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As it was pointed out above, the Europe Agreement Judgment represents the first occasion on which the Hungarian Constitutional Court carried out the a posteriori constitutional control of an international treaty proclaimed in the Hungarian legal system. Due to the exceptional importance of the issues involved and for the sake of thoroughness, the Court requested the Ministry of Justice and the Ministry of Foreign Affairs [20] to submit their opinions on Berke's first submission. [21] The opinion of the Ministry of Justice [22] was duly communicated by the Court to Berke, who in turn submitted written reflections [23] to the ministerial opinion and - following the delivery of the Preliminary Issues Judgment - a supplementary submission [24] to the Court. Subsequently, the Court requested a fresh opinion from the Ministries. [25] As a result of the exceptional transparency of the submissions, the Court's procedure in the Europe Agreement Judgment evolved into a procedure resembling a classical court proceeding [26] with Berke submitting the more legalistic, theoretic arguments opposing the two Ministries, which promoted a more pragmatic approach.
In order to understand the complexity of the arguments and counter-arguments submitted by the "parties" as well as the elaborate argumentation of the Europe Agreement Judgment itself, it is necessary to identify four significant issues:
(i) What do the 'criteria arising from the application of the rules of Articles 85 [and] 86... EC' referred to by Article 62 (2) EA cover exactly?
(ii) What does the obligation of applying these 'criteria' involve and how do these 'criteria' become effective in Hungarian law?
(iii) Is the sovereignty of the Hungarian Republic affected in any way by the competition co-operation regime? Was the co-operation regime adopted in a proper way?
(iv) Can the unconstitutionality of the Europe Agreement and the Implementing Rules be separated and what are the consequences of unconstitutionality?
The presentation of the Europe Agreement Judgment will follow the original structure of the judgment by simultaneously considering what position the "parties" and the Court took with regard to the above questions. Finally, this paper will try to identify the conclusions to be drawn from the ongoing Hungarian constitutional "saga" of the Europe Agreement, in particular its effects on the future approach of Hungarian constitutional law towards the legal system of the European Communities.
At the beginning of the Europe Agreement Judgment , the Court stated the main conclusions of its judgment. It declared that " in the context of the implementation of Article 62 (1) and (2) in Section 2 of Act I of 1994, it is a constitutional requirement that Hungarian law enforcement authorities cannot apply directly the application criteria referred to by Article 62 (2) EA. "[27] Moreover, in contrast to Article 62 (2) EA, which was not found to be unconstitutional by the Court [28], the Court declared " the first and second paragraphs of Article 1 as well as Article 6 of the Annex to Government Decree 230/1996 unconstitutional ."[29] Finally, " [t]he... Court suspended taking a decision on the annulment of the [above] unconstitutional provisions until 31 December 1999 ."[30]
Following the presentation of the arguments of Berke, the Ministry of Justice and the Ministry of Foreign Affairs, the Court cited the legal provisions relevant for the decision of the case. [31] Instructively, the list starts with the relevant constitutional provisions, although this might merely be the result of the fact that the Court strictly follows the hierarchy of the relevant laws in their presentation:
"According to Article 2 (1) of the Constitution, the Hungarian Republic is an independent and democratic law-based state [Rechtsstaat]. According to Article 2 (2) [of the Constitution], in the Hungarian Republic all power belongs to the people, which shall exercise the peoples sovereignty either through its elected representatives or directly." [32]
Subsequently, the Court identified the core issues of the case:
"[I]n [the Europe Agreement Judgment the Court] had to assess how - in the field of the prohibition of anti-competitive restraints - the legal criteria and principles of Community law may become effective in the Hungarian legal system on the basis of Article 62 EA and the Implementing Rules. [...] Accordingly, the constitutional issue is whether the norms of the domestic law of another subject of international law, another independent system of public power and autonomous legal order [...] can be applied directly by the Hungarian competition authority without these foreign norms of public law having [first] become part of Hungarian law." [33]
Having identified the basic issues of the case, the Court chose a very interesting approach to assess them:
"In the context of [Berke's] submission, the direct effect of Article 62 (1) and (2) EA and the direct applicability of the Community law criteria referred to by Article 62 (2) in the Hungarian legal system needs to be assessed." [34]
Thus, at first sight paradoxically, the Court decided to assess the constitutionality of the Hungarian application of certain foreign (Community) law provisions by having recourse to principles of the same foreign (Community) law. [35] Nevertheless, no matter how paradoxical that approach might seem at first sight, it is not unprecedented. In its First Opinion the Ministry of Justice also assessed whether Article 62 (2) EA could have direct effect. [36] Moreover, the approach of the Court is probably more easily understandable in the light of the foreseeable underlying argument of such an approach adopted by a non-Member State Constitutional Court.
For instance, the Court highlighted that:
"[d]irect applicability distinguishes the appearance of Community law in the Member States from the way in which international treaties may become part of domestic law in general." [37]
In other words, the Court is determined to assess whether the competition co-operation regime has any of the distinguishing characteristics of the application of Community law in the Member States (direct effect, direct applicability) in the context of its effectiveness in the Hungarian legal system, and should the Court find such characteristics, it is also determined to declare the provisions in question unconstitutional based on the simple argument that Hungary is not yet a Member State of the European Union.
Indeed, that is primarily what the Court did.
In its analysis of the eventual direct effect of Article 62 (1) and (2) EA in Hungary, the Court first pointed to the OECs direct obligation to apply the 'criteria':
"In the context of the application of Article 62 EA, the procedural position of undertakings is delineated by the fact that, according to the Implementing Rules, they are subject to the jurisdiction and procedure of the parties competition authorities. In contrast to the opinion of the Ministries [38], the joint interpretation of the first and second paragraphs of Article 1 IR does not only lead to the identification of the parties competition authorities but they also result in the obligation that the OEC has to effectively apply the criteria laid down by Article 62 EA." [39]
This important preliminary remark of the Court was fully in accordance with the submission of Berke [40], who assessed the possibility of the legislative implementation of the co-operation regime but rejected this on the basis of the continuously-evolving nature of competition law and concluded that the executive branch of the Hungarian state was bound to implement the competition co-operation regime. [41]
Subsequently, the Court adhered to the "parties'" shared conviction on the exclusively public nature of the obligations set out in Article 62 (2) EA. [42] On this basis, in contrast to the Ministry of Justice, which carried out a more classic assessment along the lines of ECJ jurisprudence on the direct effect of international treaty provisions [43], the Court also rejected the direct effect of Article 62 (1) and (2) EA:
"Although the requirement and content of the rules in Article 62 (1) EA was clarified by paragraph (2) [of Article 62 EA] and the Implementing Rules, Article 62 EA itself does not create direct prohibitions and legal consequences for private law subjects. Thus, it is not directly enforceable against undertakings, but only indirectly, pursuant to the interpretation of the contested provisions of the Implementing Rules. Accordingly, Article 62 (1) and (2) EA cannot be held to be directly effective." [44]
Nevertheless, distinguishing between the effectiveness of Article 62 EA and of the 'criteria' referenced thereby, the Court also stated that:
"it does not flow from the lack of direct effect of Article 62 (1) and (2) EA that the legal criteria [...] referenced by Article 62 (2) EA should not be taken into account by the Hungarian law enforcement authorities in another context." [45]
On the one hand, the Court was of the opinion that " Article 62 (2) EA is still relevant with regard to the existence of an eventual violation of the EA: that paragraph determines the content criteria the violation of which means the breach of the competition rules laid down by Article 62 (1) EA. "[46] On the other hand, the Court considered the obligation of the OEC under Article 1 IR to settle cases within the scope of the competition co-operation regime both under the 'criteria' of Article 62 (1) and (2) EA and in accordance with its own substantive competition law. Presenting a mixed approach, which is rather based on interpretation than on direct application argued by the executive approach of Berke [47], the Court stated that:
"[s]ince the obligation defined by Article 62 (2) EA has been assigned to the Hungarian competition authority by the first two paragraphs of Article 1 IR, the provision of the IR on the application of own substantive law - in contrast with the governmental opinions - does not entitle the OEC to settle the cases in its own competence solely on the basis of... the Hungarian Competition Act. In other words, besides the rules of Hungarian competition law, the relevant Community law 'criteria' are also relevant for the OEC." [48] "Although the OEC does not apply Article 62 (1) and (2) EA because of the lack of direct effect of those provisions, but the substantive provisions of the Hungarian Competition Act (which also include prohibitions and sanctions), it has to determine the applicable content of those provisions in a way that the relevant Community law criteria become properly effective in Hungarian jurisprudence. Thus, the... criteria indirectly determine the content of competition authority decisions against undertakings (private law subjects) involved in the procedure of the OEC." [49] "[T]he obligation to take into account the legal criteria of the EC Treaty referred to by Article 62 (2) EA... means that the criteria flowing from the application of Articles 85 and 86... EC... have to be taken into account by the OEC as interpretative aspects of the application of substantive law provisions of the Hungarian Competition Act in the cases under the scope of applicability of the EA. Thus, if the assessment of cases according to the relevant Community law criteria cannot be guaranteed by the interpretative action of the OEC in the application of the substantive rules of Hungarian law, Article 62 EA has been breached. As a consequence, recourse can only be had to consultations on the diplomatic level or finally to the application of commercial policy sanctions." [50]
Turning to the analysis of the direct applicability of Community norms referred to by Article 62 (2) EA through the 'criteria', the Court first assessed the scope of Community norms relevant for the 'criteria.' Adopting Berke's global approach of relevant legal sources [51] and the continuously evolving nature of competition law [52], the Court stressed that:
"the application criteria evolved and continuously evolving in the jurisprudence under Articles 85 and 86 EC constitute the actual Community competition law. The relevant criteria of application include the content totality of Community competition law, including the developments of jurisprudence and the rules of the block exemption regulations under Article 85 EC as well as the experience gained in their application. Thus, «the criteria flowing from the application» of Articles 85 and 86 EC refer to the content totality of Community law, essentially they can be equalled with the totality of Community competition law norms." [53]
Subsequently, the Court followed Berke's submission [54] further, and by emphasising the obligation of the OEC in the implementation of the 'criteria', it stated that:
"[t]he problem of direct applicability arises because [...] Article 62 (2) EA does not include [the] 'criteria' but only refers to them, as they exist and evolve in the law of the Community. At the same time, according to the IR... the OEC has the duty to apply these 'criteria.' Thus, according to Article 62 (2) EA and Article 1 IR, the relevant Community law criteria, as soon as they appear in the decisions of the competition authority or the court of the Community or in the Community regulations, have to be taken into consideration and applied by the Hungarian competition law enforcement authority, too." [55]
Finally, the Court made its acceptance of Berke's essential arguments complete by assessing whether the Hungarian direct applicability of the 'criteria' could fit into the approach put forward by Berke. Under the approach which I shall call the 'window approach', Berke advocated that foreign law, i.e., norms not originating in Hungarian law, can only enter the Hungarian legal system through constitutionally opened windows [56], in other words, in the ways expressly authorised by Constitutional law or by the jurisprudence of the Constitutional Court. According to Berke, the constitutional problem with the penetration of the Hungarian legal system by Community competition law lay in the fact that it did not fit into any of the accepted ways in which foreign law could enter into the Hungarian dualist legal system. [57] In order to demonstrate this, he examined all of the possible categories in this regard, i.e., (i) international treaty law; (ii) generally accepted rules of international law; and (iii) private international law. [58]
As foreseen earlier, a key argument of the Court for the rejection of the possibility that the direct applicability of the 'criteria' fit into the 'window approach' was the fact that Hungary was not a Member State of the European Union:
"[T]he mechanism of direct applicability is a typical characteristic of the relationship between the Community legal system and EU Member States. However, the situation flowing from the ensemble of Article 62 (2) EA and Article 1 IR has to be assessed in the course of constitutional control with regard to the fact that presently the Hungarian Republic is not a Member State of the European Union. The appearance of the Community law criteria referred to by Article 62 (2) EA in Hungarian law enforcement does not fit into the order of effectiveness of international treaties. Fundamentally, because the... criteria appear as a reference. Such reference is made to the domestic laws and the jurisprudence of the domestic fora of an international law subject (EC Commission, EC Court of First Instance, EC Court). Thus, the referenced Community law criteria require application in the procedure of the OEC without confirmation, incorporation, transformation or proclamation by a domestic law, which are necessary for the domestic effectiveness of international treaties under Hungarian law." [59]
In accordance with the requirements of the 'window approach', the Court also excluded the possibility of applying the 'criteria' referred to by Article 62 (2) EA as private international law on the basis of the public nature of competition law:
"[P]rivate international law relations, even if they are governed by cogent norms, have to be distinguished from public law relations affecting sovereignty because subjugation to this latter necessitates constitutional authorisation." [60]
Finally, the Court rejected the possibility that the 'criteria' enter the Hungarian legal system as generally accepted rules of international law on the basis that " the relevant criteria of Community law cannot be equalled in any respect with the generally accepted rules of international law or the norms of international ius cogens ."[61]
The Court also accepted Berkes arguments with regard to the eventual violation of the sovereignty of the Hungarian Republic. First, the Court upheld Berkes argument on the lack of temporal limitation of the legal norms applicable under the 'criteria' [62]:
"[N]ot only the specific «application criteria» already applicable in Community law appear in Hungarian jurisprudence but also the legal norms, principles and criteria which evolve in Community law after the adoption of the [Europe] Agreement, namely in the decisions of the European Commission as competition authority, in the judgments of the Community courts and in the Community regulations." [63]
As a next step, based on the earlier declared public nature of competition law, the Court stressed the inseparable attachment of competition law to state sovereignty:
"[B]y its meaning and implementation, [competition law] is under the exclusive jurisdiction of state sovereignty. The extension of the rules of this legal field over the principle of objective territoriality is not accepted by international law, either. [...] The exclusivity of state sovereignty attached to territoriality also means that the state may dispose of its sovereign rights in its international relations." [64]
Indeed, competition law and policy involves a great deal of State sovereignty but, as it was argued rightly by Vereshchetin, it is exactly " the most important aspects of State sovereignty and the domestic competence of States " which are more and more impinged upon by " the intrusion of international law ."[65]
Nevertheless, although accepting the argument of the Ministry of Foreign Affairs concerning the inevitable limitation of state sovereignty as a result of the conclusion of any international treaty [66], the Court stressed that:
"[i]t also applies to the formation of international relations, that the power of the Parliament - and also of other state institutions - is not unlimited power. [...] Therefore, conversely to the governmental opinions, in a legal field under the exclusive jurisdiction of state sovereignty, the Parliament is not entitled to extend constitutionally over the principle of territoriality in an international treaty without an express constitutional authorisation. In this regard, from the viewpoint of constitutionality, it is not relevant that such an extension applies to a relatively narrow, strictly delineated field, namely the law of anti-competitive restraints. The requirement of constitutionality means that the totality of the legal system and each part of it has to be in conformity with the Constitution." [67]
Thus, the Court expressly rejected the approach of the Ministries [68], and accepted Berke's argument that such a limitation of sovereignty necessitates an express constitutional authorisation, even in the absence of any kind of written rule [69], let alone prohibition in that regard. [70]
In addition to the aspect of international relations, the Court analysed sovereignty from the point of view of legitimisation. It seems that a significant underlying argument between the "parties" to the Europe Agreement Judgment [71], and also for the Court itself, was the issue of whether the Hungarian Parliament has unlimited powers to exercise its role as a legitimised depositary of the sovereignty of the Hungarian people or whether such powers are subject to constitutional control. The Court adopted a strict and far-fetched interpretation of Article 2 of the Constitution in that context:
"[I]n accordance with the principle of the sovereignty of the people declared by Article 2 (2) of the Constitution, it is one of the requirements of the democratic law-based state founded on the sovereignty of the people that public power may only be exercised on the basis of democratic legitimisation. [...] According to the Constitution, the principle of democratic legitimisation... establishes the requirement... that all public norms applicable in Hungarian law enforcement against Hungarian legal subjects be based on democratic legitimisation, that can be traced back to the sovereignty of the people." [72]
Following the logic of the above requirement of absolute legitimisation, the Court concluded that:
"[a]ccording to Article 2 (1) and (2) of the Constitution, the norms of public power that form the domestic law of another system of public power - in this case the Community - and on the creation of which the Hungarian Republic does not have any influence because Hungary is not a Member State of the European Union, cannot appear with an obligation of applicability in the jurisprudence of Hungarian law enforcement institutions. In fact, this would require an express constitutional authorisation." [73]
Thus, the Court fully accepted the 'window approach' put forward by Berke. At the same time, it expressly rejected the relevant arguments of the Ministries [74]:
"A concrete and exact state undertaking in an international treaty is absolutely different from the subjugation of a specific legal field to another system of public power, even if that refers to a narrow and strictly delineated field. Consequently, Article 2 (1) and (2) of the Constitution is violated by the fact that, as a result of the ensemble of Article 62 (2) EA and Article 1 IR, the Hungarian competition authority is bound to assess certain cases by means of the direct application of the criteria only referenced by Article 62 (2) EA, simultaneously to the application of Hungarian substantive rules." [75]
Finally, analysing the Parliament's powers to exercise the sovereignty of the people and to adopt and amend the Constitution, the Constitutional Court confirmed the status of the Constitution and thereby implicitly confirmed itself as the most legitimised institution of the Hungarian Republic:
"According to Article 2 (2) of the Constitution, the Parliament is the depositary of the sovereignty of the people; the generally applicable form of the exercise of power is the exercise of power by the Parliament. [However,]... the Parliament may not breach Article 2 (1) and (2) of the Constitution even by the conclusion and proclamation of international treaties. According to Article 19 (3) (a) of the Constitution, the Parliament has the competence to adopt and amend the Constitution. [Nevertheless,] also in this regard, the Parliament may only proceed constitutionally, in compliance with the procedural and decision-making requirements governing the amendment of the Constitution and on the basis of the provision on the direct and express power to amend the Constitution...The Parliament is not entitled to carry out the covert amendment of the Constitution by means of the conclusion and proclamation of an international treaty." [76]
Again, this argument of the Court follows the submission of Berke, who expressly argued against the 'creeping-sneaky' circumvention of the Constitution and the procedure leading to the adoption and amendment thereof. [77]
Assessing the constitutionality of Article 1 IR, the Court first accepted the common position of the "parties" with regard to the indivisibility of the co-operation regime:
"[T]he Constitutional Court assessed Article 62 (1) and (2) EA and... Article 1 IR as a tightly intertwined regulatory unit." [78]
As a next step, the Court adopted the argument of the Ministries on the constitutionality of Article 62 (2) EA [79], however, this seemingly paved the way for the conclusion urged by Berke that both Article 62 (2) EA and the relevant provisions of the Implementing Rules would be unconstitutional [80]:
"In the absence of the Implementing Rules, the unconstitutionality of the regulation does not follow from the provision in Article 62 (2) EA itself. In fact, Article 62 (2) EA in itself does not attach the obligation of assessment according to Community law criteria to the Hungarian law enforcement authority. At the same time,... Article 1 IR in itself would not be problematic from the constitutional viewpoint for naming the Hungarian law enforcement authority (OEC) as the institution applying the conventional competition rules, either, unless the Hungarian law enforcement authority has to assess cases on the basis of Community law criteria under Article 62 (2) EA by directly applying the Community norms in this field." [81]
If the Court regards the co-operation regime as a 'tightly intertwined regulatory unit', the elements of which are not unconstitutional individually but violate the Constitution in their totality, the Court should have declared both Article 62 (2) EA and the relevant provisions of the Implementing Rules unconstitutional. Although the Court rejected declaring Article 62 (2) EA unconstitutional, its initial statement that " it is a constitutional requirement that Hungarian law enforcement authorities cannot apply directly the application criteria referred to by Article 62 (2) EA" [82] reflects the implicit acceptance of the possibility that Article 62 (2) EA has an unconstitutional interpretation, namely the one pointed out by Berke.
However, the Court decided to save Article 62 (2) EA and thereby it seemingly exercised self-restraint. The reasons for such self-restraint are manifold. First, in the light of the importance of the legal and political issues involved, the Court obviously wanted to adopt the outcome with the least interference with the status quo . Second,
"[a]ccording to the [Court], the first and second paragraphs of Article 1 IR result in the obligation that the criteria referred to by Article 62 (2) EA have to be taken into consideration in the cases assessed by the competition authorities, thus by the OEC on the Hungarian part. The EA itself does not determine the order of implementing the obligation set out by Article 62 (2) EA." [83]
Thus, the Court accepted the argument for only declaring the relevant paragraphs of Article 1 IR unconstitutional put forward by Berke himself, namely that Article 1 IR on its own reproduces the whole constitutional problem and it contains the smallest regulatory unit causing the constitutional problem. [84]
The same underlying argument must have been the basis of the Court's declaring Article 6 IR unconstitutional. Indeed, the approach, the arguments and even their sequence is absolutely identical to those applied with regard to the constitutional control of Article 62 (2) EA. [85] Still, Article 6 IR was declared unconstitutional and Article 62 (2) EA was saved by the Court. The fact that the Court adopted an identical approach also means that it refused to assess the constitutionality of Article 6 IR differently because it did not pay attention to the detailed concomitant IR provisions concerning the Hungarian application of Community block exemption regulations. [86]
[20] These Ministries are usually involved in the negotiation of international treaties on behalf of the Hungarian Republic. They also took part in the negotiation of the Europe Agreement. Traditionally, they are also consulted by Hungarian courts on issues concerning the application of international law. Note 126 infra.
[21] Berke's First Submission, 4 March 1996. Copy on file with the author.
[22] First Opinion of the Ministry of Justice, 9 May 1996. Copy on file with the author.
[23] Berke's letters to the Constitutional Court, 26 May 1996 and 26 September 1996.
[24] Berke's Supplementary Submission, 28 January 1997. Copy on file with the author.
[25] Draft Opinion of the Ministry of Foreign Affairs, 24 April 1998 and Second Opinion of the Ministry of Justice, 19 May 1998. Copies on file with the author.
[26] This, however, is not a usual feature in the proceedings of the Constitutional Court. As the first President of the Court pointed out, "[i]ts abstract competencies have prompted the Constitutional Court to organise its proceedings as written and non-contentious." L. Sólyom, 'Zum Geleit zu den Entscheidungen des Verfassungsgerichts der Republik Ungarn', in G. Brunner and L. Sólyom, Verfassungsgerichtsbarkeit in Ungarn , 1995, Nomos Verlagsgesellschaft, Baden-Baden, 62.
[27] EAJ, 1.
[28] Ibid., 2.
[29] Ibid., 3.
Article 1 IR: "Cases relating to agreements between undertakings,
decisions by associations of undertakings and concerted practices between
undertakings which have as their object or effect the prevention, restriction
or distortion of competition as well as to abuses of a dominant position in the
territories of the Community or of Hungary as a whole or in a substantial part
thereof, which may affect trade between the Community and Hungary, shall be
settled according to the principles contained in Article 62 (1) and (2) of the
Europe Agreement.
For this purpose, these cases are dealt with by
the Commission of the European Communities (DG IV) on the Community side and
the Office of Economic Competition (GVH) on the Hungarian side.
The competences of the Commission and the GVH to deal with these cases shall
flow from the existing rules of the respective legislation of the Community and
Hungary, including, where these rules are applied to undertakings located
outside the respective territory.
Both authorities shall settle
cases in accordance with their own substantive rules, and having regard to the
provisions set out below. The relevant substantive rules of the authorities are
the competition rules of the Treaty establishing the European Community as well
as the Treaty establishing the European Coal and Steel Community, including the
competition-related secondary legislation, for the Commission, and the
Hungarian Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market
Practices, for the GVH ."
Article 6 IR: "In the application of
Article 62 of the Europe Agreement as provided for in Articles 2 and 3 of these
Implementing Rules, the competition authorities shall ensure that the
principles contained in the Block Exemption Regulations in force in the
Community are applied in full. The GVH shall be informed of any procedure
related to the adoption, abolition or codification of Block Exemptions by the
Community.
Where such Block Exemption Regulations encounter
serious objections on the Hungarian side, and having regard to the
approximation of legislation as provided for in the Europe Agreement,
consultations shall take place in the Association Council, in accordance with
the provisions contained in Article 9 of these Implementing Rules.
The same principles shall apply regarding other significant changes in the
Community or Hungarian competition policies."
[30] EAJ, 3.
[31] Notably, the list of relevant laws cites only the provisions of the Europe Agreement and of the Implementing Rules, and not their equivalents in Hungarian law. This confirms that in the Europe Agreement Judgment the Court effectively undertook to control the constitutionality of international treaty provisions.
[32] EAJ, II.1.
[33] Ibid., III.1.
[34] Ibid., III.2. [emphasis added].
[35] The Court defined those principles in accordance with their notion in Community law: "Direct effect (judicial effect, applicabilité directe) means that a specific provision of an international treaty establishes for subjects of private law subjective rights and duties enforceable before courts or other law enforcement authorities. The notion of direct applicability (applicabilité immédiate) is applied by the reasoning of the [EAJ] in the meaning that it covers in the Community legal system. In the relation of the Community and its Member States - as a result of their adoption - Community laws penetrate the scope of law applicable in the Member States without the transformation of Community law into domestic law... being necessary." Ibid.
[36] Note 43 infra.
[37] EAJ, III.2.
[38] Second Opinion of the Ministry of Justice, 5.
[39] EAJ, III.3.
[40] Berke argued that the competition regime is an express obligation directly binding upon the OEC. Berke's First Submission, 6.
[41] Ibid., 8. Conversely, the
Ministry of Justice promoted the idea that only the signatories to the Europe
Agreement are bound to implement the co-operation regime and only by
legislative means, although it accepted that "the Hungarian Republic
undertook to comply with the provisions of Article 62 EA by means of its
domestic law - obviously not only through its legislation but also through its
«living law»." First Opinion of the Ministry of Justice, 7. See
also Draft Opinion of the Ministry of Foreign Affairs, 7, 10. Moreover, as a
textual argument it put forward that: "Article 1 [IR]... expressly refers to
the Hungarian Competition Act... as the governing law. Thus,... the signatories
have mutually accepted... that the authorities... proceeding in competition law
cases apply their own laws. It is another issue that this own law has to comply
with Article 62 EA." First Opinion of the Ministry of Justice, 6-7. See
also Draft Opinion of the Ministry of Foreign Affairs, 7, 10. Finally, the
Ministry of Justice connected the co-operation obligation with that of
approximation: "Article 62 and its Implementing Rules do not render the
obligation of legislative approximation more burdensome: completely identical
content cannot be required even on the basis of the... «criteria».
[...] Thus,... Hungarian legal approximation can be as «generous»
and selective in the light of circumstances as under Articles 67 and 68
EA." First Opinion of the Ministry of Justice, 8-10. (A text similar to the
latter citation has been included by the Ministry of Justice in the Legislative
Reasoning of the approximated Hungarian Competition Act of 1996.)
Interestingly, Juhász, the long standing Hungarian Ambassador to the
European Communities, warned the Ministry of Foreign Affairs that "[i]t will
be very difficult to sustain the concept that Article 62 (2) of the Europe
Agreement only contains a legislative and not a law enforcement obligation, and
thus Article 62 (2) EA has to be applied through appropriate Hungarian
legislation. [...] To make a legal practice effective by means of legislation
is exceedingly difficult if not impossible because of the complex and changing
nature thereof. [...] Declaring that all provisions of the Europe Agreement
take effect through the indirect conveyance of Hungarian laws would result in
incalculable consequences, as the Constitutional Court could declare the
neglect of the Government with regard to a number of provisions of the Europe
Agreement. " Opinion of Ambassador Juhász, 28 April 1998, 1-2. Copy
on file with the author.
[42] Berke argued that "the application of Article 62 does not have an order, which could be invoked by subjects of private law or on the basis of which subjects of private law could be sanctioned. [...] According to Article 62 (6) EA, conflicts have to be settled by negotiations between the parties. In case of unsettled conflicts, [Article 62 EA] provides for an international law sanction of a commercial policy content." Berke's First Submission, 6-7. See also First Opinion of the Ministry of Justice, 5.
[43] "[T]he «criteria» to be applied on the basis of Article 62 (2) EA do not satisfy any of the conditions [of direct effect] They are not clear and unambiguous in the sense that Article 62 EA would exactly define and describe these criteria. Even that needs to be clarified what is to be understood under «criteria». The «criteria» are not unconditional either, since... they require further interpretation. Moreover, their application necessitates further steps by the signatories - either in the form of the adoption of implementing rules or by consultation or negotiations. Finally, [...] Article 62 EA is part of an association agreement. [...] Association does not establish a special legal order comparable to that of the European Communities. The doctrine of direct effect and applicability is the distinctive hallmark of that legal order. [...] Thus, an interpretation, according to which Article 62 EA renders certain elements of Community law directly effective and applicable in Hungary, does not comply with the nature of association either." Ibid., 6-7. See also Draft Opinion of the Ministry of Foreign Affairs, 7, 10. For an analysis of the possible direct effect of Article 62 EA, see M. V. Llavero, 'The Possible Direct Effect of the Provisions on Competition in the EEC-EFTA Free Trade Agreements in the Light of the Kupferberg Decision', 83-101.
[44] EAJ, III.3.
[45] Ibid., III.4.
[46] Ibid., III.3.
[47] The concepts presented by the
"parties" on how the law underlying the 'criteria' has to be applied in Hungary
are all mixed inasmuch as they all accept the relevance of both Hungarian and
Community competition law. However, those concepts necessarily diverge.
Berke's approach distinguishes cases governed by Article 62 EA from those only
governed by Hungarian law. In his opinion, in the former field the Hungarian
competition authority has to apply EC competition law. Berke's executive
approach implies that the OEC has to disregard substantive Hungarian law if it
is in conflict with prevailing Community competition law: "[I]n addition to
the [Hungarian] competition act, the applicable law seems to be determined by
Article 62 (2) EA. This latter [Article] refers to the criteria flowing from
the application of Articles 85 [and] 86 [EC] as rules applicable by the
Hungarian competition authority in a certain group of cases." Berke's First
Submission, 7-8.
Conversely, the Ministry of Justice promoted a mixed approach based on its legislative approach: "The Signatories undertook that they guarantee the effect of Article 62 EA by means of the domestic law instruments available to them. This assumes the approximation of domestic law by Hungary; the neglect whereof might lead to the application of Article 62 (6) EA." Second Opinion of the Ministry of Justice, 2.
The Ministry of Foreign Affairs highlighted the enforcement nature of the implementation of the co-operation regime, although it argued that the principles of EC competition law only have to be taken into consideration, but not applied in every case, and only if they are not in conflict with written Hungarian competition law: "[T]he OEC undertook only that in the course of proceedings belonging to its discretionary competence it proceeds by taking into account the main principles of the relevant Community rules, if the given case affects trade between the parties." Opinion of E. Dienes-Oehm, Head of Department, Ministry of Foreign Affairs, 13 May 1996, 3. Copy on file with the author.
[48] EAJ, III.4.
[49] Ibid., III.5.
[50] Ibid.
[51] Berke argued that the 'criteria' covered not mere principles but every legal source of EC antitrust law. Berke's First Submission, 8-9.
[52] "These criteria flow from a moving, dynamically evolving legal field... formed by legislation of Community institutions and by the decisions of the Community competition authority and the judicial fora of the Community." Ibid. , 9.
[53] EAJ, IV.1.
[54] Stressing the lack of any temporal limitation on the law relevant for the 'criteria', Berke concluded that: " [b]y signing... the EA, [Hungary] undertook - also with regard to the future - the obligation laid down by Article 62 (2) EA that Community legislation not known at the inception of the EA and only evolving at a later point of time as well as the content and criteria of competition authority and judicial jurisprudence automatically oblige the Hungarian authorities (as applicable norms that have to be implemented)." Berke's First Submission, 9.
[55] EAJ, IV.2.
[56] "From the point of view of the Hungarian constitutional legal order, undertaking an obligation of the above content and consequences is not possible without the amendment of the constitutional basis and without an express constitutional authorisation. In the absence thereof, Article 62 (2) EA is in breach of the Hungarian Constitution." Berke's First Submission, 10.
[57] The 'window approach' is rooted
in traditional Hungarian dualism and it could expect warm welcome from the
Constitutional Court. At the same time, it was strongly contested by the
Ministries.
The Ministry of Justice contested the 'window approach' by
referring to the mixed private and public character of competition law and thus
trying to open the 'private international law window': "As a quasi norm of
collision, paragraph 2 [of Article 62 EA] refers to Community law as the
interpretative background of paragraph 1, which applies to legal relations
necessarily having a foreign element. However, paragraph 2 does not involve a
real norm of collision, because it does not declare a specific law applicable
in its entirety, but it invokes the «criteria»... deductible from
the referenced law as a help to the joint interpretation of the substantive law
rules by the parties, it makes them a common basis of reference." First
Opinion of the Ministry of Justice, 11.
The Ministry of Foreign Affairs
rejected the 'window approach' in principle: "[T]he a posteriori
constitutional control of validly concluded international treaties [is] an
absurd idea... based on the absolutisation of the notion of national
sovereignty and on the excessive interpretation of its content. Taking this
concept to its logical extremes directly leads to the denial of the existence
of international law ." Opinion of Dienes-Oehm, 1.
[58] Berke's First Submission, 10-11.
[59] EAJ, IV.3.
[60] Ibid., IV.4.
[61] Ibid., IV.5.
[62] Note 54 supra.
[63] EAJ, V.1.
[64] Ibid., V.2.
[65] Note 18 supra, 8.
[66] Draft Opinion of the Ministry of Foreign Affairs, 5.
[67] EAJ, V.2.
[68] Note 71 infra.
[69] In Berke's opinion, "[b]y means of the obligation undertaken in Article 62 (2) EA, by a unilateral act made in a bilateral convention, Hungary authorised another sovereign to issue law with a compelling effect on Hungary" because "no one else is involved in the adoption of the law flowing from the foreign source (the domestic law of another sovereign) but the participants in the legislative mechanism of the European Community." Consequently, "as a result of Article 62 (2) EA, an essential component of the sovereignty and independence of the Hungarian State has been breached ." To support this, Berke argued on the absence of relevant constitutional provisions: "[T]here was and there is no provision in the Constitution of the Hungarian Republic that would authorise any state institution to order the unilateral, automatic application and enforcement in Hungary of a law adopted by the domestic legislation of another sovereign and of norms established by the jurisprudence of the law enforcement organs of another sovereign in their completeness as regards their content. The content and requirement of the referred articles mean that Hungary is brought into the supranational legal order of the EC in a specific legal field. This, however, even in a narrow field, is only possible if in the necessary field of competence the power of legislation and jurisdiction is transferred by Hungary to the European Union on the basis of an authorisation included in the Hungarian Constitution. Such transfer of sovereignty was not allowed by the Constitution... [at the conclusion of the Europe Agreement] and it is not allowed at present, either. Therefore, Article 62 (2) EA violates the fundamental structure (the independence of the Hungarian Republic, the principles of state governance, the responsibility of legislative power and jurisdiction) and principled provisions (democratic law-based state) of the Constitution ." Berke's First Submission, 9-11.
[70] "[T]he Constitution does not exclude the undertaking of an international law obligation that compels domestic law to continuous approximation after the conclusion of the international agreement in order to guarantee harmony [between domestic and international law]." First Opinion of the Ministry of Justice, 10.
[71] The Ministry of Justice connected the issues of how Community law applies in Hungary through Article 62 (2) EA and whether the co-operation regime was adopted in a constitutional way. Criticising Berke's 'window approach' for its conceptual rigidity, the Ministry of Justice proposed that only the second issue should be regarded as decisive in assessing the constitutionality of the co-operation regime: "I do not regard as convincing the argumentation, according to which the application of foreign law on the basis of the norms of collision of private international law is not problematic from a constitutional point of view, however,... the application of foreign law on the basis of an authorisation or prescription of an international treaty is problematic. I do not share the view that the application of foreign law in Hungary would be divided along the (anyway not too clear) line between public and private law into an unconstitutional and a constitutional part... [O]nly the constitutional limits of the Parliament's competence to conclude international treaties may be regarded as decisive in this regard." Second Opinion of the Ministry of Justice, 9. Analysing the competence of the Parliament to conclude the co-operation regime, the Ministry of Justice put forward that: "[i]n the light of the fact that the Constitution itself is adopted by the Parliament, as the depositary of sovereignty, within the constitutional framework the Parliament may also take decisions affecting its own sovereignty, it is even entitled to determine the content of its own sovereignty" (First Opinion of the Ministry of Justice, 13), although "[t]he exercise of people's sovereignty obviously cannot involve the endangering of the independence of the Hungarian Republic, moreover the Parliament cannot conclude an international treaty which results in depriving of its content either the generally applicable exercise of sovereignty by representation or the special direct exercise of sovereignty. Similarly, an agreement concluded by the Parliament cannot lead to the Parliament losing or waiving fully, unilaterally and irrevocably the exercise of its competences laid down by... the Constitution... [T]he Parliament may only act within the framework of the Constitution and... the limits of its powers are determined by the Constitution, e.g., fundamental rights regulated by the Constitution ." Second Opinion of the Ministry of Justice, 7. In order to show that the above criteria to the limitation of Hungarian sovereignty have not been breached, the Ministry of Justice the limited scope of the co-operation regime: "The contested provisions... govern a very special... field...: competition law. [Moreover,] Article 62 EA only applies to anti-competitive practices that may affect trade between the Communities and Hungary. Under no circumstances does the authorisation of the transfer of legislative competences or of the Hungarian application of foreign law in such a narrow field, which necessarily also contains a foreign element,... deprive of its content the exercise of the people's sovereignty by the Parliament ." Ibid., 8-9. Furthermore, as a contextual argument, the Ministry of Justice argued that "The common goal of free trade... provides the constitutional reason for the authorisation of the Hungarian application of foreign (Community) law in this strictly delineated field. [...] In an appropriately developed phase of the process [of integration] the previous «reception» of the supranational legal order of the EC in certain delineated fields cannot be excluded ." Ibid., 8-9.
The Ministry of Foreign Affairs argued that the Constitution authorised the Parliament to declare the state of war and to conclude peace treaties, thereby implicitly referring to the two most serious limitations of Hungarian sovereignty in the 20 th Century: the Trianon Peace Treaty after the First World War and subjugation to Soviet rule following the Second World War. The Ministry implied that if the Parliament has the power to accept the limitation of the sovereignty of the Hungarian Republic to such an extent, it certainly has the same power concerning a much more restricted limitation of Hungarian sovereignty. Draft Opinion of the Ministry of Foreign Affairs, 3-4.
The Ministry of Justice also highlighted that none of the earlier dangers have to be feared, because "the EA has been concluded on the basis of the voluntary resolution of the Hungarian Republic as an independent state,", moreover no "irreversible limitation of sovereignty" was involved and "[t]hus, the Hungarian Republic has remained master of the treaty limiting her sovereignty." Second Opinion of the Ministry of Justice, 9.
[72] EAJ, V.3.
[73] Ibid.
[74] Note 71 supra. The Ministry of Foreign Affairs drew attention to the fact that even if there is a limitation of sovereignty, such limitation essentially does not change the situation in which practices affecting bilateral trade are already covered by the extraterritorial applicability of Community competition law. Draft Opinion of the Ministry of Foreign Affairs, 8. See also Opinion of Ambassador Juhász, 2.
[75] EAJ, V.4.
[76] Ibid.
[77] "By its euphemistic wording [Article 62 (2) EA] smuggles secondary Community law and the jurisprudence of the Community judicial fora into the norm of reference. " Berke's First Submission, 9. Conversely, Juhász argued that "the Parliament was entitled to allow for the direct application of foreign law even in the absence of an express constitutional authorisation. This is confirmed by the fact that the Parliament passed the given act by 231 «Yes» votes, 1 «No» vote and 3 abstentions. This majority would have even been sufficient for the amendment of the Constitution ." Opinion of Ambassador Juhász, 3. However, the Parliament has special voting rules for amending the Constitution, which have to be respected in a distinct procedure in the case of the ratification of an international treaty in conflict with the Constitution. According to a Resolution of the Constitutional Affairs Committee of the Hungarian Parliament dating from the early 1990's, if a confirmed international treaty violates the Constitution, even if confirmation is voted upon by all elected MPs, the parties represented in the Parliament have to amend the Constitution accordingly within 8 days of the finding of a constitutional conflict. (Conversation with Gy. Rubovszky, May 1999).
[78] EAJ, VI.1.
[79] "In order to be able to determine the criteria flowing from the application of Articles 85 [and] 86... EC... the parties have to adopt implementing rules. Thus,... the alleged unconstitutionality of Article 62 (2) EA could only be assessed on the basis of the Implementing Rules ." Opinion of Dienes-Oehm, 2-3.
[80] Berke extended his arguments on Article 62 (2) EA to the relevant provisions of the Implementing Rules and requested that the Court declare both Article 62 (2) EA and the contested IR provisions unconstitutional: "Due to their content, which is limited to inter-institutional relationships, the contested provisions of... Government Decree 230/1996 may continue to become effective even after the... Court eventually declares their unconstitutionality in the proclaiming law. They continue to exist on the level of international law, and according to their content, this is sufficient to effectively oblige the Competition Office... Thus, even after the declaration of the unconstitutionality of the contested provisions of the proclaiming Government decree, Article 62 (2) of Act I of 1994 proclaiming the [Europe] Agreement remains unconstitutional." Berke's Supplementary Submission, 9-10.
[81] EAJ, VI.1.
[82] Ibid., 1.
[83] Ibid., V.5.
[84] Berke's Supplementary Submission, 8.
[85] EAJ, VII.1. Berke also reiterated his 'window approach' concerning Article 6 IR. Berke's Supplementary Submission, 3-4.
[86] The Ministry of Justice argued that "Article 6 IR requires that the parties take into account legal approximation set out by the Europe Agreement in the course of consultations within the Association Council. [...] As a result of Article 9 IR..., if the Hungarian competition authority is not capable of complying with the first sentence of Article 6 IR... the direct application of Community law by the Hungarian authority does not follow but the case goes before the Association Council, thus Article 9 of the Implementing Rules and Article 62 (6) EA is applied." Second Opinion of the Ministry of Justice, 3-4. Consequently, the Ministry of Justice concluded that its mixed approach concerning the implementation of Article 62 (2) EA would also apply in the case of the contested provisions of the Implementing Rules. Ibid., 4. Moreover, " the first sentence of Article 6 [IR] may also be interpreted in a way that... the [OEC] is not only bound but is also capable of carrying out the complete application of the principles included in the valid block exemption regulations of the Communities. The first sentence of Article 6 IR... represents the acknowledgement from the part of the Community that Hungary is in the position to comply with Article 62 EA on the basis of its substantive law referred to in Article 1 IR." Ibid., 3.
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