Room to breathe

A decision from the Court of First Instance annulling Community legislation or decisions is always of interest '“ all the more so when it contains comments which seem to hint at new or more rigorous principles of judicial review. This is the case with the judgment of the CFI in Case T-263/07 Estonia v Commission (7th Chamber, 23 September 2009).

The case concerned the highly technical '“ but politically charged '“ issue of greenhouse gas allowances and trading. Under Directive 2003/87/EC, member states were required to establish national allocation plans to allocate allowances during various periods. The European Commission was given the right to consider those plans and, if it found them incompatible with various criteria specified in the directive, to disallow them. In due course the commission rejected Estonia's plan for 2008 to 2012. The commission's decision explained how it required the Estonian plan to be amended in order to comply with the criteria including a maximum threshold of allowances it wanted to see imposed. Estonia brought proceedings to challenge that decision.

The CFI annulled the decision. The central argument accepted by the CFI was that, in carrying out its task of reviewing Estonia's plan to see if it was compatible with the criteria set out in the directive, the commission had engaged in far too intrusive an exercise. It had substituted its own factual and expert assessment for those carried out by Estonia, and attempted to impose a 'ceiling' onemissions which was not directly found in the legislation.

Freedom of action

The CFI founded its conclusion on considerations of general principle. A directive, it pointed out, is binding as to the result to be achieved '“ but leaves to member states the choice of form and methods; it was inconsistent with this freedom for the commission to seek to dictate 'methods' of assessment in a prescriptive way. The CFI perceived in the use of directives, and in the general subsidiarity principle embodied in article 5 EC (to which it specifically referred), a certain 'freedom of action' in relation to directives, which the commission is obliged to respect.

These may seem entirely unexceptional observations; but in fact they are important, and to some extent novel. The choice of 'form and methods' allowed under directives has not always been regarded as leaving member states with any significant amount of discretion.

The CFI found support for its conclusion on the text and structure of the directive, which entrusted member states with the power to develop the allocation plan, and allowed the commission only the power to review the plan. It would have been inconsistent with those provisions for the commission to enjoy the power to tell member states what the plan must contain.

The CFI decisively rejected an argument that if the commission did not enjoy wide powers, then the objectives of the carbon-trading system, so central to the attempt to tackle global warming, would be undermined. However important the carbon-trading system might be, it could not justify departures from the rule of law. If the legislation was inadequate for its purpose, the remedy is to modify the legislation properly not to permit the commission to modify it unilaterally by an over-generous use of its powers.

Once again, this point might seem obvious. But, to say the least, it has not invariably been the practice of the Community courts to insist so eloquently on the need to preserve the constitutional provisions allocating power between member states and the Community institutions, even if that causes difficulties in pursuing important Community policies. Taken together, the strong emphasis on respect for institutional boundaries is refreshing.