Do the Lessons of EU Legal Integration "Travel"?

Three ECSA members examine the interplay of domestic and international law, using the European Union as a basis for analysis.

Martin Shapiro

THE EU IS BASICALLY a treaty-based free-trade area plus attendant treaty-based organs of legislation, administration and adjudication. The intention of the signatory member states was that the principal legislative organ, the Council, remain completely under the control of member state governments, that the administrative organ, the Commission, be relatively independent and exercise a strong role in legislation, and that the adjudicatory organ, the ECJ, be almost entirely independent. As we all know there is a scholarly debate about whether the law-making process engaged in by Commission-Council has remained entirely under member state control or under the law of unanticipated consequences and through the dynamics of path-determined institutional evolution has become somewhat independent of immediate member state control. I leave this vital question to others. Of course many questions of EU lessons and whether and where they can travel depend upon whether the EU is merely a species of intergovernmentalism or something new under the sun.

I turn instead to the ECJ. Here the EU experience tends to confirm a particular set of interdependent hypotheses that do travel easily. Intrinsically and historically courts, that is triadic conflict resolution mechanisms, are convenient modes of conflict resolution. Therefore when constitution writers and others similarly situated constitute political arrangements in which power is divided geographically or among central political organs, they are likely to establish a court to handle the boundary conflicts that necessarily arise among the various holders of the divided political power. Indeed a court may be essential for the success of all such divided power arrangements because boundary conflicts are so endemic to them. Moreover a court has a certain natural advantage in such a situation. From the standpoint of each power holder it would be best if it could disobey the rules of the power dividing arrangement, but all other holders obeyed the rules. The second best solution is that it and all other holders obey the rules. So long as the survival of the basic arrangement (e.g., constitution) is preferred by each power holder over the dissolution of the arrangement, each will obey the rules and insist that other holders do so as well. Thus when the court of the arrangement seeks to impose compliance with the rules on any recalcitrant holder, the court will be supported by all other holders and ultimately even by the recalcitrant holder. Even the recalcitrant holder will disobey only if the court should seek to impose a cost on it higher than the benefit of remaining in the arrangement.

Finally, and this is a crucial hypothesis, courts cannot engage in successful conflict resolution unless they also engage in law making. Law making is as intrinsic to courts as is conflict resolution. In order for a judge to succeed as a conflict resolver, she must persuade the loser at trial that he has lost not simply because the judge has chosen him as the loser but because he has violated a pre-existing legal rule. In reality, however, there sometimes is no pre-existing legal rule that clearly defines the winners and losers in a particular case. In such instances, the judge must make a new legal rule herself while pretending that it pre-existed the litigation. (This hypothesis is elaborated in my 1986 book, Courts.)

Where constitution makers and other similarly situated actors feel compelled to establish a court because of anticipated conflicts among the power holders in the arrangement they are constituting, they will also feel compelled to make that court relatively independent of the immediate will of all other holders, because only under such conditions will the court be an effective conflict resolver with a capacity for exploiting the mutual "second best" preference of all the holders. Because courts must engage in law making in order to do conflict resolution, and because they must be partially independent in order to do conflict resolution, it follows that no matter what the framers' initial intentions or the subsequent preferences of the other power holders, the court created will wield a certain degree of independent law making authority. From the point of view of the constituters of a divided power political arrangement, be it constitutional or treaty based, the lesson is, "If you buy a junk yard dog ..." (A junk yard dog is a large, fierce dog that the yard owner turns loose each night to discourage thieves and which he, himself, must chain up again each morning. Thus if you buy a junk yard dog, you, yourself, run the risk of getting bitten.) Players who choose to create a conflict-resolving court have, whether they like it or not, created a somewhat independent law making authority and each player can expect to be bitten once in a while, that is to encounter a piece of judicial law making that it doesn't like.

The member states of the EU created both a geographic (center-periphery), and a central government (four-branch) division of powers. They created the ECJ in line with the hypotheses outlined above. The ECJ has been a relatively successful conflict resolver and a quite active and successful law maker. Each of the member states has been bitten from time to time. Each has typically supported the Court when it bites others and ultimately submitted to being bitten itself. Indeed the biting has been sufficiently severe that in a number of the revisions of the treaties the member states collectively have sought to bar or limit judicial review from some sectors. But the dependency on judicial conflict resolution in the EU system is so great that most attempts to limit review have been aborted or have subsequently crumbled.

What travels, therefore, is the junk yard dog. Whether the member states do or do not completely control the Commission-Council-Parliament law making process, they do not completely control the ECJ law making process–and cannot do so as long as they want an effective conflict-resolving guardian of power holder boundaries. That lesson is now being learned by the members of the WTO and NAFTA, other treaty-based free-trade areas with attendant judicial organs, just as it has been learned previously by countries like France, which consistently rejected judicial review until it divided executive power between PM and President, created a court to police the boundary between them, and ended up with a law making process in which one faction of the Assembly is constantly siccing the judicial dog on another.

Martin Shapiro is James W. and Isabel Coffroth Professor of Law at the University of California, Berkeley.


Karen J. Alter

HAS THE STUDY of European integration yielded generalizable hypotheses or lessons that might inform the study of other domestic or international legal systems? The answer is surely yes. There are at least four ways that insights gained from studying EU legal integration "travel."

1) Insights into the factors shaping national court and private litigant behavior in the EU legal process are generalizable outside of the EU context. Because of the central role private litigants and national courts play in the EU legal process, there has been much research on the factors motivating these actors. Scholars have found that the way domestic interests are organized (whether they represent broad or narrow constituencies, whether they are involved in or excluded from the policy-making process etc.) as well as the magnitude and distribution of potential benefits (large/small, narrow/diffuse) shape whether or not private litigants or groups see the EU legal system as a means to promote their objectives, and thus whether they raise EU law challenges to national policy (Alter and Vargas, forthcoming; Caporaso and Jupille, forthcoming; Conant, 1998). Such findings are clearly generalizable to other contexts. In addition, studies have identified legal cultural factors, the location of judges within the national legal bureaucracy, and historical and institutional features of national legal systems as important factors shaping national judicial behavior, all of which influence judicial behavior in areas outside of EU law as well (Alter, forthcoming (a); Chalmers, 1997; Mattli and Slaughter, 1998). Because these factors are directly generalizable, studies such as Carol Harlow and Richard Rawlings' Pressure Through Law, and Alec Stone Sweet's Governing with Judges integrate the EU into more general studies of judicial politics in Europe, examining EU judicial politics as part of broader political phenomenon (Harlow and Rawlings, 1992; Stone Sweet, 2000).

2) Insights into how European integration is influencing national legal systems are generalizable outside of the legal realm. Why assume that insights from the European legal realm are only transferable within the legal realm? There are a number of ways in which insights from the EU legal process apply to the overall political process of European integration, and to integration in other national and international contexts.

Insights into how EU law impacts national legal systems (which are after all administrative bureaucracies) are generalizable to other administrative bureaucracies. Renaud Dehousse generalizes from the legal realm to the policy realm when he discusses the trend towards transnational administrative networks making policy in the EU (Dehousse, 1997). Anne-Marie Slaughter generalizes outside of the EU realm, making a broad claim that in the future international policies will be made and politics fought among disaggregated sub-state agencies—specifically courts and administrative bureaucracies— hammering out detailed international agreements that regulate transnational relations (Slaughter, 1997).

Because the EU legal system from an early point looked federal in nature, European law scholars have long been comparing the EU legal system to other federal systems (Weiler, Cappelletti, and Seccombe, 1986). Indeed many of the legal and political dynamics within the EU—namely the politics created as a result of the EU's multi-level governing structure, struggles over the borders of federal and state authority, and where the Kompetenz-Kompetenz (the power to decide on the limits to EU authority) lies—are dynamics present in any federal entity.

Indeed general political science theories have been applied to the study of legal integration in Europe, from neo-functionalism, to inter-governmentalism, to principal-agent analysis, to constructivist and cultural theories, yielding insights that go beyond the legal realm. For example, studies on the extent to which the ECJ enjoys institutional autonomy from member states draw on and contribute to the broader debate about the extent to which EU institutions (or any political institution for that matter) have autonomy from political actors (Alter, 1998; Garrett, Kelemen, and Schulz, 1998; Pollack, 1997; Tsebelis and Garrett, 1999).

3) Insights from the EU legal system may be generalizable to other international legal contexts. Because the EU legal system offers the best example of an international rule of law that works, it has become the model used in theorizing about international law in other contexts. The EU legal system and the European Court of Human Rights are prototype cases for theorizing about law among liberal states, the possibility for more effective supra-national adjudication, how international adjudication contributes to the construction of supranational constitutions, and how regime design undermines or enhances the effectiveness of international legal mechanisms in shaping state behavior (Alter, forthcoming (b); Helfer and Slaughter, 1997; Slaughter, 1994; Slaughter, 1995; Slaughter, Keohane, and Moravscik, forthcoming; Stone Sweet and Brunell, 1998). Indeed an upcoming special edition of International Organization on "Legalization in World Politics" situates the EU legal system and the process of legal integration in Europe where it belongs, as part of a broader trend towards legalization and the strengthening of legal mechanisms in the international realm.

4) EU legal scholarship has much to say about the type of polity the EU is. National courts have been asked to decide where the core of national sovereignty lies. In Brunner and others v. The European Union Treaty (aka the Maastricht Decision), the German Constitutional Court had to consider whether the Maastricht Treaty compromised German democracy. Similar questions were asked of the French Constitutional Council and the Danish Supreme Court. Their soul searching has been examined and expanded upon in legal commentary, and in articles by European legal scholars questioning what type of polity the EU is (see for example Bañkowski, 1999; Bañkowski and Scott, 1996; Eleftheriadis, 1996; Maher, 1998; Shaw, 1998; Weiler, 1995). Their reflections are not only philosophical, but also practical. Legal scholars have contributed to studies and plans to create a European Constitution, and they are part of broader debates about democracy in Europe (Weiler, 1999).

The question raised by this forum is a good one. The study of legal integration provides an exemplary case of how to overcome the n = 1 issue discussed in an earlier ECSA Review forum. To be sure the EU legal system has some unique features. But the issues European legal integration raises pertain beyond the EU, and beyond the legal realm. And the insights from the EU can apply to other international and domestic contexts. At the same time, I don't think there has been enough comparative work situating the EU in a comparative context. It is more often the case that scholars take theories developed elsewhere and apply them to the EU than vice-versa. The study of the EU would be of greater interest to the broader disciplines of political science, sociology, economics, etc., and less theoretically isolated, if specialists of the EU used the EU experience to inform the study of politics in other international and domestic contexts. For this to happen EU scholars need to become comparative scholars, respectful of the unique aspects of the EU yet looking for ways to learn and generalize from the EU case.

Karen J. Alter is an Assistant Professor of Government at Smith College.


Laurence R. Helfer

THE STUDY OF HOW the European Court of Justice (ECJ) transformed itself into the world's most successful international court is by now a familiar one to political scientists and legal commentators alike. In the forty years since its creation, the ECJ restructured the legal architecture of the European Community (EC) from a classical international law regime based on treaties to one founded upon supranational law—a true international/domestic hybrid in which EC rules penetrate deeply into the national legal fabric of the member States (Helfer and Slaughter 1997; Weiler 1991).

Can the ECJ's success be transplanted beyond Europe? In particular, what insights does the ECJ's experience hold for three governments on the other side of the Atlantic, who five years ago established in NAFTA a treaty-based free trade regime that, like the EC before it, gives precedence to international norms over many domestic laws and regulations?

Without doubt, an essential ingredient in the ECJ's success was the decision to grant the Court power to hear claims brought by private parties against national governments or against other private parties. Conferring treaty rights on individuals and firms with financial and other incentives to invoke those rights de-politicizes the enforcement of treaty rules. It also allows an international tribunal to penetrate the surface of the State, forging direct relationships with private parties and with distinct government institutions such as national courts (Slaughter, Stone Sweet and Weiler, 1998). In short, private party participation creates opportunities for international jurists to strengthen and legitimize international legal regimes and legal norms. Seen from this perspective, NAFTA's chapter 11, which allows private investors of one State to sue the government of another State before a panel of arbitrators for violations of the treaty's investment rules, should have enhanced the efficacy of those rules and of NAFTA itself. For complaining businesses, chapter 11 has indeed proved an effective means of enforcing treaty rights. Investors have filed nearly a dozen chapter 11 cases, at least one of which prompted Canada to repeal a domestic environmental law and pay a multi-million dollar compensation award.

Unlike the European experience, however, private party access to international dispute settlement has so far neither solidified nor legitimized NAFTA. To the contrary, the last two years have witnessed a noisy and increasingly broad-based backlash against chapter 11 and the treaty itself. Non-governmental organizations supporting environmental protection, labor standards, and consumer rights have branded chapter 11 plaintiffs as "corporate predators" using a "secret tranche of international laws" and trade treaties "to overturn national laws which get in the way of their business activities" (Kingsnorth 1999).

Nor is the anti-NAFTA response limited to advocacy groups traditionally opposed to business interests. Government officials within the three treaty parties have also come to view chapter 11 as a threat to their sovereignty. Some have even endorsed proposals to scuttle pending cases or wipe out private party dispute settlement altogether (Jack 1999).

Why has private party adjudication under NAFTA produced a sovereignty backlash rather than the increasingly broad interpenetration of international and domestic legal rules and actors that characterized the EC? Although NAFTA is still in its infancy and much evidence must still be gathered, a preliminary comparison between chapter 11 and other facets of ECJ adjudication seems warranted. What follows is a tentative and unordered list of differences between the two treaty regimes intended to stimulate further thinking and research into the causes of the chapter 11 backlash and possible responses to it.

1) Lack of transparency. Chapter 11 is modeled on international arbitration rather than international adjudication. For this reason, the process is closed to outsiders. Key documents and key proceedings must be shielded from to public scrutiny unless the parties decide otherwise. These features are in striking contrast to the ECJ, in which oral arguments, pleadings, and, of course, final judgments are publicly accessible.

2) Identity, background, and domestic profile of dispute settlement jurists. Outside of a small cadre of trade and arbitration lawyers, little is known about the identity and background of the arbitrators hearing chapter 11 claims. The arbitrators do have the backing of established arbitral centers such as the International Center for the Settlement of Investment Disputes. They are not, however, required to have served as national court judges, nor are they likely to have preexisting relationships with domestic legal or political actors, both characteristics of ECJ jurists.

3) Early, expansive treaty interpretations. NAFTA's drafters conceived of chapter 11 as a way for businesses to protect their investments by challenging expropriations, discriminatory treatment of foreigners, and other anti-investor harassment by host countries. In practice, investors have used chapter 11 expansively to challenge laws of general application, focusing in particular on environmental regulations. This record contrasts sharply with the ECJ's early history, in which most cases on the Court's docket fell within the heartland of legal rules protected by the EC treaties.

4) Lack of incrementalism. One often-cited feature of the ECJ's success was its ability to build slowly over a period of decades the legal doctrines necessary for the supremacy and legitimacy of EC law. Under chapter 11, by contrast, arbitrators are already being asked to adopt expansive interpretations of NAFTA's investment rules, even though the dispute settlement system is still a fledgling operation and even though an extension of investor rights is more appropriately carried out by the treaty parties themselves through NAFTA's political review processes.

5) Absence of links to national courts. Unlike the ECJ, investors challenging host country laws and regulations need not submit their treaty claims to national court judges prior to submitting them to chapter 11 arbitrators. Indeed, investors can simply by-pass national courts altogether. This practice isolates chapter 11 proceedings and decisions from domestic jurists. In Europe, domestic jurists' application of EC law and referral of pending cases to the Court was a crucial component of the ECJ's (and the EC's) success. The lack of any links between domestic and international adjudication also fuels the perception that foreign investors are using NAFTA to do an end run around democratically adopted national laws.

6) Absence of treaty rights for domestic private parties. If foreign investors are granted a slew of treaty rights favorable to their operations, why not domestic businesses? Domestic firms, who might have come to support NAFTA and chapter 11, now feel doubly slighted, having lost both protective tariffs and trade barriers and the ability to operate on an equal playing field with foreign firms. Here too the contrast with the EC is striking, where both domestic and foreign private parties may assert claims based on violations of EC treaties and legislation.

7) Imbalance between investor protections and other legal and social objectives. Legal rules protecting foreign investment and trade often conflict with other vital societal values, including environmental protection, labor regulation, public health, and consumer safety. Domestic legislators and administrators must carefully balance these competing objectives in response to the demands of rival constituencies. Yet chapter 11 does not respect the need for this balancing; to the contrary, it gives enforceable treaty rights only to one side of this complex regulatory equation. It thus skews decisionmaking in favor of investor firms at the expense of other domestic goals, further undermining the legitimacy of the NAFTA treaty regime. That a balanced regime of rules and enforcement is necessary internationally as well as domestically is apparent from the EC's history, in which member states have increasingly added subjects as diverse as human rights and employment protections to complement the free trade rules that comprise the treaty's core.

Although far from conclusive, this brief comparison of the ECJ and NAFTA chapter 11 suggests that simply granting enforceable treaty rights to private parties does not ensure that effective supranational adjudication will result. To the contrary, private party rights, unaccompanied by other factors, may well produce a backlash that destabilizes a treaty regime.

Laurence R. Helfer is Associate Professor of Law at Loyola Law School, Los Angeles.


Forum References

Alter, Karen J. (forthcoming (a)) "Where, When and How does the European Legal System Influence National Policy?" International Organization, Summer 2000.
_____ (forthcoming (b)) "Regime Design Matters: Designing International Legal Systems for Maximum or Minimum Effectiveness," paper read at ISA Conference, Los Angeles, March 14-17, 2000. _____ (1998) "Who are the Masters of the Treaty? European Governments and the European Court of Justice," International Organization 52 (1): 125-152.
_____ and Jeannette Vargas (forthcoming) "Explaining Variation in the Use of European Litigation Strategies: EC Law and UK Gender Equality Policy," Comparative Political Studies (June 2000). Bañkowski, Zenon (1999) "Subsidiarity, Sovereignty and the Self," in Subidiarität: Idee und Wirklichkeit, edited by K. Norr and T. Oppermann. JCB Mohr, 28-39.
_____ and Andrew Scott (1996) "The European Union?" in Constitutionalism, Democracy and Sovereignty, edited by R. Bellamy. Aldershot: Avery Press, 77-95
Caporaso, James, and Joseph Jupille (forthcoming) "The Europeanization of Social Policy and Domestic Political Change," in Europeanization and Domestic Structural Change, edited by M. Green Cowles, J. Caporaso and T. Risse. Ithaca, NY: Cornell University Press.
Chalmers, Damian (1997) "Judicial Preferences and the Community Legal Order," Modern Law Review 60 (2, March), 164-199.
Conant, Lisa (1998) "Contained Justice: The Politics behind Europe's Rule of Law," Dissertation in Political Science, University of Washington.
Dehousse, Renaud (1997) "European Integration and the Nation State," in Developments in West European Politics, edited by M. Rhodes, P. Heywood and V. Wright. New York: St. Martin's Press, 37-56.
Eleftheriadis, Pavlos (1996) "Aspects of European Constitutionalism," European Law Review (February): 32-42.
Garrett, Geoffrey, Daniel Kelemen, and Heiner Schulz (1998) "The European Court of Justice, National Governments and Legal Integration in the European Union," International Organization 52 (1): 149-176.
Harlow, Carol, and Richard Rawlings (1992) Pressure Through Law. London: Routledge.
Helfer, Laurence R., and Anne-Marie Slaughter (1997) "Toward a Theory of Effective Supranational Adjudication," Yale Law Journal 107 (2): 273-391.
Jack, Ian (1999) "Ottowa Pushes for Reform of NAFTA Lawsuit Provisions: $1 Billion in Claims," Financial Post, April 20.
Kingsnorth, Paul (1999) "A Very Happy Birthday for NAFTA," The Ecologist, 1 January. Maher, Imelda (1998) "Community Law in the National Legal Order: A Systems Analysis," Journal of Common Market Studies 36 (2): 237-254.
Mattli, Walter, and Anne-Marie Slaughter (1998) "Revisiting the European Court of Justice," International Organization 51 (1): 177-209.
Pollack, Mark (1997) "Delegation, Agency and Agenda Setting in the EC," International Organization 51 (1): 99-134.
Shapiro, Martin (1986) Courts: A Comparative and Political Analysis (Chicago: University of Chicago Press).
Shaw, Jo. (1998) "Constitutional Settlements and the Citizen After the Treaty of Amsterdam," Jean Monnet Working Paper 7/98.
Slaughter, Anne-Marie (1997) "The Real New World Order," Foreign Affairs (September/October): 183-197.
_____ (1995) "International Law in a World of Liberal States," European Journal of International Law (6): 503-538.
_____ (1994) "A Typology of Transjudicial Communication," University of Richmond Law Review 29 (1): 99-137.
_____ , Robert Keohane, and Andrew Moravscik forthcoming) "Legalized Dispute Resolution, Interstate and Transnational," International Organization.
_____ , Alec Stone Sweet, and J.H.H. Weiler, eds. (1998) The European Court and National Courts—Doctrine and Jurisprudence. (Oxford: Hart Publishing).
Stone Sweet, Alec (2000) Governing with Judges. Oxford: Oxford University Press.
_____ and Thomas Brunell (1998) "Constructing a Supranational Constitution: Dispute Resolution and Governance in the European Community," American Political Science Review 92 (1): 63-80.
Tsebelis, George, and Geoffrey Garrett. Unpublished manuscript. "The Institutional Determinants of Supranationalism in the European Union," Manuscript under review.
Weiler, J.H.H. (1999) The Constitution of Europe. Cambridge: Cambridge University Press.
_____ (1995) "The State ‘über alles': Demos, Telos, and the German Maastricht Decision," European University Institute Working Paper, RSC 95/19.

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