applied to the nature of soft governance, as identified in chapter 2.
3.2. The democratic legitimacy of soft governance in European employment policy 3.2.1. Representation of citizens
As concluded earlier, input legitimacy is defined as the effective representation of citizens in majoritarian institutions, the active involvement of such institutions in policy-making, and relatable politics. The EP is the EU institution which most directly represents the European citizen’s through direct elections. Therefore, if the involvement of one EU institution could67 guarantee the democratic representation of the EU citizens, it would be the EP. However, as we have seen in chapter 2, the powers of the EP in the European Semester is limited to the publishing of an opinion relating to employment policy and the entering into dialogue with other EU institutions. It is still relatively unknown to what extent these mechanisms are influential in the policy-making procedure. However, parliamentary involvement should perhaps not be limited to the EP. One point of criticism of the soft governance of employment and social policy has been the lack of involvement of national parliaments in the policy-making process. In the policy-making process of hard law, one of the most critical roles of the national parliaments is safeguarding the principle of subsidiarity. According to Protocol (no. 2) Art. 7, member states can make the adoption of proposed legislation more difficult when they suspect that the EU
66 See Caroline de la Porte, “State of the art. Overview of concepts, indicators and methodologies used
for analyzing the social OMC,” Working Papers on the of Work and Welfare in Europe 15 (2010): 9.
would not be capable of regulating in the relevant field more effectively than the member states. However, this system is limited to legislative acts, thus excluding soft law instruments.
Scharpf has held that robust parliamentary control (especially by the EP) in the policy-making process is irrelevant as long as there is a lack of a collective European political identity, the existence of which necessitates relatable politics. Here it is relevant to assess 68 whether the European citizens experience that a common European social policy exists and whether it is relatable. First of all, EP election turnouts are relatively low, illustrating the weak public interest in European politics. Secondly, social policy is a field which is mostly regulated 69 at a national level, suggesting that it is most commonly associated with national politics. As has been concluded, the actual progress in social policy at EU level has taken place in the form of soft governance. Studies have shown that the general public is not aware of the OMC in social policy and that the only actors aware of the OMC at national level are the ones who are involved with it directly, such as government officials or NGO’s. 70
Consequently, the individuals who vote in the EP elections rarely take into account the EU’s involvement in employment policy since they are not aware of it. Therefore any involvement of the EP in the policy-making progress still does not increase input legitimacy. In conclusion, soft governance of social policy lacks input legitimacy due to the lack of national parliamentary control of the policy-making progress and due to the lack of a European political identity.
However, it has also been argued that increased parliamentary control would be the solution to the lack of a European demos. The reason is that the collective political identity and71 interest in social and employment policy-making would materialize as a result of the awareness that the outcome of the process can be affected. Thus, introducing a role or increasing the role 72
68 Fritz Scharpf, Governing in Europe: Effective and Democratic? (Oxford: Oxford University Press, 1999),
22.
Milena Büchs, “How Legitimate is the Open Method of Coordination?,” Journal of Common Market
Studies 46, no. 4 (2008): 768.
Schmidt, “Democracy and Legitimacy,” 667.
69 European Parliament, “Results of the 2014 European elections - Turnout,” accessed April 29, 2019,
http://www.europarl.europa.eu/elections2014-results/en/turnout.html.
70 de la Porte, “State of the art,” 9.
71 See Andreas Follesdal, Simon Hix, “Why there is a Democratic Deficit in the EU: A Response to
Majone and Moravcsik,” Journal of Common Market Studies 44, no. 3 (2006): 550.
of national parliaments and the European Parliament in the policy-making process is likely to increase the effective representation of citizens, and consequently the input legitimacy.
3.2.2. Facilitating participatory democracy
Reiterating the definition of throughput legitimacy, it refers to the transparency and accountability which eventually leads to facilitation of participatory democracy through the formation of interest groups. Openness and transparency of soft governance vary considerably 73 amongst the different policy fields. However, regarding the employment OMC, all documents and inter-institutional communication is available on the websites of the EU institutions, including CSR’s and NRP’s. However, this level of transparency is limited to the documents on communication between EU institutions and the member states. The information provided directly from the EU on the practical functioning of soft governance and its effectiveness is still relatively ambiguous. Furthermore, the process taking place at national level in the 3rd phase of the European Semester is also relatively unknown and entirely dependent upon national procedure. It is therefore difficult to evaluate the role that soft law measures play at national level irrespective of transparency when it comes to the publication of relevant documents. However, drawing from the previous evaluation of input legitimacy, the level of transparency loses its meaningfulness in the absence of public visibility of soft law measures.
Accountability is perhaps the most controversial issue of soft governance. One might argue that the lack of legal effects of soft law justifies the lack of accountability of EU institutions. Meanwhile, member states can be held accountable for non-compliance with soft law mostly through the non-judicial means of naming and shaming, and as shown in chapter 2, to some extent through sanctioning. However, from a legal perspective, it should be evaluated whether it is possible to challenge soft law before the CJEU. Such an act would constitute the checking of whether in the adoption of the relevant soft law measures, legal limits posed by the Treaties are observed.
A judicial review of EU law is dependent on the existence of legal effects. This discussion requires a distinction between a measure being ‘legally binding’ and a measure
having ‘legal effect.’ It was already concluded in chapter 2 that soft law, and therefore OMC measures, by nature have no legally binding force. The relevant soft law instrument is this instance is predominantly the recommendation which according to Art. 288 TFEU “shall have no binding force.” Consequently, member states are not by law obligated to give force to measures of soft law. By contrast, soft law measures are not by their nature automatically excluded from their possibility of carrying legal effect. Under Art. 263 TFEU the CJEU has jurisdiction to review the legality of “legislative acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions” in addition to “acts of bodies, offices or agencies of the Union intended to produce legal effects vis-a-vis third parties.”
In the case AETR, the CJEU concluded that measures being legally binding is not limited to instruments listed in (what is today) Art. 288 TFEU. In the 74 Grimaldi case, the Court held that it could not automatically be concluded that soft law lacks legal effects. In the case of 75 Belgium
v Commission, the CJEU confirmed this line of reasoning by confirming the possibility of legal effects of a recommendation, making recommendations a potential subject of judicial review. 76 The assessment of legal effects was to be based on the wording, the context, and the substance of the provision, as well as the intention of the drafters. However, most commonly soft law is 77 concluded not to have legal effects, meaning that the opportunities to legally challenge such measures are rare.
3.2.3. The effectiveness of soft modes of governance
Output legitimacy ultimately boils down to the effectiveness of soft governance and to what extent it can deliver what is expected of it. On the one hand, it could be argued that output legitimacy is unattainable as long as European social and employment policy remain politically irrelevant due to lack of knowledge amongst the general public of their existence. Lack of awareness automatically leads to a lack of expectations. On the other hand, it could be argued
74 CJEU, C-22/70, Commission of the European Communities v Council of the European Communities,
ECLI:EU:C:1971:32 (31.3.1971) para. 97-99.
75 CJEU, C-322/88, Salvatore Grimaldi v Fonds des maladies professionnelles, ECLI:EU:C:1989:646
(13.12.1989) para. 8.
76 CJEU, C-16/16 P, Kingdom of Belgium v European Commission, ECLI:EU:C:2018:79 (20.2.2018) para.
44.
that a lack of excessive effect is a democratic virtue. As the OMC is based on an iterative process where goals and objectives are renewed continuously, it is in the interest of the Commission to set realistic targets to increase the likelihood that the member states will attempt to meet them. 78 Adherence to the principle of subsidiarity, in particular, is facilitated for this reason. The Commission frequently consults municipal bodies, NGOs and other members of civil society in addition to the member states in order to increase the chance of implementing successful OMC measures.
Researchers have identified the difficulties in measuring the success or even the effects of the EES. Despite the Commission’s conclusion that the EES has created 10 million jobs in the79 period 1997-2002, it is difficult to prove that this would not have happened without the EES. 80 The reason is primarily that member states tend to use media and political debate to strategically further their agendas by, inter alia, blaming the EU for failed policy implementation. On the81 other hand, when policy changes made in connection to the EES, have been successful, member states tend to want to take credit for their success. Therefore the EES rarely receives any credit 82 for successful employment policy implementation from other sources than the EU itself. This phenomenon further hinders the public visibility that throughput legitimacy also requires. Furthermore, empirical evidence has shown that soft law is more effective when there already is similar hard law in place. The reason is that members of national parliaments are much more 83 likely to consider soft law measures when they seem to supplement already existing hard law provisions such as directives or regulations. 84
Effectiveness can also be evaluated in light of the extent that soft law can be enforced. Despite being a seemingly contradictory phenomenon, there are enforcement mechanisms in place to ensure member state compliance with soft law. As previously mentioned, legal effect refers to the consequences or effects in the legal landscape and practice due to the existence of the measures. For example, national courts frequently interpret EU soft law in conjunction with
78 Milena Büchs, “New Governance in European Social Policy”, 30. 79 Mailand, “The uneven impact,” 355.
80 Anderson, “Social policy,” 117. 81 Mailand, “The uneven impact,” 355. 82Ibid.
83 de Ruiter, “Full disclosure?,” 101. 84Ibid.
hard law, suggesting that those relevant soft law measures have legal effect. Such practice also appears to solidify the role of soft law in the legal landscape by giving it a more concrete role and interpretation. When it comes to enforcement of soft law, involvement of the CJEU is next to impossible due to the lack of legally binding force. Instead, we can identify different ‘modes of soft enforcement’ which vary depending on the nature of the soft law. However, here the more appropriate use of wording would be ‘compliance’ instead of ‘enforcement.’
Member states’ compliance obligations are rooted in the principle of sincere cooperation laid down in Art. 4(3) TFEU. The relevant treaty-based objective requiring cooperation is to “work for [...] a highly competitive social market economy, aiming at full employment and social progress” as is mentioned in Art. 3(3) TEU. However, this loyalty obligation does not extend to soft law measures. It could be argued that compliance with soft law merely goes to show the voluntary commitment of member states to cooperate with EU institutions in collectively working towards EU objectives. Scholars have concluded that the enforcement of/compliance with, relate not so much to the enforceability of the soft law measures themselves, but merely the underlying legal principles and objectives which they aim to serve. Therefore, enforceability 85 and compliance are mostly dependent on the taxonomy of soft law and interests they further, rendering them legally ambiguous means of governing employment.
Not only should output legitimacy be evaluated based on effectiveness, but also based on soft governance. Where effectiveness refers to the extent to which soft governance can facilitate the materialization of a social Europe, assessment of achievements demonstrates the extent to which the developments favor the people. Chapter 2 explained how soft governance of social policy has been linked to economic development after the economic crisis. The relevance of such development becomes evident in an evaluation of the achievements of soft governance. The emergence of austerity measures in the employment OMC has resulted in increasing pressure for the member states to cut welfare expenses. Therefore, the coupling of economic and social 86 interests in soft governance has allowed an originally social project aimed at increasing employment, to lose the elements which more directly benefit individuals. It appears that the
85 Oana Ştefan, “Soft Law and the Enforcement of EU Law,” in The Enforcement of EU Law and Values:
Ensuring Member States’ Compliance, ed. András Jakab and Dimitry Kochenov (Oxford: Oxford University Press, 2017), 206.
renewed soft governance focuses on long-term benefits. Whether these achievements match the expectations individuals have of European social policy remains questionable.
3.3. Conclusions
This chapter has defined the concept of democracy through input, throughput, and output legitimacy. An application of these conditions to the soft governance of social policy as identified in chapter 2 shows that there is a democratic deficit on all three metrics, mostly due to the lack of public visibility and formality of soft governance which overlaps all the types of legitimacy identified. As long as soft governance remains an unfamiliar concept to the general public and the social policy is advocated as a member state competence, input legitimacy is unattainable. Finally, the development of soft governance in social policy, while increasingly including civil society in the process, also fails to facilitate the materialization of a social Europe.
However, democratic legitimacy is a relative concept, and a lack of alternative approaches often seems to justify the use of soft law. Thus, the analysis only becomes meaningful once contrasted against an alternative means of coordinating social and employment policy. The next step is thus to make the analysis relative through comparison, by introducing such an alternative.
4. Replacing the OMC with hard
law: Legal alternatives and limits
So far this thesis has shown that there is merit to the concerns on the lack of democratic legitimacy when it comes to interference through soft modes of governance in member states employment policies. However, this analysis has yet to answer the question of whether the OMC is a democratically appropriate means of coordinating member states’ employment policies in comparison to other alternatives. Soft law can be considered appropriate despite its issues if it is considered to be the best or even only available option, and simultaneously is a better option than no cooperation in employment policy at EU level at all. This chapter will proceed to assess whether hard law would be a more appropriate alternative to the OMC and whether such legal options exist. For this thesis, we are interested in the potential introduction of legal instruments facilitating positive integration, as opposed to the already existing hard law measures facilitating negative integration as discussed in chapter 2. We are therefore interested in secondary
legislation capable of introducing common standards in the field of employment policy. A relevant example is the Commission’s first attempts at introducing a European Unemployment Benefit Scheme (EUBS) which for the time being appear rejected due to a lack of EU competence. The introduction of an EU-wide framework for the payment of unemployment87 benefits, based on secondary legislation, would require harmonization of member states employment and social policies. Consequently, it would constitute a violation of the explicit prohibition of harmonization of member states laws and regulations as laid down in Art. 149 TFEU.
The analysis must begin with an evaluation of whether it is, from a legal perspective, possible to implement such hard law instruments, through an analysis of potential legal bases, commencing with an assessment of how to choose the appropriate legal basis. The analysis is based on a textual interpretation of the relevant Treaty provisions. The second section of the chapter analyses the democratic merits of the two policy-making processes called the ordinary legislative procedure (OLP), also known as co-decision procedure or community method, and the special legislative procedure (SLP), by analogy to the OMC as discussed in chapter 3. Finally, the chapter arrives at its conclusion.
4.1. The EU’s competence in the field of employment
The EU’s ability to adopt hard law is limited by the principle of conferral laid down in Art. 5(2) TEU, which states that EU institutions’ abilities to act are limited to the competence conferred upon them by the Treaties. Employment is listed in Art. 5(2) TFEU as a coordinating competence of the Union, stating that “the Union shall take measures to ensure coordination of the employment policies of the member states, in particular by defining guidelines for these policies.” It appears from the wording of the provision that guidelines are strongly suggested to be the means of policy coordination in the field of employment. However, since Art. 5 TFEU uses the wording “in particular” when describing types of coordinating measures, this cannot be understood to comprise an exhaustive list of measures to be adopted, even to facilitate a positive
87 See René Repasi, European Commission, Legal Options and Limits for the Establishment of a
European Unemployment Benefit Scheme, Written for the research project “Feasibility and Added Value of a European Unemployment Benefit Scheme”, Luxembourg: Publications Office of the European Union, 2017.
integration of employment policies. Otherwise, it would be inappropriate for the Commission and the Council to issue CSR’s in connection to the OMC. As opposed to guidelines, recommendations constitute treaty-based secondary legislation, albeit of soft nature, as listed in Art. 288 TFEU. Furthermore, it has been argued that the provisions categorising EU competences (Art. 2-6 TFEU) do “not in any way affect the material scope of the competences themselves, which are regulated by the terms of the respective legal bases provided in the remainder of that Treaty and in the TEU”, meaning that those provisions are not by any means decisive for determining the existence of EU competence Title IX of the TFEU comprises of 88 the treaty-based provisions on employment, including competence in the field. Thus, an analysis of the existence of an appropriate legal basis is to be based mostly on that title. Art. 145 TFEU specifies the employment objectives of Art. 3 TEU as the aim to “work towards developing a coordinated strategy for employment and particularly skilled, trained and adaptable workforce and labor markets responsive to economic change.”
A legal basis in the EU Treaties is the expression of the existence of EU competence. 89 Any legally binding instrument must be based on a legal basis in the treaties, most importantly because the basis indicates the bodies capable of implementing an act, the content of the measure, and the procedure to be followed for its implementation. The CJEU held in the Case 90
Titanium Dioxide that the choice of the legal basis is to be decided “on objective factors which are amenable to judicial review [....] Those factors include in particular the aim and content of the measure.” Therefore, it will here be assumed that the proposed hard law alternative to the91 OMC ought to have the same aim and content as the current OMC measures in the field of employment in order to as carefully as possible constitute a replacement of the OMC measures. It is, therefore, relevant to evaluate the aim and content of these measures.
88 Bernard, Peers, European Union Law, 108.
89 Repasi, European Commission, Legal Options and Limits, 7. 90 Bernard, Peers, European Union Law, 106.
91 CJEU, C-300/89, Commission of the European Communities v. Council of the European Communities,
