Bounded Discretion in EU Law: A Limited Judicial Paradigm in a Changing EU

Date01 May 2017
DOIhttp://doi.org/10.1111/1468-2230.12265
Published date01 May 2017
AuthorJoana Mendes
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Bounded Discretion in EU Law: A Limited Judicial
Paradigm in a Changing EU
Joana Mendes
Against the background of the reinforcement of the EU executive pursuant to the post-2008
economic and financial market regulatory reforms, this article deconstructs the prevailing dis-
tinction between an executive body’s discretion to make policy choices and its discretion when
conducting technical assessments. This distinction, which arises out of the current judicial
paradigm for discretion, has contributed to the re-allocation of executive authority within the
EU (sanctioned in UK vParliament and Council and Gauweiler vDeutscher Bundestag). The article
traces the distinction’s roots in legal conceptions that have shaped legal-administrative thinking
since the early days of the Etat de Droit or Rechstaat. It proposes a public-interest-regarding
conception of discretion where, in an institutional context where courts’ reviewing role may
be limited, discretion’s relationship to law is a matter of how legal norms may operate in the
spheres of discretion that they attribute to decision-makers, rather than how courts may review
an exercise of discretion.
DISCRETION AND LAW IN CONSTITUTIONAL PERSPECTIVE
The crisis-induced reform of economic governance and financial-market reg-
ulation in the European Union (EU) resulted in the European Commission
having stronger implementation competence in the area of economic gover-
nance, in new functions for the European Central Bank as the lender of last
resort and as the supervisor of the European financial system, and in a recon-
figuration of the powers of EU financial agencies.1Some have perceived these
changes as exceeding, or bypassing altogether, the long-standing legal limits
recognised by the Court of Justice of the European Union on the competences
of the EU institutions and other bodies defined in the Treaties. These expanded
powers raise the question of the extent to which legal norms can limit or struc-
ture the EU executive’s authority, in particular its exercise of discretion. Much
debated in the EU with respect to the ability of EU primary law to contain
the reform-augmented role of EU executive bodies, that question focuses on
Professor, University of Luxembourg. I am grateful to Blake Emerson, Peter Lindseth, Thomas
Perroud, Jens-Peter Schneider, and Ulrich Stelkens for useful comments on an earlier draft and to
the anonymous reviewers of the Modern Law Review. This research was funded by the Netherlands
Organisation for Scientific Research (NWO), under the VENI grant scheme.
1 For example, M. Bauer and S. Becker, ‘The Unexpected Winner of the Crisis: The European
Commission’s Strengthened Role in Economic Governance’ (2014) 36 Journal of European
Integration 213; V. Borger, ‘Outright Monetary Transactions and the Stability Mandate of the
ECB: Gauweiler’ (2016) 53 CMLRev 139; N. Moloney, ‘The European Securities and Markets
Authority and Institutional Design for the EU Financial Market: Part (1), Rule-making, A Tale
of Two Competences’ (2011) 12 European Business Organisation Law Review 41.
C2017 The Author.The Moder n Law Review C2017 The Modern Law Review Limited. (2017) 80(3) MLR 443–472
Published by John Wiley& Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA
Bounded Discretion in EU Law
the constitutional and democratic implications of the legal and institutional
structures adapted or created to face challenges for which those bodies were
previously unsuited. High-profile judgments issued by the Court of Justice,
which endorsed the powers acquired and attributed to EU executive actors,
fuelled the debate.2
Against a backdrop of an evolving, constitutional re-shaping of the EU, this
article takes a different perspective. It returns to a classic theme of administrative
law that is at the core of the rule of law (in the sense of Etat de droit or Rechtsstaat)
and that has been challenged by recent developments in the EU: discretion and
its relationship to law. Relying on a comparative administrative law analysis, it
critically analyses the way in which law – understood to be the legal norms,
legal principles, and values that administrative action is expected to concretise
in a constitutional system – may constrain and structure the substantive choices
that EU administrators make within their areas of discretion.3It makes two
related arguments. First, the way in which executive discretion and its relation-
ship to law are conceived in the EU has been influenced, in important respects,
by a difficult distinction between discretion to make policy choices and
discretion in conducting technical assessments. The Court’s characterisation
of the financial agencies’ discretion in United Kingdom vParliament and Council
(ESMA)4and its observations on the discretion of the European Central Bank
(ECB) in Gauweiler and Others vDeutscher Bundestag (Gauweiler)5are indicative
of a segmented conception of discretion and its relationship to law that has
deeper roots in legal-administrative thinking. Revisiting those roots reveals the
rationale for such a segmented understanding as well as its limits. Second, that
understanding is the product of the judicial paradigm for discretion that should
be set aside in the EU’s current constitutional context. While scholarly legal
writing typically addresses discretion from the perspective of judicial review
of its exercise, this article argues that the question of discretion’s relationship
to law is broader than that which the current judicial paradigm allows one
to envisage. The latter focuses on the court’s role in reviewing the exercise
of discretion rather than on the role law may play in structuring those discre-
tionary choices regardless of the availability of judicial review. The prospect of
an EU increasingly dominated by executive actors and, perhaps, less driven or
moulded by judicial fiat, emphasises the importance of a broader perspective on
2 Case C-370/12 Pringle EU:C:2012:756 (on the legality of the European Stability Mechanism);
Case C-270/12 United Kingdom vParliament and Council EU:C:2014:18 (ESMA); Case C-62/14
Gauweiler and Others vDeutscher Bundestag EU:C:2015:400 (Gauweiler) at [75] (on the legality
of the Outright Monetary Transactions program of the ECB). On the debates generally, see,
for example, A. Somek, ‘Delegation and Authority: Authoritarian Liberalism Today’ (2015)
21 European Law Journal 340 (and references cited therein). Referring to the mutation of
the constitution to point out the break with the previous constitutional framework, see A. J.
Men´
endez, ‘The (Un)constitutional Mutation of the European Union’ paper presented at the
Workshop on ‘Austerity and Law in Europe’Amsterdam, June 2016.
3 On the principle of legality in EU law and on its difficulties, see L. Azoulai and L. Cl´
ement-
Wilz, ‘Le principe de l´
egalit´
e’ in J. Auby and J. Dutheil de la Roch`
ere (eds), Tra i t ´
edeDroit
Administratif Europ´
een (Brussels: Bruylant, 2014) 543, 544-555.
4ESMA n2above.
5Gauweiler n2above.
444 C2017 The Author. The Modern Law Review C2017 The Modern Law Review Limited.
(2017) 80(3) MLR 443–472

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