between the institutions
4. Developments concerning EU public fi nances in the institutional debate
The European Convention, which met between March 2002 and July 2003, drew up a Treaty establishing a Constitution for Europe which was intended to replace the existing treaties. Although this institutional debate did not focus specifi cally on budgetary matters, some of the changes envisaged could have a direct or indirect impact on the budget- ary procedure or the budget itself.
The Constitutional Treaty (1) was subsequently submitted to an intergov-
ernmental conference (IGC). It was adopted after some amendments in June 2004 and signed in October of the same year (2). However, the fail-
ure of the referenda in France and the Netherlands effectively halted the ratifi cation process and led the EU to a period of refl ection on future institutional reforms.
(1) See Intergovernmental Conference document CIG 87/04
http://www.consilium.europa.eu/cms3_applications/Applications/igc/doc_register.asp? content=DOC&lang=FR&cmsid=754.
THE LEGAL INSTRUMENTS 131
At its meeting on 21-22 June 2007, the European Council agreed to convene an IGC to prepare a Reform Treaty amending the existing treaties with a view to enhancing the effi ciency and democratic legitimacy of the enlarged Union. The draft Treaty amending the Treaty on European Union and the Treaty establishing the European Community (1) was fi nally adopted at the inter-
governmental conference of 18 October 2007 in Lisbon. The Lisbon Treaty was signed on 13 December 2007 in Lisbon.
Subject to ratifi cation by the Member States (2), the Lisbon Treaty will
introduce changes in the EU public fi nances architecture. The changes envisaged concern areas such as own resources procedures, the multi- annual fi nancial framework and the annual budgetary procedure.
4.1. Own resources
The Lisbon Treaty reformulates the provisions concerning the system of own resources. Article 311 of the Treaty on the Functioning of the Euro- pean Union (TFEU) (3) states that ‘The Union shall provide itself with the
means necessary to attain its objectives and carry through its policies’. The next paragraph provides the defi nition of ‘the means’ which is basi- cally the current system of own resources of the European Union.
The Council, acting in accordance with a special legislative procedure and after consulting the European Parliament, may, unanimously, adopt a decision on the Community’s own resources which, inter alia, may establish new categories of own resources or abolish existing ones. As at present, any decision on the system of own resources will require approval by the Member States in accordance with their own constitu- tional requirements. Implementing measures in the form of regulations (1) See Intergovernmental Conference document CIG 1/1/07 REV 1.
(2) The Treaty of Lisbon is still in the process of being ratifi ed by the Member States, in
accordance with their respective constitutional requirements. As provided for in Art- icle 6 thereof, the Treaty will enter into force on 1 January 2009, provided that all the instruments of ratifi cation have been deposited, or, failing that, on the fi rst day of the month following the deposit of the last instrument of ratifi cation.
(3) Ex Article 269 TEC – see Annex 1 for a comparative table of the provisions contained in
the Treaty establishing the European Community and the Treaty on the functioning of the European Union (Lisbon Treaty).
will also be adopted following a special legislative procedure by the Council, acting after obtaining the consent of the European Parliament in so far as provided for in the own resources decision.
4.2. The multiannual fi nancial framework (MAFF)
The multiannual fi nancial framework, which until now was only included in the Interinstitutional Agreement and therefore – strictly speaking – was not legally binding, was incorporated into the Lisbon Treaty to enhance budgetary discipline and transparency (new Article 312 TFEU). The over- all aim of the MAFF, covering at least fi ve years and adopted in the form of a regulation, is to ensure that the European Union’s expenditure devel- ops in an orderly manner and within the limits of its own resources. The Council, acting in accordance with a special legislative procedure and after obtaining the consent of the European Parliament, will adopt the MAFF regulation. Unanimity is required, although the European Council may, unanimously, adopt a decision authorising the Council to adopt the MAFF regulation by a qualifi ed majority.
The fi nancial framework must determine the annual ceilings on com- mitment appropriations by category of expenditure and the annual ceil- ing on payment appropriations. The categories of expenditure, limited in number, must correspond to the Union’s major sectors of activity. In addi- tion, the MAFF regulation will lay down any other provisions required for the annual budgetary procedure to run smoothly.
The provisions of the Lisbon Treaty underline the political responsibil- ity of the budgetary authority and the Commission by stipulating that ‘throughout the procedure leading to the adoption of the fi nancial frame- work, the European Parliament, the Council and the Commission shall take any measure necessary to facilitate its adoption’.
4.3. The Union’s annual budget
The Lisbon Treaty does not amend the provisions agreed upon in June 2004. As a rule, the new Treaty will simplify the budgetary procedure, on the one hand by removing the distinction between compulsory and non- compulsory expenditure and, on the other, by amending the budgetary
THE LEGAL INSTRUMENTS 133
procedure which becomes analogous to a co-decision procedure with one reading and conciliation.
The fundamental distinction between compulsory and non-compulsory expenditure will be abolished. The current distinction between these two types of expenditure results in a division of responsibility for the fi nal adoption of any expenditure. The Council has the fi nal word for compulsory expenditure which, inter alia, consists of common agricul- tural policy expenditure, contributions to international organisations or institutions, contributions provisioning the loan guarantee, expenditure resulting from international agreements, pensions and compensation. The European Parliament has the fi nal decision on the rest of expendi- ture, which is non-compulsory.
Removal of this distinction should have a dual impact on the process of adoption of the annual budget. On the one hand, the responsibility of each arm of the budgetary authority will no longer be limited to its cat- egory of expenditure. Both arms of the budgetary authority will be fully and jointly accountable for the whole budget. On the other hand, the new provisions are likely to have an impact on the way the budget will be negotiated between the Council and the European Parliament.
The possibility for the Council or the European Parliament to reject the draft budget in the course of the procedure may increase the uncertainty of the outcome and open the risk of confl ict between the two arms of the budgetary authority. On the other hand, the Commission may take all the necessary initiatives, e.g. it can call the Presidents of the European Parliament and the Council to meet for consultations and conciliation. The Conciliation Committee can be convened to reach agreement on a joint text. Several scenarios are envisaged by the Lisbon Treaty in this respect, which may lead to two different results: either the budget is deemed to be adopted or a new draft budget has to be submitted by the Commission.
If, within 21 days, the Conciliation Committee does not agree on a —
joint text, a new draft budget must be submitted by the Commission. Similarly, if the European Parliament and the Council both reject the joint text, or if one of these institutions rejects the joint text and the other fails to take a decision, a new draft budget must be submitted by
the Commission. The same applies if the European Parliament rejects the joint text but the Council approves it.
Any other outcome of the conciliation procedure leads to the budget —
being deemed to be adopted.
This new Treaty should result in balanced power-sharing between the Council and the European Parliament when it comes to adopting the annual budget. Moreover, the incorporation of the MAFF into the Lisbon Treaty and the removal of the distinction between non-compulsory and compulsory expenditure render the provisions concerning the maximum rate of increase obsolete.
4.4. Implementation of the budget and discharge
The Lisbon Treaty takes into account the obligations and resultant responsibilities of the Member States in respect of budget implementation and discharge. Regarding budget implementation, where the majority of budgetary appropriations are implemented under the shared manage- ment system, Article 317 TFEU (ex Article 274 TEC) stipulates that ‘the Commission shall implement the budget in cooperation with the Member States’. The same article also provides that the appropriate regulations will lay down the control and audit obligations of the Member States in the implementation of the budget. Therefore the responsibility of the Member States emerging from close cooperation with the European Com- mission in implementation of the budget has been recognised.
Chapter 8