Fundamental terminologies, Basic content of an employment contract
Level of legal regulations – laws
In the centre of labour law is Labour Code
The other major legislations about work somehow relate to it.
Several rules of Labour Code refer to the Civil Code as ones that must be applied in employment relationships as well.
Level of legal regulations: decrees
In certain specific topics, laws give authorization for making decrees on implementing certain parts of the law in details:
Government and Ministerial decrees
The authorization of making a decree may arise from
The Labour Code itself
e.g. reimbursement of cost for travel to work, mandatory minimum wage
Laws regulating other types of legal relationships
It’s pretty frequent in the public sector
Or from the thematic laws
E.g. law on occupational health and safety also has implementing decree
Is there anything else beyond legal regulations?
In labour law there are rules, which are not legal regulations, though still behave as if they were.
Collective agreements
These are concluded by the trade union(s) – if such exists at an employer or at a sector, this represent a regulatory level above the individual employment contracts
Work agreements
Concluded between the worker’s council and the employer on cooperation rules
The binding decisions of the conciliation committee adopted
Thus, we introduced an important definition
Employment regulations:
Legal regulations
Laws and decrees
The previously discussed „quasi-laws” of collective labour law
Collective agreement
Work agreement
The binding decisions of the conciliation committee adopted
Is Labour Code cogent or dispositive?
Unless otherwise prescribed by law, the employment contract may derogate from employment regulations to the benefit of the employee
Such derogations shall be adjudged by comparative assessment of related regulations
Labour Code is basically unilaterally (for the benefit of the employee) dispositive → RELATIVE DISPOSITIVITY
By collective agreement derogation is allowed also for the disadvantage of the employee (with exceptions).
Labour Code also contains a set of rules from which derogation is forbidden, even if the parties could agree in it or would serve the employee’s benefit.
Parties of employment relationship
Those, who conclude employment agreement with each other:
The employer and the employee
It’s a bipolar legal relationship
(exception: temporary agency work)
The parties of employment relationship
Employer
A person having the capacity to perform legal acts, who employs employees under employment contract
May be an organization – if mandated by law with the capacity to perform legal acts (as a legal persons)
A natural person – a human - (e.g. self-employed entrepreneurs may also be employers of employees.)
Employee
A natural person who works under an employment contract
Always a human.
Basically over 16 years old (with exceptions)
For several jobs many further conditions apply (e.g. scholar level, professional qualifications, non-criminal record etc.)
Attention! Please do not confuse definitions!
An organization as employer: the employer and the person exercising employer’s rights surely differ
The person exercising employer’s rights shall be entitled to make legal statements on the employer’s behalf.
The rules for exercising employer’s rights shall be laid down - within the framework of law - by the employer.
Commencement of an Employment Relationship
An employment relationship is established by entering into an employment contract.
Under an employment contract:
The employee is required to work as instructed by the employer;
The employer is required to provide work for the employee and to pay wages.
Basic typologies of employment relationships
By working time:
Full time
8 hours daily - general principle for full-time daily employment (exceptionally may differ)
Part time
which is less than above
By duration/term:
Indefinite duration
Fixed-term duration
The compulsory minimum content of employment agreement
The parties must specify in the employment contract the employee’s
base wage and job function
Any of these is missing, the consequence is invalidity.
Written format is a must for concluding a valid employment contract.
Further – frequent – content of employment agreement
The duration of the employment relationship
An employment relationship is indefinite unless agreed otherwise.
Workplace
The workplace is where the job is usually done, unless agreed otherwise.
Working time
Employment is full-time by default, unless agreed otherwise
Probation / trial period
Not more than three months from the date of commencement of the employment relationship. The parties may extend the probationary period once. The duration of the probationary period may not exceed three months
Collective agreement may allow maximum 6 months probationary period
Probation time rules in the public sector differ from the ones in the private
An extended probation period may not exceed altogether maximum 3 months
During probation period, employment contract may be terminated by either party
in writing (!)
without notice (i.e.: with immediate effect),
without giving reason.
Special rules for probation period in fixed term contracts
No probationary period may be stipulated if the same or similar fixed-term job continues within 6 months
For employment relationships less than 12 months, probationary period shall be proportionate
Job function
A very basic minimal content of employment agreement.
It’s an overall category – a wide circle of duties
E.g. sous chef, racehorse bender, chorus dancer, clown, footballer etc.
This gets in the employment contract – specifying the function and goal of the employment – but not the exact duties
Sometimes specific conditions must be applied
E.g. scholar level of education, specific professional qualification, non- criminal record etc.
Job description
Job description is not a question of agreement – it’s given in written form by the employer but it’s only an information about the duties of the employee within the frame of the job function.
Employer may change, without the employer’s consent, but within the range of the job function
The exact, concrete duties are arising from the employer’s individual instructions or from the employer’s internal regulations – within the frames of the job description.
Rules of employment relationships for fixed-term duration
„The period of fixed-term employment shall be determined
according to the calendar or by other appropriate means.
The date of termination of the employment relationship may not depend on the party’s will, if the duration is not determined by the calendar. In the latter case the employer is required to inform the employee of the expected duration of employment.
The duration of a fixed-term employment relationship may not exceed 5 years, including extended relationship or new fixed-term relationship concluded within 6 months of the termination of the previous one
Exception: employments where official authorization is required
A fixed-term employment relationship may be extended, or another fixed-term one may be concluded within 6 months from the time of termination of the previous one upon the employer’s legitimate interests. The agreement may not harm the employee’s legitimate interest
Fundamental obligations
Fundamental obligations of the employer
To employ
To provide the necessary working conditions
To implement occupational safety and occupational health requirements
To reimburse costs
To provide the opportunity to vote in the elections and in referendums.
Obligation to employ
Employers shall employ their employees following the rules and regulations pertaining to contracts of employment and employment regulations
Employment under a labour contract is not a right, it’s an obligation
There are exceptions:
Employers shall be entitled to temporarily reassign their employees to jobs and workplaces, or to another employer
The duration of employment may not exceed a total of 44 working days or 352 scheduled hours during a calendar year. This shall proportionately apply if the employment relationship commenced during the year, if it was entered into for a fixed-term or in the case of irregular daily working time and part-time work. The employee affected shall be informed of the expected duration of work in derogation from the employment contract.
If breached, it may have consequences.
Obligation to provide the necessary working conditions
Employers shall provide the necessary working conditions
To be interpreted broadly
E.g. material, personal, informational conditions, instructions, control etc.
At teleworking special rules may apply to material conditions.
Obligations of occupational health and safety
Employers are responsible for ensuring workplace safety and health rules are followed.
Also to be interpreted broadly
E.g. prior, regular and extraordinary occupational health check depending upon job functions, work safety appliances, equipment, education, safety procedures, organizing work processes, even office furnishing etc.
Employees must only be assigned work that is not harmful to their health or physical condition.
In the event of any change in the employee’s health, the employer shall make adjustments in the working conditions and in the work schedule
Obligation of cost reimbursement
Employers shall be liable to compensate their employees for
Necessary and justified expenses
Incurred in connection with fulfilment of the employment relationship.
Salary /wage is paid for carrying out work. Cost reimbursement is different.
These are costs the employer normally pays, but the employee initially pays them and is later reimbursed.
It also raises issues on taxation.
Fundamental obligations of the employee
To appear
To be the employer’s disposal for work
To perform work
To perform proper conduct
To cooperate with coworkers
1. The obligation to appear
Employees shall appear
At the place and time specified by the employer,
In a condition fit for work…
Condition fit for work is a differentiated term and may differ in different job functions:
Mental and physical fitness
E.g. health issues, certain medicines, alcohol, drugs, dressing etc.
2. Obligation to be at the employer’s disposal
Employees shall be at the employer’s disposal in a condition fit for work during their working time for the purpose of performing work.
To be prepared for carrying out work – to enable the employer to fulfil its obligation to employ
3. Obligation to perform work
Employees shall perform work
in person,
One’s job should be carried out by him/herself, may not delegate it to some other person
with the generally expectable level of professional expertise and diligence
in accordance with the rules, regulations, instructions and customs concerning his job
4. Obligation for proper conduct
Employees shall conduct in a way that’s in accordance with the trust necessary for carrying out his job
Differentiated, determined by the expectations related to the job function
Not a question of personal sympathy – workplace is not necessarily a friendly circle at once
It’s not an abstract concept – and is not a „miraculous word” but a sufficiently concrete and justifiable cause is needed if referred to its loss
5. Obligation to cooperate
Employees shall cooperate with their co-workers.
The employment contract is bipolar – employer and employee are the parties.
Co-workers are not parties in our employment contract, so we must be linked legally – this rule is about this
General rules of conduct
General rules of conduct
“The precepts of the law are these:
To live honestly
To injure no one
To give every man his due.”
The “rubber rules” of labour law
„Soft law” - „Hard” consequences…
Employment relationship is a very personal one. Person-to-person connections are determinative
These are – so called – subsidiary rules
One may only refer to them when a breach of a more specific legal provision cannot be referred.
The other purpose of these rules is that we must give a rule somehow to regulate the unregulatable – life itself:
So that we can refer to a paragraph in a legal dispute, if necessary
To act as generally expected in the given circumstances
Unless law provides different requirement, while executing the employment contract one must act as generally expected in the give circumstances
A „social meter cord” – not personal
The question is not what I personally expect of others but what people in general expect to do in such a situation.
It’s also not about what is expected from me by a specific person (e.g. my boss) in a given situation – because it may be too high compared to the general.
The unlawful acting is when I remain below the general standard.
The „given circumstances” means the „here and now” situation – whatever may it be.
It’s very differentiated –
The given circumstances may be the same, but what is generally expected may vary depending on the job/position/responsibility, etc.
Principle of good faith and fairness, cooperation obligation
Rights and duties must be exercised in good faith, fairly, with cooperation, and without harming the other party’s rights or interests.
Good faith is considered broken if someone acts against their earlier behaviour that the other party reasonably relied on
The principle of equitable assessment
The employer shall take into account the interests of the employee under the principle of equitable assessment: Unilateral work instructions must not unfairly burden the employee.
Prohibition of abuse of rights
Not everything is fair that is allowed
Rights also should be used what they are provided for
Rights are granted for a purpose – and not for something else
A typical appearance of this is when someone misuses an existing, real right, against the original goal, purpose of this right
e.g. personal conflict, revenge to intimidate etc.
Practicing the right formally looks OK, while as of its essence is not
Do not confuse with the principle of equitable assessment - They are different
Abuse of rights is prohibited. For the purposes of this Act ‘abuse of rights’ means, any act that is intended for or leads to
The injury of the legitimate interests of others
Restrictions on the enforcement of their interests
Harassment
The suppression of their opinion
Obligation to inform
Both parties falling within the scope of this Act shall inform each other about all facts, information and circumstances, and any changes which are considered essential from the point of view of employment relationships and exercising rights
Protection of employer’s reputation and legitimate economic interest
Under employment relationship, employees shall not engage in any conduct by which to jeopardize the legitimate economic interests of the employer, unless so authorized by the relevant legislation.
Employees may not engage in any conduct even out of their working hours that - stemming in particular from the employee’s job or position in the employer’s organization - directly and factually has the potential to jeopardize
The employer’s reputation
Legitimate economic interest
The purpose of the employment relationship
The employee’s right to express opinion
The employee may not exercise the right to express his opinion in a way that can cause serious harm or jeopardy to the employer’s reputation or legitimate economic and organizational interests
According to judicial practice, freedom to express opinion does not bear – even if the opinion is based on true facts - when the way of expression is disproportionally exaggerated, unreasonably hurting, degrading
Protection of business secret and confidential information
The employee shall maintain confidentiality of business secrets obtained during the course of work
The secret remains secret even after the termination of the employment contract
The employee shall not disclose to unauthorized persons any data obtained during carrying out his job, that could result in disadvantageous consequences for the employer or other persons
Introduction to labour law
Cessation of an employment relationship
The employment relationship is ceased upon
a) the death of the employee;
b) the dissolution of the employer without legal successor;
c) the expiration of the fixed term;
d) the case defined in Subsection (3) hereof;
e) other cases defined by law.
Termination of employment relationship
An employment relationship may be terminated
By mutual consent
With notice - by “Ordinary dismissal”
Without notice - by “Extraordinary dismissal”
Important rule on the formal requirement of termination of employment relationship
The legal declaration terminating the employment relationship must be made in writing
It’s a compulsory precondition for validity.
Reasoning/justification to termination of employment relationship
Termination legal declaration must contain a reasoning with requirements to be matched:
The reasoning shall clearly specify the grounds for termination
The burden of proof to verify the authenticity and substantiality of the grounds of the act of termination shall lie with the party making the legal statement
Requirements for justification of terminating an employment relationship
To be clear
The reason for ending employment must be clear and specific, not vague or general.
To be authentic
Termination should be based on a true fact or circumstance, valid at the time of delivering the dismissal
To be substantial
There should be a causal relationship between the reason specified in the justification and the termination
The reason named must be the real cause of termination
The reason must be a sufficient reason for a termination
Termination with notice – in general
The employment relationship may be terminated with notice either by the employer or the employee
It makes a difference whether the employment contract is for indefinite or for fixed term
That also makes a difference whether it is the employer or the employee terminates the employment contract with notice
Termination with notice of employment contract for indefinite term
The employee is not required to justify
The employer is obliged to give a justification. Reasons only may be:
Reasons in connection with employee’s behaviour in relation to the employment relationship, or with his/her ability
Reasons in connection with the employer’s operations.
Termination with notice of employment contract for indefinite term for reasons in relation to the employer’s operations
Most frequent group of reasons:
Reorganization:
A big variety of possible cases, an overall category
A change in the organizational structure - cessation of a job function, change in submitting duties and responsibilities etc
Downsizing
Frequently it’s a consequence of a reorganization but not necessarily
It is the employer who has the right to choose whose contract is terminated with notice, but it is also his obligation to prove in a lawsuit whether and how the job function of the given employee was affected by the reorganization/downsizing
Termination of notice of employment for indefinite term for reasons relating to the behaviour or the ability of the employee
Reasons of inadequacy:
Not proper behaviour in relation to his/her employment
Not adequate abilities for carrying out his/her job
The disability may be a consequence of medical/health reasons
There are specific rules for termination with notice if the employee is
Receiving rehabilitation treatment or rehabilitation benefits and the consequences also differ from that if the disability has no medical aspects
Is within 5 years of qualifying for old age pension
Termination of fixed-term employment contract with notice
The employer shall be permitted to terminate a fixed-term employment by notice:
If undergoing liquidation or bankruptcy proceedings
For reasons related to the employee’s ability
If maintaining the employment is no longer possible due to unavoidable external reasons
Employees are also required to give justification for terminating their fixed-term employment relationship. The reason given for termination may only be:
The situation makes it impossible to continue the employment relationship.
That would cause unreasonable hardship in light of his/her circumstances
Major prohibitions and limitations of termination with notice
The employer may not terminate the employment relationship by notice:
a) during pregnancy;
b) during maternity leave;
c) during paternity leave;
d) during parental leave;
e) during a leave of absence taken without pay for caring for a child
f) during any period of actual reserve military service;
g) in the case of women, while receiving treatment related to a human reproduction procedure, for up to 6 months from the beginning of such treatment
h) during the period of exemption specified
+ elected trade union official – needs approval from a higher trade union body.
the president of the workers’ council is the same: the prior consent of the workers council is needed
Major prohibitions and limitations of termination with notice
For the legal protection, the condition must be met at the time of delivery of the termination with notice is relevant.
Legal succession of employer may not constitute reason in itself for termination
There are specific rules for termination with notice to employees within 5 years before reaching the old age pension conditions
Notice period
Termination with notice: the period starts on the following day of delivering the termination with notice
Notice period is 30 days
For minimum half of the termination period, the employee must be freed from obligation to work (by paying absentee fee)
In case terminating a fixed-term employment contract, the termination period may not exceed the date of original expiration of contract
Severance payment
In case the employer terminates the employment contract with notice, the employee is entitled to severance payment after minimum (in general) 3 years of employment
Between 1-6 month by payment of absentee fee as severance payment depending on the length of the employment
For employees in protected age: +4 months
Exceptions:
For employee qualifying a pensioner: 0 month
For employees where justification was not proper behaviour/conduct or disability (other than medical reason): 0 month
There are times which fall out of the calculation of working time for severance payment (e.g. any period longer than 30 consecutive days when the employee was not entitled for wage, but with exceptions.)
Termination without notice (Out of probation time)
An employer or employee may terminate an employment relationship without notice if the other party
A.
Intentionally or by gross negligence commits grave violation of any substantive obligations arising from the employment relationship
B.
Otherwise engages in conduct that would render maintaining the employment relationship impossible
The right of termination without notice may be exercised within a period of 15 days of gaining knowledge of the grounds, in any case within not more than 1 year of the occurrence of such grounds, or in the event of a criminal offense up to the statute of limitation for criminal liability
Termination without notice – another possibility
The right of termination without notice may be exercised, without giving reasons by the employer in connection with fixed term employment relationships
The employee shall be entitled to absentee pay due for twelve months, or if the time remaining from the fixed period is less than one year, for the remaining time
European Union
The EU
A unique entity
Supranational organisation
Permanent population
Sovereignty - Comes from the member states
Monopoly of violence by state bodies - Police, courts
Ability to communicate with their states
It can have rights and obligations on its own members
Created by states
Based on an international treaty
Specific, because enforceability is non-existent
Legal entity – independent from Member States
International Cooperation
Intergovernmental nature
State sovereignty preserved
Decisions are subsequently confirmed, ratified, and can be rejected
Decision-making usually by unanimity
It operates based on international law, there is no independent legal system
Supranational in nature
Giving up of part of state sovereignty
Binding decisions, no subsequent ratification
Not only unanimity
Independent institutions
Financial autonomy
Own legal order
I. History of European Integration
European Coal and Steel Community (ECSC)
Its main objective was to promote German-French reconciliation, the integration of the coal and steel industries
April 18, 1951 — Treaty of Paris establishes the ECSC
6 founders: France, Italy, Netherlands, Belgium, Luxemburg, BRD (West-Germany)
Win-win cooperation for all members
Its peculiarity: creation of a supranational organization
High Authority – Member States fully transferred their ownership of the coal and steel sectors
It regularly consulted the Council of Ministers
Other bodies: the Assembly and the Court of Justice
1957: Treaties of Rome
European Atomic Energy Community
European Economic Community (EEC)
Europe of Six 1958-1972
In the EEC, continuous work resulted in a customs union by 1 July 1968
Free trade was built in a completely unique way
Integration never formed before - a special free trade area
Supranational policies were developed in the '60s
Common foreign economic policy
Common competition policy
Common agricultural policy – CAP
Following the creation of the Customs Union, the implementation of three additional freedoms came to the forefront
Services, workers, capital and intensive legal harmonisation
First enlargements – 1973-1989
First expansion – 1973
United Kingdom, Denmark, Ireland, Norway
Norway rejected accession in referendum
GB and Denmark - Eurosceptic countries for the first time
The European Monetary System becomes operational in 1979
ECU - first common European bank money
European exchange rate mechanism
European Monetary Cooperation Fund
1979 - First direct election of Members of the European Parliament
From Maastricht Treaty to Lisbon Treaty – 1990-2009
In the early 90s, the EEC faced new challenges
Role in the new world order
German reunification
Eastern enlargement
Institutional reforms needed
GMU project
The challenges that the Treaties of Maastricht, Amsterdam, Nice and Lisbon sought to address
Maastricht Treaty on European Union 1992
The three-pillar structure is created
Pillars 2 and 3 on an intergovernmental basis with unanimity
1st Pillar is supranational
The Cohesion Fund is set up
Catching up the less developed countries to achieve the introduction of the single currency
Introduction of the principle of subsidiarity
New Community policy:
Consumer protection, industrial policy, education and culture
Introduction of the co-decision procedure
Further enhancing the role of the European Parliament
4. Enlargement – EFTA States
Before the creation of the European Union, the Community did not want any further enlargement
First, a treaty with EFTA, which led to the creation of the European Economic Area (EEA)
Its importance soon diminished because Switzerland did not ratify it, and the other countries soon became EU members
The signing of the Maastricht Treaty paved the way for the accession of the EFTA States
1993 - Austria, Sweden, Finland and Norway start accession negotiations
Austria, Sweden and Finland join the European Union on 1 January 1995
Treaty of Amsterdam – 1999, Treaty of Nice 2001
Treaty of Amsterdam
The Common Foreign and Security Policy – High Representative
Cooperation in the field of justice and home affairs – moved to the 1st pillar
Treaty of Nice
Outcomes:
The contract foresees 27 future members, removing obstacles to further enlargements
The votes in the Council and Commission are distributed, each new member shall be placed in the same position as the Fifteen
There is no equality in the allocation of EP seats
Charter of Fundamental Rights
Eastern enlargement
Eastern bloc countries have continuously joined international organizations (Council of Europe, OECD, NATO)
EU support for democracy and market building for eastern block countries
1991-1996 European agreements
EU association agreements with countries in the region
The Copenhagen criteria were created
Rule of law, democracy, protection of human and minority rights, functioning market economy
This was accepted by the states of the region and their applications for membership were submitted between 1994 and 1996
Eastern enlargement agenda
Accession of Romania, Bulgaria and Croatia
A Copenhagen European Council: Romania and Bulgaria received a new timetable and enhanced pre-accession assistance
The 2004 accession criteria were accepted by both countries, so Romania and Bulgaria joined the EU relatively soon on 1 January 2007
Accession negotiations opened with Croatia and Turkey in 2005
Croatia was a well-prepared candidate with negotiations concluded in 2011 and became a member of the EU in 2013
Turkey's admission is opposed by European public opinion and a significant number of governments
Constitutional Treaty – 2004
At the Nice Council, new goals:
A more efficient, closer to citizens and democratic Union
A Convention on the Future of Europe is established
A wide-ranging consultation process resulted in the European Constitutional Treaty in 2003, which included significant institutional reforms
Constitutional Treaty
European Council granted an institutional status and a permanent President
A system of Commissioners with and without voting rights has been introduced in the Commission
EU has a separate legal personality
Further extension of qualified majority voting
13 December 2007 - Signature of the Treaty of Lisbon
Treaty of Lisbon 2007 (2009)
Structure
EC Treaty - Treaty on the Functioning of the European Union
Rules governing the operation of institutions
Legal acts and decision-making of the Union
Budgetary and financial rules
Rules on enhanced cooperation
Union’s competences
Rules for implementing Union policies (except foreign and security policy
Treaty on European Union
Democratic principles
General rules for institutions and enhanced cooperation
EU core values, objectives and rules for exercising its powers
Rules on the Union's external action
Charter of Fundamental Rights
European Economic Community – European Community – European Union
Founding countries and accessions
Founding countries: France, Italy, Germany (West Germany), Netherlands, Belgium, Luxembourg
1st enlargement – 1973: United Kingdom, Ireland, Denmark
2nd enlargement – 1981: Greece
3rd enlargement – 1986: Spain, Portugal
4th enlargement - 1995: Austria, Finland, Sweden - EFTA States join
5th enlargement — 2004: Cyprus, Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary, Malta, Slovakia, Slovenia
6th enlargement – 2007: Romania, Bulgaria
7th enlargement – 2013: Croatia
1st exit – 2021: United Kingdom (BREXIT)
Founding treaties and amendments
Treaty of Paris - 1951 – founding
Establishes the ECSC
Treaty of Rome - 1957 – founding
Establishes the European Economic Community and Euratom
Merger Treaty - 1965 – amendment
Single European Act - 1986 – amending
Maastricht Treaty – 1992 – Amendment/Founding
Establishes the Treaty on European Union (TEU)
Treaty of Amsterdam - 1997 - amendment
Treaty of Nice - 2001 - amending
Treaty of Lisbon – 2007 – Modifier/ Founding
Establishes the Treaty on the Functioning of the European Union (TFEU)
Repeals the Treaties establishing the ECSC and EEC
Challenges of the XXI century
2008 crisis
2020. Brexit
Europe 2020 strategy
Raising the employment rate (20-64)
Research and development (GDP 3%)
Energy and climate package
Reducing early school leaving (below 10%)
Below 25% living below the national poverty line
Covid–19
The EU's recovery plan, the Next Generation EU
A granting temporary aid to workers – SURE
Amendments to the EU budget to address pressing issues
Redirecting EU funds to support Member States most in need
Support for the hardest hit sectors
Euroscepticism
“The EU is not democratic enough, has too much sovereignty, the integration is not a good thing (...)”
The EU institutions
The institutions of the European Union
European Parliament(EP)
European Council
Council of the European Union (Council of Ministers or Council)
European Commission(EC)
Court of Justice of the European Union(CJEU)
European Central Bank(ECB)
European Court of Auditors
1. European Parliament
One of the EU's main institutions, based in Strasbourg
Since the '70s, it has played an increasingly important role in decision-making
Initially, the representatives were delegated by national parliaments
Since 1979, its members have been directly elected by citizens every 5 years in the form of list voting
It currently has 720 members (proportional to the size of the country)
A Member State may elect at least 6 MEPs (Cyprus, Estonia, Luxembourg, Malta) and up to 96 MEPs (Germany).
They form political groups on a political basis, not a national basis.
A political group must have at least 23 MEPs, representing at least a quarter of the Member States
EP composition after the 2024 elections
The two largest groups
EPP – European People’s Party
S&D - Socialist Party
Duties of the European Parliament
Its tasks and powers have been constantly expanding, most visibly in the field of It does not have the right to initiate a legal regulation
It may, acting by a majority of its component members, request the Commission to draw up a legal regulation
In the legislative procedure, it acts as co-legislator or consultative body
Under the ordinary legislative procedure, a valid source of law can only be adopted if the EP votes in favour
Under the budgetary procedure, the Council and Parliament adopt the budget jointly
In relation to the budget, it also has powers of audit
It is also actively involved in appointment procedures
Self-management
Parliament's right to remove the Commission as a body
By motion of no confidence
The Commission must report annually to the EP
The ECB also reports annually on monetary policy
Annual reporting obligation of the Court of Auditors
2. European Council – The summit
The EU's highest policy-making body
Treaty of Lisbon elevated it to institutional status
The EU Council is composed of the heads of state or government of the member states, its own president and the President of the EC
The High Representative for Foreign Affairs and Security Policy also participates in his work
It sets out the general political directions and priorities of the Union
It meets twice a semester
2 in Brussels, 2 in the Member State holding the Presidency of the Council of the European Union
As a rule, decisions shall be taken by consensus
Current President: Antonio Costa
Its president is elected for a term of 2.5 years
Main tasks of the European Council
Does not exercise legislative functions!
Convening of intergovernmental conferences and conventions amending treaties
Agreement on institutional changes
Taking a political decision on the admission of new members
The intention to leave must be notified to the European Council
It provides guidelines on withdrawal negotiations
Determines the size of the EP and the EC
Exercises appointing authority powers in relation to the ECJ and the High Representative for Foreign Affairs and Security Policy
It has the power to unanimously determine that a Member State is in serious and persistent breach of the values on which the Union is founded (Article 7 procedure)
It defines the objectives of the common foreign and security policy and provides guidelines
3. Council of the European Union
The Council consists of one representative of each Member State at ministerial level, who may commit and vote on behalf of the government of the Member State which it represents
It can work in ten compositions:
General Affairs
Foreign affairs
Economic and financial affairs
Justice and home affairs
Employment, social policy, health and consumer protection
Competitiveness
Transport, telecommunications and energy
Agriculture and fisheries
Environment
Education, youth, culture, sport
How the Council of the European Union works
It is chaired by a different Member State every six months
The rotating presidency prepares and chairs meetings and represents the Council in relations with the other EU institutions – now Cyprus
Voting order
Simple majority, qualified majority, unanimity
The general rule is qualified majority
Two conditions must be met together:
55% of Member States support the proposal - At least 15 out of 27 Member States
The Member States supporting the proposal represent 65% of the total EU population
Special case of qualified majority
At least 72% of Council members 20 out of 27 Member States
Members supporting the proposal represent at least 65% of the EU population
Blocking minority
Four Council Members, representing more than 35% of the EU's population, can block the adoption of a proposal
Tasks of the Council of the European Union
It carries out legislative, budgetary, policy-making and coordination tasks
It has broad legislative powers
It is normally exercised jointly with the EP under the ordinary legislative procedure
The Council and the EP together constitute the budgetary authority that adopts the EU budget
Coordinates Member States' economic policies
Implements the Common Foreign and Security Policy
Within the framework defined by the European Council
Concludes international agreements on behalf of the Union
It determines the salaries, allowances and pensions of the President of the ECJ, the High Representative, the members of the ECJ, the Presidents, Judges and Registrars of the CJEU, and the Secretary-General of the Council
European Council/Council of the European Union/Council of Europe
4. European Commission
Task of the European Commission
Initiator of EU policies
Participates in EU law-making
Most legislative procedures cannot be started without a proposal from the Commission, who presents the legislative initiative
It also has its own decision-making power
Based on the Treaties
Powers delegated by the Council
Brings infringement proceedings against Member States before the Court of Justice
Financial management tasks
Conduct of external relations
European Commission organisation
Its term of office is 5 years
To be established within 6 months of EP elections
The Commission shall be completely independent
They shall neither seek nor take instructions from any government, institution, body, body, or organization
The Commission has Commissioners from all countries and currently has 27 members
President of the EC: Ursula von der Leyen
The Commission is accountable to the European Parliament
EP can remove Commission with motion of censure
5. Court of Justice of the European Union
Location: Luxembourg
Task:
Legal interpretation
Enforcement
Annulment of Union acts
Ordering Union measures
Sanctioning EU institutions
The CJEU is composed of two courts:
Court of justice
It deals with references for preliminary rulings, actions for annulment and appeals
1 judge per MS and 11 advocates-general
General court
Hears actions for annulment
2 judges per Member State
6. European Central Bank
It is based in Frankfurt and chaired by Christine Lagarde
Its main objective is to maintain price stability
Promoting economic growth and job creation through this
Tasks:
Determines the base interest rate
Manages foreign reserves
Formulates and implements the EU's economic and monetary policy
Manages the euro
7. European Court of Auditors
Location: Luxembourg
One auditor per Member State
Its members are appointed by the Council after consulting the EP for a term of 6 years
Tasks:
It controls EU revenue and expenditure
Carries out audits of persons and entities managing EU funds
It provides advice on how to make EU financial management more efficient and accountable
In case of suspicion of fraud, corruption or any other illegality, it shall be notified by the European Anti-Fraud Office (OLAF)
Prepares an annual report for the EP and the Council
Law of the European Union
Member States – EU – international law
National law
A relative term
Compared to external law it is considered internal law – from the point of international and EU law
The legal system of a state - sovereignty
EU law
It is an independent and autonomous legal system with supernational characteristics
International law
The set of legal norms that states – and other subjects of international law with the ability to participate in international legal relations - have established by express or tacit agreement to regulate their relations with each other
Competence
The scope of competence determines the nature and manner of exercise of powers between the member states and the EU
Through this we can get to know what tasks, how and within what framework the Union can act
The founding treaties did not contain a catalogue of powers
It was not possible to know exactly which tasks fall under the competence of the Community or the Member States
The Treaty of Lisbon named the forms and practice of competences
Regulates the exercise of powers
Principle of subsidiarity
Limited, case-by-case authorization
The competences of the Union derive from the Member States, and only apply to certain areas defined by the Member States in the founding treaties
Competences only on delegated areas
Cannot independently assign powers or competences to itself
Does not have general competences in the field of legislation, enforcement and justice
All actions of the Union must be traced back to the authorizing provisions contained in the founding treaties
Competences of the EU
The EU has 5 types of competence
Exclusive competence – only the EU can legislate
Union’s competence shared with the Member states – the Members states can only act, when the EU choose not to
Supporting, coordinating and supplementary competence
Additional competence – basically the EU has no competence, but the Member States decide to authorize it
Common foreign and security policy and defence
Competences
1. Exclusive competence
In the following areas:
Custom union
Competition rules necessary for the functioning of the internal market
Monetary Policy (for the EUR zone)
Conservation of marine biological resources under the common fisheries policy
Common commercial policy
+ Conclusion of an international agreement
2. Shared competence
Generally, those areas fall under this category, which does not fall under the exclusive or supporting, coordinating and supplementary competence
The TFEU states the main areas:
Internal market, environment, consumer protection, transport, energy, social policy, agriculture
The Union and the Member States can also legislate
The Member States could only legislate, when the Union does not exercise its power
The powers of the EU and the Member States will remain in parallel, and the regulatory powers of the Member States will remain for the future, as long as the Union does not exercise its own power
3. Supporting or coordinating competence
Allows the EU to take action to support, coordinate, or supplement Member State action, without thereby superseding their competence in these areas, and without entailing harmonization of Member States’ laws.
In defined areas:
Improvement of public health, Industry, Culture, Tourism
Education, vocational training, youth and sport,
Civil protection
Administrative cooperation
4. Supplementary competence
The EU has no explicit competence or power
IF the action should prove necessary, and the Treaties have not provided the necessary powers, the Council, acting unanimously on a proposal from the Commission and after obtaining the consent of the Parliament, shall adopt the appropriate measures.
Based on defined conditions
For reaching a goal defined in the Treaties
The goal should be connected to the functioning of the internal market
The goal could only be reached by the action of the EU
There is no competence based on the Treaties
The action should be appropriate
Subsidiarity and proportionality
The principle of subsidiarity was introduced by the Maastricht Treaty, it can be considered as a constitutional limitation of the EU legislation
Principle of subsidiarity
The EU shall act only if the objectives of the proposed action cannot be sufficiently achieved by the Member States
Principle of proportionality
The content and form of Union action shall not exceed what is necessary to achieve the objective of the Treaties
It is a prerequisite for the validity of the EU legislation
The legal source and competence are appropriate --> Union or Member States
The form of the legal act is also appropriate
EU legislation must leave as much room as possible for Member State measures
Ignoring these two principles shall lead to the invalidity of the adopted EU legal act
The protocol attached to the Lisbon Treaty extended the application of the two principles to the entire EU legislation
Legal basis
The provisions of the Founding Treaties that authorize legislation are called the legal basis
Content of the legal basis:
Power to legislate
Define the legislative procedure
Type of regulation
The EU objective of the legislation
It is extremely important to choose the right legal basis before starting the legislative process
Directive of the European Parliament and of the Council
On improving working conditions in platform work
Regulation 2020/2092 of the European Parliament and the Council of 16 December 2020 on a general regime of conditionality for the protection of the Union budget
Legal sources
The characteristics of EU law
It was created based on international law, but it is fundamentally different from it
Eu law regulates the rights and obligations between the EU and its Member States and private individuals under their jurisdiction
In the field of international public law, the states are judges in their own cases
in EU law the Court serves to remedy legal violations in addition to national courts
Most of the rules of EU law are directly applicable in the legal system of the Member States – for the rules of international law to appear in domestic law, a relevant internal legal act is required
The rules of the EU law take precedence over the rules of the national law
EU law – territorial scope
Generally, it coincides with the territory of the Member States
There are special areas named in the Treaty, special rules for territorial scope
France overseas areas, Azores, Madeira, Canary Islands
Aland Islands – EU law applies with the exception of acquisition of real estate and certain tax regulations
Excluded areas – Faroer Island
Extraterritorial scope
EU law- personal scope
Member States
Public law formations within the Member States
Federal states
Local governments
Natural and legal persons
Citizens of Member States, in some cases citizens of 3rd countries residing in the EU
Companies domiciled in the Member States
EU citizenship
Citizens of the Member States are entitled certain additional rights:
Freedom of movement and residence in the EU
Right to participate in local and EP elections
Right to diplomatic and consular protection in third countries
Right to petition to the EP
Scope of EU law
The EU was created for an indefinite period - EEC and Euratom as well
Subject
The EU does not have comprehensive authority to regulate all public affairs
The EU’s legislative competence comes from the Treaties --> it could only act on regulatory issues defined in the Founding Treaties
Sources of the EU law
1. Primary sources
Two categories
Founding Treaties, their amendments, accession agreements, Charter of Fundamental Rights
General legal principles
Secondary sources of law must be derivable from primary sources of law, and they must be consistent with primary sources of law
Primary sources – Founding Treaties
They create the legal basis for further legislation and designate the goals
The Charter of Fundamental Rights has the same legal binding force as the Treaties – formally it is not a Founding Treaty
Primary sources – general principles
They do not appear among the written sources
General principles originate from two sources
The constitutional traditions of the Member States
European Convention of Human Rights
The practical importance of general principal decreases, but they are still decisive
The general principles also protect certain sub-principles of the rule of law and legal security, which the Charted does not
Guarantees of legislation and law enforcement
The right to be heard
Right to jurisdiction
Equity – justice and fairness
Principle of good faith
Principle of legal certainty
No retroactive effect
Protection of acquired rights
Proportionality
2. Secondary sources
Non-legislative acts
Institutions can adopt it based on authorization or executive powers
Typically by the Commission
They are always based on a legislative act, so they rank below them
Legislative acts
It can be adopted in the framework of ordinary or special legislative procedure
Regulation, directive, decision – binding
Recommendation, opinion – not binding
Secondary sources – Regulation
Secondary sources – Directive
The most specific source of law of the EU
The Directive is binding on all Member States with regards to the goals to be achieved, but leaves the choice of form and means to the national authorities
It creates a legislative obligation for the Member States
It defines the result to be achieved, not the means, the Member States have discretionary powers regarding transposition into national law
It determines the deadline for implementation (1-3 years)
Expectations regarding implementation
Effective enforcement must be ensured
Must comply with basic principles
Secondary sources – Decision
A decision is addressed to specific addresses, usually relating to specific cases, and is fully binding on its addressees, who may be Member States and natural or legal persons.
The unique nature can be blurred if the range of recipients is wider
e.g. Croatia introducing the euro
3. Other legal sources
Recommendations, opinions
Not binding
The Court interprets them and takes them into account when interpreting EU law
National courts should also take the recommendations into account
Agreements between the Institutions
Parliament, Council, Commission determine the rules of their cooperation
There may also be binding agreements
Mandatory for the Institutions
They apply to the exercise of powers arising from the Treaties
Other
EU bodies issue acts with various names, these are not binding
Soft law
Other actions
Decisions of the Court
Formally they are not sources of law
Previous decisions are not binding
Court is not obliged to decide similar cases similarly
Legal certainty requires the stability of case law
The Court established the referability of its jurisprudence, which binds the member states, institutions and legal entities under EU law
The law development activity of the Court is extremely important
Hierarchy of legal sources
The Founding Treaties rank above the secondary sources of law
The validity requirement of secondary legal sources is the compliance with primary legal sources
There is no clear hierarchy between secondary sources of law, either based on form or legislator
The Lisbon Treaty establishes a hierarchy between legislative and non- legislative acts
A non-legislative act can only be adopted based on authorisation contained in the legislative act, within its framework
There is no hierarchy between the legislative acts, but ranking can be based on general legal principles
A definite, individual decision cannot conflict with an abstract, general rule
Decision --> regulation, directive
Agreements based on international law
Treaties concluded by the EU are sources of EU law
Two categories
EU is the contracting party
Mixed contracts: the EU and the Member States are contracting parties also
In certain areas, the EU has specific authority to conclude treaties
The EU’s international agreements bind the institutions and the Member States
They take precedence over secondary legislation and national law
The international treaties of the EU cannot conflict with the founding treaties
Characteristics of EU law - EU law and national law
The Court, during its practice developed the following doctrines
Direct applicability
Certain elements of EU law (Treaties, regulations) become directly part of the national law of the Member States without adoption or implementation. (directives not)
There are no, and cannot be national legal prerequisites for the applicability of the EU law
Direct effect
Natural or legal persons may refer to EU law before their national courts and request that the national court base its judgement on EU law
Conditions: the law contains a precisely worded, clear and unconditional provision that is suitable for conferring rights and obligations on a person
Indirect effect
The national court must, as far as possible, interpret national law in accordance with the EU law – and with the objectives of the directive
Simmental case: the task of the national court is to put aside the application of the national legislation if it is contrary to EU law. The national court does not have to wait for the national law to be invalid.
Supremacy
When EU legislation applicable by a Member State conflict with a national law the national court must set aside the national law; it must not apply it.
Member States shall not create national law that conflicts with EU law.
Costa vs ENEL case
Primacy
Applicable during legislation
If the EU and the Member States have co-existing legislative powers in an area, the exercise of the legislative power by the Union terminates the national legislative power
Direct applicability – direct effect – indirect effect
Direct applicability
There is no need for a national legal regulation for the EU norm to apply
Direct effect
Natural and legal persons may refer to EU law before their national courts
Natural and legal persons can request that the national court base its judgement on EU law
Indirect effect – doctrine of interpretation
The national court must interpret national law as far as possible in accordance with EU law
Supremacy – primacy of EU law
Supremacy
It is not in the Treaties, it was developed by the jurisprudence of the Court
In the event of a conflict, EU law takes precedence over national law.
Obligations arising from the Treaties as sources of law cannot be overruled by national law
Primacy
Its practice is still developing
Boarder than supremacy
It solves problems that arise during legislation
Law of the European Union
Direct applicability – direct effect – indirect effect
Direct applicability
There is no need for a national legal regulation to the EU norm to apply
Direct effect
Natural and legal persons may refer to EU law before their national courts
Natural and legal persons can request that the national court base its judgement on EU law
Indirect effect – doctrine of interpretation
The national court must interpret national law as far as possible in accordance with EU law
Supremacy – primacy of EU law
Supremacy
It is not in the Treaties, it was developed by the jurisprudence of the Court
They wanted to include it in the Constitutional Treaty and the Treaty of Lisbon, but some of the Member States opposed it.
In the event of a conflict, EU law takes precedence over national law
Obligations arising from the Treaties as sources of law cannot be overruled by national law
Primacy
Boarder than supremacy
It solves problems that arise during legislation
EU law: company and competition law
I. Company law
II. Specifics of EU law regulation
III. Companies based on EU law
IV. Competition law
Legal system of the EU
Business law could be separated
EU business public law – the state (EU) is on one side, and there are other entities on the other side, the state (EU) has the power over all the public obligations and rights
Freedoms
Competition
Economic and Monetary Union
Other (agriculture, environment, transfer)
EU regulates with regulations
EU business private law – two individuals, they have equal rights and obligations, they are balanced
Company law
Customer protection
Labour law
Intellectual property law
International private law, contractual law
EU regulates with directives
The aim of the EU regulation
Promoting the economic and social goals of integration
Removal of obstacles to the free movements of goods persons, services and capital between Member States
Harmonization of national law of the Member States
Jurisdiction:
Dassonville case (Liquor import case 25% ⏪⏩ 60%)
Cassis de Dijon case (Whiskey import case – certificate of origin)
Basic principle: the equal treatment of companies established in one Member State
EU law
Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States.
Companies or firms: companies or firms constituted under civil or commercial law including corporative societies, and other legal persons governed by public or private law, save for those which are non-profit.
Gebhard-test: national restrictions must not be discriminatory, must be for public interest, and proportional
Means of realization
The Treaty of Rome transferred powers from the Member States to the institutions of the EU
Freedom of enterprise
Adoption of the legal harmonization measures necessary for the implementation of the single market
Necessary competence clause: the Commission also has the opportunity to take the necessary measures
Supplementary competence
TFEU: the effective corporate governance framework: by creating a positive business environment covering the entire Union, encouraging cross-border cooperation of companies
TFEU – basis for harmonization of company law
In connection with the freedom of establishment:
Article 49: right to start and continue economic activity as a self-employed person, to establish and manage enterprises, such as companies and firms.
Article 50 (1) g: harmonization of safeguards that Member States require from commercial establishments to protect the interest of members and third parties
Article 114-115: authorization to harmonize the laws, regulations and administrative provisions of Member States ensuring the creation and operation of the internal market - Directives
EU business sector 2024
24 million corporation
99% micro-, small- and medium enterprises, which
Provide 2/3 of the jobs in the private sector
Represent more than half of the added value created in the EU
80% of the enterprises, 98% of the SMEs are limited liability companies
EU law – directives
They do not cover company law as whole:
It remains within the competence of the Member States: what forms of company a Member States recognizes, what conditions it establishes in areas not regulated by EU law.
They contain regulations for some important features of establishment, organization and operation (protection of shareholders, creditors and the public interest, information disclosure obligations, separation and merger of companies).
Their goal: by harmonizing the laws of the Member States make it easier to establish a company in other Member States, to acquire shares, to ensure transparency of the companies’ operations
EU company law directives
Affected areas:
Publication of company information in public registers
Maintenance of capital
Separation of companies
Domestic and cross border merger
Supernational companies
EU law – supernational company forms
Independent of the national legal systems, they only exist at a transnational level
European Economic Interest Grouping (EEIG)
European Company (SE)
European Cooperative Society (SCE)
European grouping for territorial cooperation (EGTC)
Proposal:
European private company (SPE)
Single-member private limited liability company (SUP)
European Economic Interest Group (EEIG)
Aims to promote and facilitate the economic activity of its own members, to increase the results of the members, not to make a profit
Complementary nature of the activity: its activities must be related to the activities of the members, but they cannot, by definition, replace them
Main areas regulated:
Restrictive rules related to its activities
Establishment, founding members, applicable law
Administrative and representative bodies, decision making
Distribution of profit, losses, liability
Termination
European Company (SE)
Aims to enable companies registered in different Member States to plan and implement the reorganization of their business at EU level
It differs from economic companies established according to national law in that
Its foundation is based on not national but EU law
The rules of its organizational structure and operation are determined by the Regulation
Registered office can be transferred freely within the EU
Minimum capital: 120.000 EUR
Mostly in service and financial sector
European Cooperative Society (SCE)
Aims to satisfy the needs of the members of the cooperative and/or developing their economic and social activities
It is created to meet the needs of its members, it facilitates the members’ economic activities in one or more EU cooperatives and/or national cooperatives.
SCE’s capital is represented by the members’ shares – Can't be less than 30.000 EUR
European Grouping for Territorial Cooperation
Public entities of different Member States – new entity with legal personality
For new projects, investment policies in the territory
Members:
Member States
Associations
Other public bodies
European Competition Law
Definition of Competition
There is no normative definition of competition in Community law
Thus, competition is defined differently by different schools of economics.
OECD definition
The EU acts only when Member States cannot sufficiently achieve a goal on their own, and EU-level action is clearly more effective.
Are there values in economic competition?
Market types – Perfect Competition
In each market there are many sellers of similar size and strength and many buyers.
5 conditions must be met
On the market, the goods are offered by a large number of sellers, and none of them carry so much weight that they determine the prices unilaterally
Transparency characterizes the market
Consumers behave sensibly
The primary goal of businesses is to maximize profits
Potential players can enter the market, the market is open to them.
The price
One of the most important aspects
One of the biggest advantages of competition is the relatively cheap prices
Market types – Monopoly
In a given market, you can buy a product from one player that cannot be completely replaced by another
The opposite of a perfect competition
A company in a dominant position is subject to the same treatment as a monopoly from a competition policy point of view
There are 2 types
Natural monopoly
Monopoly based on natural endowments (port)
Network service providers (telephone, railway)
State monopoly
Gambling organization, stamp printing
Typically price-setting
Market types – Oligopoly
In this case, a small number of companies dominate the market
Market participants consider the expected actions of both customers and competitors.
Oligopolistic markets have the best chance of creating cartels.
Abuses of a common dominant position occur
Mergers and acquisitions must also be thoroughly examined to ensure that they do not have a restrictive effect on competition.
EU competition law
Legal basis
Article 101 and 102 of TFEU: prohibition of restriction or distortion of competition and abuse of a dominant position
Article 106 of TFEU: public enterprises and public service providers
Article 107 of TFEU: state subsidies
Regulation on mergers
Its goal:
Developing and ensuring economic efficiency
Increasing customer welfare
Strengthening internal market integration
Its role:
Negative – prohibitive
Positive– provides a uniform background
Development
Commission – Court – Member States
2004 – radical modification
European Competition Network (ECN)
2008 crisis – need for a strong state intervention
2012-2015 modernization– group exemption regulations
2014 antitrust directive
EU competition law (cont.)
Antitrust rules for businesses
Prohibition of anti-competitive agreements
Abuse of dominant position
Control of fusions
Measures regulating the market behaviour of Member States
Public enterprises and public service providers
State subsidies
Competition authorities
Commission
European Court of Justice
National Competition Authorities
National Courts
European Competition Network
Application of Articles 101 and 102
National competition authorities
National courts– compensation, nullity
Commission
Determination of the infringement
Applying fine
Mandatory commitment
Remedy: European Court of Justice
Regulations for corporations
1. Prohibition of agreements restricting competition – Article 101
The following shall be prohibited as incompatible with the internal market:
All agreements between undertakings
Decisions of associations of undertakings
Concerted practices
Which may affect trade between member states and which have as their object or effect the
prevention, restriction or distortion of competition within the internal market, in particular:
Directly or indirectly fix purchase or selling prices or any other trading conditions
Limit or control production, markets, technical development, or investment
Share market or sources of supply
Apply dissimilar condition to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage
Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature have no connection to them
All those agreements or decisions shall be automatically void.
2. Abuse of a dominant position – Article 102
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
In particular:
Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions
Limiting production, market or technical development to the prejudice of consumers
Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage
Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature have no connection to them
Merger control 139/2004/EK Regulation
Merger of companies
Two or more previously independent businesses merge
One or more persons acquire direct or indirect control over part of one or more enterprises
Prior notification to the Commission
Horizontal merger: parties are competitors on the same market
Vertical merger: parties are in a subordinate relationship
Conglomerate: parties are competitors in adjacent product markets
Efficiency improvement
Competition rules for Member States
1. Public companies and public service providers
Enterprises entrusted with the operation of services of general economic interest are subject to the competition rules to the extent that this does not hinder the execution of the specific tasks entrusted to them.
This cannot affect the development of trade to an extent that is contrary to the interest of the Union.
Public company: the state directly or indirectly exerts a decisive influence.
2. Prohibition of state subsidies
A support of any form, provided by a Member State or from public sources, which distorts competition by favouring certain enterprises or the production of certain goods, or threatens to do so, is incompatible with the internal market, insofar as this affects trade between Member States.
State subsidy
Provided by a Member State
It burdens the Member State’s budget
Advantage for the company
It distorts or threaten to distort competition
EU competition law – case law
EU competition law
Legal basis
Article 101 and 102: prohibition of restriction or distortion of competition and abuse of a dominant position
Article 106: public enterprises and public service providers
Article 107: state subsidies
Antitrust rules for businesses
Prohibition of anti-competitive agreements
Abuse of dominant position
Control of fusions
Measures regulating the market behaviour of Member States
Public enterprises and public service providers
State subsidies
Application of Articles 101 and 102
National competition authorities
National courts– compensation, nullity
Commission
Determination of the infringement
Applying fine
Mandatory commitment
Secret cartels: a 10% fine reduction in case of initiating a dispute settlement procedure
Regulations for corporations
1. Prohibition of agreements restricting competition – Article 101 of TFEU
The following shall be prohibited as incompatible with the internal market:
All agreements between undertakings
Decisions of associations of undertakings,
Concerted practices
Which may affect trade between member states, and which have as their object or effect the
prevention, restriction or distortion of competition within the internal market, in particular:
Directly or indirectly fix purchase or selling prices or any other trading conditions;
Limit or control production, markets, technical development, or investment;
Share market or sources of supply;
Apply dissimilar condition to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature have no connection to them
All those agreements or decisions shall be automatically void
Motor vehicle trade and insurance case
Since the end of 2002, a number of motor vehicle dealers - who also operate as motor vehicle repair shops - have entrusted the National Association of Motor Vehicle Dealers with annually negotiating on their behalf with insurance companies.
The framework agreement was regulating on the hourly rates applicable to the repair of vehicles damaged in accidents and insured by these insurers.
The dealers are in connection to the insurers (Allianz and Generali) in two ways:
On the one hand, they act as mediators of the insurers in such a way that they offer their customers car insurance on behalf of the insurers in the event of a car sale or repair.
On the other hand, dealers repair cars damaged in accidents and damaged by insurance companies.
In 2004/2005, the national Association and Allianz concluded framework agreements regarding the hourly rates for repairs. Based on the framework agreements, Allianz then entered into individual agreements with several dealers, according to which the dealers receive a higher hourly rate for the repair of vehicles if the insurance policies contracted with Allianz represent a certain percentage of the insurances sold by the given dealer. Generali has also entered unique, similar agreements with traders
Proceeding of the National Competition Authority
In 2006, it found that the agreements were incompatible with the competition law
The group of agreements (assessed both collectively and individually) had the purpose of restricting competition in both the car insurance and car repair services markets
Allianz 5.3 billion HUF, Generali 1 billion HUF, Association 360 m HUF fine, Peugeot dealers 13.6 m, Opel 45 m HUF
Review proceedings
Preliminary decision-making request to the ECJ:
"Can bilateral agreements between an insurance company and certain car repairers, - or between an insurance company and an association of car repairers – be considered as restricting competition, on the basis that the insurance company defines the hourly rate paid to the repair shop according to the number and ratio of insurance policies sold by the repair shop?"
Questions
Agreements:
Is it possible to classify the agreements between different enterprises and an association of enterprises as restricting competition in view of their purpose?
Aim to restrict competition
Can the agreements be classified as agreements which purpose is to restrict competition?
Verdict: the agreements are considered a targeted restriction of competition
Cartels
Definition: behaviour between independent competitors whose effect or purpose is to exclude, limit or distort competition
Typically, the joint influence of the price level, the division of markets or the limitation of production and output
Independent competitors operating in the same market, providing the same or similar services and goods
Truck Cartel – Commission case
Between 1997-2011
MAN, Volvo/Renault, Daimler, Iveco, DAF, Scania truck producers
Coordination:
Wholesale prices
The timing of the introduction of new emission technologies
Transfer of costs to customers
Shared commercially sensitive information with each other
Total 3.8 billion EUR fine
Multitude of compensation lawsuits in member states
Cement Case
Cembureau 14. January 1984:
„Now let me describe the exact purpose of our meeting today. The first task is to collect all available data with your help. We will then be able to assess the dangers of import growth and price reductions before this phenomenon takes hold.
Our goal is not to make collective decisions, to pass judgment or to act as a mediator. With your help, our task is to develop solutions for shaping market processes and to make proposals, at least on a principle level - for the rules of the game - which is in the interest of all of us. Then we expect you to sow the seeds of wisdom around you and to hold bilateral or multilateral meetings as needed...”
Cementcartel
Agreements
Assessment of the dangers associated with increase in imports and the associated decrease in certain prices
Gradual reduction of price differences - all producers adjusted their prices to the local price leader so that cross-border movement does not endanger the stability of the price level in the destination country
Establishing uniform rules for overseas exports - prevented competition between members
Bilateral agreements
Producers in Benelux countries informed other members of their minimum prices
Market Sharing
Spanish-Portuguese: they cooperated to restrict cement trade between the two countries and keep their own markets, they also cancelled foreign orders
Enticing customers together
Italian cement producers coordinated their behaviour to lure away one of the most important customers of the Greek manufacturer who wanted to break into the Italian market
Export control
Motorway cartel
Negotiations related to the public procurement procedure of National Motorway Plc.
Procedure — Vegyépszer and Benonút invited to tender
After the change of government in 2002, Strabag, Hídépítő, Betonút and Egút were also eligible to apply
Hungarian Competition Authority: a distribution of labour based on a territorial agreement has been established, the essence of which is that all enterprises (as subcontractors) will be participating in the construction of the motorway
Regulation for corporations
2. Abuse of a dominant position
Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. In particular:
Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
Limiting production, market or technical development to the prejudice of consumers
Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature have no connection to them
Dominant position
Concept of dominance: CJEU: economic situation enjoyed by an undertaking which could distort competition by behaving appreciably independently of its competitors, customers and consumers.
Costs and risks of market entry
Property and financial situation of the enterprise
Structure of relevant market, market share ratio etc.
Definition of relevant market: United Brands, Michellin, Coca-cola case
Abuse
CJEU: 'The concept of abuse is an objective concept linked to the conduct of a dominant company affecting the structure of a market in which – precisely because of the presence of that company – less competition is achieved and which, by applying methods different from those typical of normal competition, has the effect of preventing the maintenance or intensification of competition that still exists on that market.'
For example
Abuses related to pricing policy: excessively high price, predatory price, discriminatory pricing, selective price reduction, loyalty discount
Refusal to deliver, contract, refusal of access to essential equipment
Tying of goods together
Cutting emissions, hampering technical progress
Vertical traffic restrictions
Intellectual property abuses
AKZO case
AKZO, a multinational group based in the Netherlands
Production and distribution of organic peroxide
Market share in the common market 50%
His customer was English ECS – it started his own peroxide production, it also wanted to enter the German market
AKZO has made significant price cuts, primarily targeting the ECS customers
Commission 1985 — Abuse of a dominant position
Imminent threat
Predatory pricing
Exclusive business policy
Fine ECU 10 million
CJEU dismissed the appeal:
A price below the average variable cost, depending on the quantity of goods produced, is considered abusive. It is not in the interest of the dominant undertaking to apply such a price unless it seeks to eliminate its competitors, after which it will be able to raise prices by virtue of its monopoly position
British Airways case
British Airways applied discounts to travel agents – hindering the expansion of its competitors
BA: It claimed that, according to Article 102(b), the distinction between intense price competition and predatory pricing should be based on its effect by 'limiting production, market or technical progress to the detriment of the consumer’
CJEU: the competition law assessment of discounts is a complex task, it must be examined:
Whether the discount has restrictive effects
What are the objective economic reasons behind the discount
Microsoft case
Microsoft Media Player is built into it’s operating system - Committee:
Microsoft's dominant position on the market for client computer operating systems — that Microsoft has not disputed
Multimedia players and client computer operating systems are two separate markets
Microsoft did not give consumers a choice as to whether to acquire Windows without the Player
Tying excludes competition in the market for multimedia players
'When a stand-alone product is offered for sale linked to a dominant product, this is a sign of foreclosure effect on competitors.’
Microsoft's defence:
Wanted Windows to be accepted as a single, constantly evolving product with more functionality
Does not charge extra for the installation of Media Player
Several years after the start of the activity in question, multimedia players from many manufacturers are present on the market
Google case
Dominant position:
General internet search engines
Licensed intelligent mobile operating systems
Android mobile operating system app stores market
Conduct
Device manufacturers were required by Google to download all listed Google applications to the device in advance, Google Search and Google Play applications to be prominently placed and Google Search to be the default search engine
Commission: restricted competition by tying, €4.43 billion fine
Essential facility doctrine – Bronner
Deny access to infrastructure
Directorate-General:
Conduct constitutes denial of access
The secluded enterprise enjoys a dominant position
Input is essential
Rejection is likely to have negative competitive effects
There are no objective reasons for refusal
Bronner case
Bronner: Dealt with editing, producing, publishing and distributing the Austrian daily newspaper Der Standard, 3.6% share
Mediaprint: publisher of the daily newspapers Neue Kronen and Kurier, 46.8% share of the market
Mediaprint: established a nationwide delivery distribution network
Bronner demanded that Der Standard also be delivered through the same distribution network
Court proceedings
It is necessary to consider:
Whether delivery systems constitute a separate market
Other supplies — shops, post offices, newsagents — have sufficient substitution characteristics
Judgement:
There are other marketing methods,
There are no technical, legal or economic obstacles to the establishment of a network
Merger control Regulation
Merger of companies
Two or more previously independent businesses merge
One or more persons acquire direct or indirect control over part of one or more enterprises
Union threshold
Prior notification to the Commission
Horizontal merger: parties are competitors on the same market
Vertical merger: parties are in a subordinate relationship
Conglomerate: parties are competitors in adjacent product markets
Efficiency improvement
Competition rules for Member States
1. Public companies and public service providers Article106 of TFEU
Enterprises entrusted with the operation of services of general economic interest are subject to the competition rules to the extent that this does not hinder the execution of the specific tasks entrusted to them.
This cannot affect the development of trade to an extent that is contrary to the interest of the Union.
Public company: the state directly or indirectly exerts a decisive influence.
2. Prohibition of state subsidies - Article 107 of TFEU
A support of any form, provided by a Member State or from public sources, which distorts competition by favouring certain enterprises or the production of certain goods, or threatens to do so, is incompatible with the internal market, insofar as this affects trade between Member States.
State subsidy
Provided by a Member State
It burdens the Member State’s budget
Advantage for the company
It distorts or threaten to distort competition
Affects the trade between Member States