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How decisions are made at an EU Level

The standard decision-making procedure is known as ‘Ordinary Legislative Procedure’, meaning that the directly elected European Parliament has to approve EU legislation together with the Council of Europe.

The EU Institutions  

The European Union (‘EU’) institutions mainly include the European Council, the European Commission and the European Parliament. The EU’s standard procedure for decision making is the ‘Ordinary Legislative Procedure.’

Law is not the only factor shaping the EU’s decision-making processes. By virtue of EU Law:

  • the Commission takes decisions on the permissibility of proposed mergers between large companies;
  • the Council and European Parliament determine the size and shape of the EU’s annual budget;
  • Fishermen are restricted in what and how much they can catch in the seas surrounding the EU; and
  • Products not meeting specified standards cannot be sold in the EU’s market.

The set-up of the Institutional structure can be seen in the identification of the Commission, the European Council, the Council of Ministers, the European Parliament, and the Court of Justice of the EU.

The European Council is essential in decision-making within the EU as it decides, together with the European Parliament.

Codecision’ – whereby decisions are made upon the proposals submitted by the European Commission.

The Procedure for Decision-Making 

Both the European Parliament and the European Council are placed on equal footing when adopting legislation. The procedure involves the directly elected European Parliament to approve the EU Legislation together with the European Council. The process initiates with a proposal from the European Commission, which is an executive branch of the Union, and consists of three (3) readings:

  1. First Reading – Both the Parliament and the Council examines the proposal put forward by the Commission. The Commission has the right to propose legislation and to oversee the proper implementation of the EU Legislation and budget. At the First Reading stage, the Parliament (which is a decisive institution on most EU Laws along with the Council) casts it’s votes via a simple majority of votes cast. The Parliament’s vote reflects the adopted position being taken and is then followed by the decision of the Council. The Council may either accept the position of the Parliament or adopt a different position. Accepting the Parliament’s decision means that the Legislative Act is adopted. A different position by the Council means that the Parliament will have a second reading. The first reading has no imposed deadline.
  2. Second Reading – For the Second Reading, a similar approach is taken, however, the co-legislators have three (3) months to take their position. Such period may be extended by one (1) month. The Parliament may reject or amend the position of the Council – taken at first reading – via an absolute majority of its members (which includes those absent and/or not voting).
  3. Conciliation – This procedure is only opened if the Council does not accept all amendments instigated by the Parliament at the second reading. Conciliation includes the negotiations of the co-legislators in the Committee framework, the aim being that of reaching an agreement in the form of a ‘joint-text’ [agreements reached at the Conciliation Committee]. Joint text is to be then confirmed by both the Parliament and the Council.

Proposed Salient Changes  

The three (3) European Supervisory Authorities (ESAs), namely the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA) all form the European System of Financial Supervision (ESFS) together with the European Systematic Risk Board (ESRB).

All three (3) authorities strive to develop one set of rules within the financial markets of the EU. One of the aims and competences of ESAs is to ensure that financial markets within the EU are regulated and supervised.

Citizens are further protected since ESAs exist to strengthen financial supervision. ESAs strive towards the overall contribution to improve the functioning of financial services. Also, they enhance the integrity and the orderly function of the financial markets, providing effective supervision and customer and investor protection.

A good governance structure within the EU shall allow more efficient decision making. The ESAs structure includes the Board of Supervisors, the Management Board, a Chairperson and an Executive Director – which includes good reporting lines exercising the dual control principle.

The three (3) supervisory authorities shall cooperate in the combatting money-laundering and financing of terrorism. A dedicated committee was intended to be established for the preparation of decisions in relation to measures against money laundering and terrorist financing.

In fact, the joint committee of ESAs issues guidelines and opinions to help national competent authorities to understand the regulatory expectations within the AML/CFT framework. National supervisory authorities and European Supervisory Authorities are responsible to ensure legal compliance. In the decision- making process, the final decision will be taken in agreement with ESMA or EIOPA, respectively.

Competences:

  1. EBA strives to ensure the integrity, transparency, and orderly functioning of the financial markets of the EU. In doing so, the EBA works to prevent money laundering and financing of terrorism.
  2. ESMA endeavours to provide guidance.
  3. EIOPA is an independent advisory body to the European Commission, the European Parliament, and the Council. It is at the heart of insurance and occupational pensions supervision in the EU.

The ESAs together with the ESRB initiated their operations back in 2011 by their adoption of a legislative acts package compromising of acts which establishes the authorities and a regulation conferring specific tasks upon the Central Bank in relation to the ESRB. Furthermore, the ‘Omnibus Directive’ was enacted to amend the financial services legislation, which was already in place, to ensure that the new authorities work effectively. Later on, the Omnibus II Directive further clarified the segregation of powers and focused in particular on the insurance sector.

The adoption of the above-mentioned pieces of legislation followed the proposals of the Commission communication in relation to financial supervision and the recommendations of the de Larosière expert group.

Later, the Five Presidents’ Report relaunched the debate on the future of EMU whereby it set out a series of policies to be undertaken on a ten-year timespan, arranged under four main headings:

  1. Economic Union
  2. Financial Union
  3. Fiscal Union and Democratic Accountability
  4. Legitimacy and Institutional Strengthening.

For more information visit this page.

 

Disclaimer: The above-mentioned article is simply based on independent research carried out by Dr. Werner and Partner and cannot constitute any form of legal advice. If you would like to meet up with any of our representatives to seek further information, please contact us for an appointment. 

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