ESA’s Agencification process under Meroni Doctrine

V. CRITIQUE POINTS ROOTED IN THE LITERATURE –

Commission’s White Paper on European Governance²⁴². As a result, agencies were critically observed as a bitter end to an institutional alternative to the EU’s internal market supervision²⁴³. Nevertheless, in the early 2000s, the literature contempt towards agencies as supervisory bodies, as put forward by Van Cleynenbreugel, ‘gradually made room for the development of supranational agencies as supporting mechanisms in the monitoring of EU market regulation’²⁴⁴. Albeit predominantly unpopular at first, supranational agencies would be gradually entrusted with enhanced market supervision powers.

In light of the above, the academic debate focused on the ESAs’ volatile position in the regulatory space. On the one hand, Chiu²⁴⁵ stressed the need to keep agencies’ decision-making process within Meroni’s rule of thumb, which limited the delegation of powers to private bodies to purely executive powers²⁴⁶, and, on the other hand, the author recognised an increasing urge to grant ESAs the appropriate power to reflect their technocratic expertise.

This is highly debatable within the literature and the academic perspectives diverge tremendously.

Chiu also drew attention to the ESAs’ lack of regulatory independence in developing binding technical standards and handling emergency situations, although adopting a more moderate position in which the ESAs can be simultaneously regarded as extensions of ancillary EU political power, albeit deprived of autonomous powers. Chiti²⁴⁷, in turn, identified the Meroni Doctrine as politically desirable, considering the Commission and the national administrations’ interests. In the same vein, Tsagas²⁴⁸ refers to the Commission as adopting a somewhat reluctant stance concerning the expansion of the ESAs’ regulatory powers²⁴⁹. Notwithstanding the above, Everson & Vos²⁵⁰ consider that the Court’s rule in ESMA²⁵¹ allows the EU agencies to act beyond the constraints of the Meroni Doctrine. The authors read into ESMA’s powers as a green pass to allow agencies to carry out tasks on which they possess technical expertise, contrary to the Commission. This line of argument is extended

242 It reinforces the need for independent European agencies with technocratic expertise and specific powers to implement the Commission’s policies, however, it does not concede broader regulatory powers. See Chamon (2016).

243 It was preferred to allow national supervisory bodies to take a lead role in EU market supervision.

244 Van Cleynenbreugel (2014a), p. 37). See also Mogg (2002).

245 Chiu (2016).

246 Chiti (2009).

247 Supra note.

248 Tsagas (2016).

249 See European Commission (2014), p. 5.

250 Everson & Vos (2021); Everson et al. (2014).

251 In Everson & Vos (2021), p. 35, one can read: ‘The Court in ESMA both protects and confines the Meroni doctrine to EU agencies operating beyond the modes of delegation described in Articles 290 and 291 TFEU, and this new Meroni 2.0 must be welcomed in functional regulatory terms as an adaptation of law to functional reality. Under this new reading, tasks which are conferred upon the Commission but cannot be carried out by the Commission due to lack of technical expertise, could now be left to agencies’.

to the EBA’s capacity of fostering regulatory technical standards in the field of banking, which otherwise would not be attained by the Commission alone.

Although several authors grasp Meroni’s ruling supremacy in all its multi-interpretable forms²⁵², others, such as Chamon²⁵³, denote its ‘paralysing effect’²⁵⁴. According to Chamon, authors such as Dehousse, Geradin, and Yataganas²⁵⁵, emphasised that the materiality of the Meroni Doctrine for ESAs raises some doubts, as Agencification does not concern a delegation of powers at the EU level per se but rather transferring Member States’ powers (not the Commission’s) to the European scene, through an agency. In the same vein, Van Cleynenbreugel²⁵⁶ focused on Article 114 TFEU to argue that in the specific context of the creation of the ESAs, neither Meroni nor Romano judgements are relevant precisely because what is at stake is a constitutional delegation of implementing powers from the MSs²⁵⁷ to independent supranational authorities.

Chamon still raises a note of caution regarding the abovementioned precepts, as although the Meroni Doctrine is now highly contested, one still needs to bear in mind that there are no sufficient grounds to rule out the Meroni Doctrine's relevance for EU agencies. In any case, the Court has deployed some leeway under the scope of ESMA’s powers and, thus, according to Cervone²⁵⁸, drawing a distinction between the agencies under Meroni and Romano rulings²⁵⁹ and the contemporary Agencification of the European landscape, which is compliant with Article 114 TFUE.

It is, however, important to look into Gortsos & Lagaria²⁶⁰, and Tsagas’²⁶¹ viewpoints. The authors state that the use of Article 114 TFEU (inter alia, the use of internal market harmonisation powers) has been perennially riddled with condemnation as a narrow legal basis for the creation of the new institutional framework that governs the ESAs²⁶². This

252 See Everson (1995); Ott (2008); Vos (1999).

253 Chamon (2016).

254 Chamon (2016), p. 185.

255 Dehousse (2002), p. 221; Geradin, (2004), p. 10; Eg Xénophon (2001).

256 Van Cleynenbreugel (2014a).

257 Van Cleynenbreugel (2014b).

258 Cervone (2018).

259 According to Cervone (2018), p. 17, ‘the Advocate General in ESMA noted that the post-Lisbon regime extends judicial review into the activity of EU agencies, thus differentiating modern EU agencies from the ones which underpinned the restrictive approach in Meroni and Romano. It held that powers “precisely delineated and amenable to judicial review in the light of the objectives established by the delegating authority” comply with the requirements laid down in Meroni.’

260 Gortsos & Lagaria (2020).

261 Tsagas (2016).

262 According to Gortsos & Lagaria (2020), p.4, ‘The use of Article 114 TFEU has been criticised as a slender legal basis for the creation of the new institutional framework in the financial system in the wake of the financial crisis, which would normally require Treaty amendment to be solidly legitimised’.

aspect can be associated with Fahey’s²⁶³ point, who contemplates the EBA’s as ‘both too narrow and too broad’ in terms of EU institutional and constitutional law²⁶⁴.

Furthermore, ESMA’s wider regulatory power privileges (widely criticised in the literature), although broaden than the other sister authorities, must take into account a number of caveats²⁶⁵, namely guaranteeing the role of the Commission and that those discretionary powers are framed by EU legislative acts in order to prevent them from an arbitrary exercise of power.

1.1.1 ESAs faulty design and lack of discretionary decision-making powers Some scholars are also deeply concerned with the ESAs flawed design apart from its lack of discretionary powers.

Chiu²⁶⁶ casts light on the divergent views on the ESAs’ power attributions, as some authors regard the agencies as lacking law-making power, hence being power constrained; whilst other schools of thought consider the sister authorities as powerful supranational regulators, on account of their tasks on binding technical standards, supervisory convergence, and settlement of disputes among NCAs. The latter is the position advocated by Chiu who states that the ESAs have taken further steps into developing with relative autonomy the areas that fall within their legal purview, either separately or through the work of the Joint Committee²⁶⁷ which promotes interagency cooperation, transparency, and accountability.

Moloney²⁶⁸, on the other hand, deems the ESAs institutional framework as inherently flawed, as the provisions in the Treaty render excessive control to the Commission against the Authorities’ independence. This reflects poorly on the ESAs’ quasi-rule-making role, pulling away its direct power to make rules and hindering the ESAs’ scope of activity. In the same way, Fahey²⁶⁹ reiterates that the EBA is deprived of the essential legal regulatory powers to manage effectively the aftermath of financial crises.

A powerful stance as such sets the tone for the lively debate that regards the ESAs as an

‘imperfect regulatory chain’²⁷⁰, thus lacking discretionary decision-making powers.

The extant literature highly focuses on the tension between the reinforcement of the ESAs’

powers and the interpretation of their discretionary nature, on the one hand, and exposing these powers as purely technical, on the other hand. This, once again, depicts the steep

263 Fahey (2011).

264 Supra note, p. 582.

265 See supra note 76. For discussion, see Chamon (2016); Cervone (2018).

266 Supra note.

267 See supra note 160.

268 Moloney (2010).

269 Fahey (2011).

270 Chiti (2015), p. 314.

division between the scholars who acknowledge the ESAs as specialised regulators and the ones who disregard the ESAs’ regulatory role.

According to Cervone²⁷¹, the ESAs are equipped to develop specialised measures to regulate the EU financial landscape, and, therefore, the application of the Meroni Doctrine shall be considered with less rigor²⁷². We also retrieve Van Cleynenbreugel’s argument²⁷³ to substantiate this interpretation, as the author adds that ESAs’ regulatory work in the form of technical standards does not encompass ‘strategic decisions or policy choices’²⁷⁴; in turn, ESAs’ work relies on requirements issued by more general EU legislative acts. Albeit conditional upon the Commission’s endorsement, the belief behind the positivity of the ESAs’ regulatory power is that the EU legislator tasked the Agencies with the final say on the content of these standards and hence contributing under the scope of its mandate to ensuring a common, uniform, and consistent application of Union law²⁷⁵.

In light of the above, we draw attention to Botopoulos²⁷⁶, who contends that the ESAs are not under the same category as other bodies under the EU Agencification momentum.

According to the author, the ESAs hold enhanced features which relate to their purpose to endure a financial crisis and therefore, possess systemic importance in the financial sector, heightened autonomy, and independence²⁷⁷. As per the aforementioned, Botopoulos considers the ESAs’ acts as sui generis and vested with greater autonomy than most of the other EU agencies. This leaves room in the literature to believe that the ESAs are reputable and trusted bodies²⁷⁸.

Although the ESAs have encountered proponents from a more moderate and supportive side, there are still authors drawing harsh criticism on their regulatory framework.

D’Ambrosio²⁷⁹, for instance, builds on this angle by acknowledging the ESAs’ powers as wielded by the Commission and lacking discretionary power in the performance of their statutory duties, also accounting for their weak scope on the arbitrage of conflicting interests and, thus, implying a more severe reading of the Meroni Doctrine.

271 Cervone (2018).

272 ‘It is desirable not to apply a rigid application of the Meroni doctrine, which has become obsolete as far as it is applied to financial markets’. Cervone (2018), p. 21. See also Pelkmans & Simoncini (2014).

273 Van Cleynenbreugel (2014a).

274 Van Cleynenbreugel (2014a), p. 54.

275 Article 16(1), ESAs’ Founding Regulations.

276 Botopoulos (2020).

277 See Recitals 45 and 59, ESAs Founding Regulations.

278 Botopoulos (2020).

279 D’Ambrosio (2016).