When Private Actors Contribute to Public Interests : A Law and Governance Perspective 9789462741720, 9789089749956

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GOVERNANCE & RECHT 10

NILG

Roundtable Forum on the theme: ‘When Private Actors Contribute to Public Interests’ held on the 19th of April 2012 in Amsterdam, the Netherlands. Traditionally, when we think of the actors responsible for securing or protecting fundamental interests of society, we think of public actors – state authorities, government officials, the judiciary,

enforcement officers, and politicians. However, the focus of this book is to reflect on the role private

actors play in regard to fundamental interests of society – the degree of interaction between private actors and public actors, and the processes and instruments that arise. The concomitant appearance

of new or revised forms of governance, together with the growing role of private actors, nonetheless, raises questions about legitimacy, accountability, participation and transparency. These questions are addressed throughout this book.

The series Governance & Recht is aimed at the general debate concerning governance in relation

to law. The series provides a platform for contributions to this debate in the fields of positive law, comparative law, legal theory, philosophy of law, sociology of law, political science and public

administration. This series is part of the book series published by the Netherlands Institute for Law and Governance (NILG).

The Netherlands Institute for Law and Governance (NILG) is a joint venture between the faculties of law at the VU University Amsterdam, the University of Groningen and other research

institutions to improve research in the field of Law and Governance. The NILG’s research theme is the interaction between the regulation of public and private interests in law and the way in which these interests are being regulated.

When Private Actors Contribute to Public Interests • McCann, Van Rooij, Hallo de Wolf & Neerhof

This volume of the Netherlands Institute for Law and Governance Series is the result of a PhD

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NILG

GOVERNANCE & RECHT 10

When Private Actors Contribute to Public Interests A Law and Governance Perspective Editors • A. McCann • A.E. van Rooij • A. Hallo de Wolf • A.R. Neerhof

ISBN: 978-90-8974-995-6

9 789089 749956

When Private Actors Contribute to Public Interests_NILG 10.indd Alle pagina's

26-08-14 10:31

WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS

WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS A LAW AND GOVERNANCE PERSPECTIVE

Editors: Adam McCann Mandy van Rooij Antenor Hallo de Wolf Richard Neerhof

Published, sold and distributed by Eleven International Publishing P.O. Box 85576 2508 CG The Hague The Netherlands Tel.: +31 70 33 070 33 Fax: +31 70 33 070 30 e-mail: [email protected] www.elevenpub.com Sold and distributed in USA and Canada International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786, USA Tel: 1-800-944-6190 (toll-free) Fax: +1-503-280-8832 [email protected] www.isbs.com Eleven International Publishing is an imprint of Boom uitgevers Den Haag.

ISBN 978-90-8974-995-6 ISBN 978-94-6274-172-0 (E-book)

© 2014 A. McCann, A.E. van Rooij, A. Hallo de Wolf & A.R. Neerhof | Eleven International Publishing This publication is protected by international copyright law. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher. Printed in The Netherlands

Preface This issue of the Netherlands Institute for Law and Governance Series is the result of a PhD Roundtable Forum on the theme: ‘When Private Actors Contribute to Public Interests’ held on the 19th April 2012 in Amsterdam, the Netherlands. We are grateful to all the speakers who accepted to take part in this forum and generously accepted to make their contributions available to a wider audience by contributing to this publication. In addition to the debt we own to our contributors, we wish to express our gratitude to the Groningen Centre for Law & Governance and the VU University Amsterdam Centre for Law & Governance for financing this project and supporting young researchers so enthusiastically. Finally, we would like to thank Lottie Lane and Veronika Flegar for their valuable note taking on the day of the forum, as well as the members of the peer review committee for their meticulous work, which resulted in numerous constructive comments for the authors. It has been a pleasure to edit these contributions and we trust that this new issue of the Netherlands Institute for Law and Governance Series on when private actors contribute to public interest will contribute to a better understanding of the competing values, complexities and contemporary challenges pertaining to the issue. July 2014 Adam McCann Mandy van Rooij Antenor Hallo de Wolf Richard Neerhof

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Table of Contents Introduction

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I. PUBLIC SERVICES AND COMPETITION LAW Public Procurement Law and In-House Delivery of Public Services: Improving a Paradox Willem Janssen The Scope for Exempting Anti-Competitive Self-Regulation from the Cartel Prohibition Mart Kneepkens

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II. PUBLIC ORDER AND CRIMINAL LAW Private Powers for Public Order: On the Protection of Personal Liberties When Private Actors Maintain Public Order at Public Events Mandy van Rooij

51

Euthanasia in England, France and the Netherlands: A Law and Governance Perspective Adam McCann

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III. ENERGY SERVICES AND ENVIRONMENTAL SUSTAINABILITY Realizing ‘Universal Access to Modern Energy Services’: Exploring Avenues for Private Stakeholder Accountability in International Human Rights Law and Governance Marlies Hesselman

107

Public Participation in Environmental Impact Assessments in China: Status Quo and the Way Forward Huanlin Lang

131

Working in Concert: Regulation and Incentives for Private Land Conservation in the United States Yun Ma

155

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IV. THE PROTECTION AND DISSEMINATION OF INFORMATION Private Actors in the ‘Wiki-Leaks World’ – Changing Boundaries of Traditional Secrecy Vigjilenca Abazi

179

Regulating the Information Society: The Reproduction Right in European Copyright Law Hein Scholtens

201

V. PRIVATE REGULATION AND DELEGATED REGULATION Private Regulation as a Form of New Governance in the European Union: What Role Do Courts Play in Ensuring Its Accountability? Paul Verbruggen

223

Governance of Government Undertakings in the Netherlands: Ensuring Public Interests: Adapting the Objective in the Articles of Association of a Public Limited Liability Company to Better Suit the Protection of Public Interests Jelle Nijland

245

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Introduction All the chapters of this book were composed by young researchers during their PhD studies in universities throughout the Netherlands. Each early researcher had at least one broad underlying topic in common – the role of private actors in contributing to public interests. Traditionally, when we think of the actors responsible for securing or protecting fundamental interests of society, we think of public actors – state authorities, government officials, the judiciary, enforcement officers, and politicians. We tend to think of command-control type regulation. However, the focus of this book is to reflect on the role private actors play in regard to fundamental interests of society – the degree of interaction between private actors and public actors, and the processes and instruments that arise. A closer look will be given herein to the desirability of a shift away from topdown governance towards bottom-up or co-governance, in a number of specific instances. ‘A shift away’ does not mean that there is no reliance on public actors; governments are still alive and well. Instead it implies less reliance on public actors and implies greater reliance on other forms of governance. This ‘shift away’ does not necessarily imply novelty. The role played by private actors in securing public interests can be appreciated throughout history.1 However, in the last 30 years there has been an increased reliance in the private sector to realize public goals, either due to privatization, globalization, or market driven initiatives.2 This shift also does not imply that in the past there was an exclusive reliance on top-down governance. Rather, said form of governance was largely understood to be the preferred with regard to public interests. The ascent of the regulatory state with the concomitant appearance of new or revised forms of governance,3 together with the growing role of private actors, nonetheless, raises questions about legitimacy, accountability, participation and transparency. These questions are addressed throughout this book. We are now living in an unprecedented and ever-evolving age of globalization and interdependence. In certain fields, we are witnessing the creation of new negative externalities, whilst also witnessing a diminishing role for central 1

See A. Hallo de Wolf, Reconciling Privatization with Human Rights, Intersentia, Antwerp, 2011, pp. 2223. 2 Ibid., pp. 36-41. 3 See for example T. Prosser, ‘Public Service Law: Privatization’s Unexpected Offspring’, Law & Contemp. Probs., No. 63, 2000, pp. 63-82.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS governing institutions. This raises interesting and challenging questions for young and experienced researchers in political science, sociology, economics, philosophy and law. One may readily identify advantages and disadvantages to greater private actor involvement in public interests. On the one hand, and as already observed, concerns indeed arise. On the other hand, certain aspects are to be welcomed such as greater stakeholder and expert participation (efficiency via functional specialization), great flexibility and responsiveness. This book is divided into five general themes. Theme I deals with the role of private actors in Public Services and Competition Law. Willem Janssen’s chapter examines the delivery of public services in four specific sectors in the Netherlands: waste collection, support services such as IT, public transport and social support. He identifies a paradox: fair competition rules were introduced via public procurement procedures, yet the performance of these public services are increasingly internalized by public authorities, or excluded from competition by the legislature. Janssen further recognizes that the decision-making relating to the delivery of public services often lacks transparency and objectivity. A number of potential solutions are advanced in light of a comparative analysis of relevant developments in the Netherlands, the U.S. and the E.U. Mart Kneepkens’s chapter examines the advantages and disadvantages of selfregulation in the banking sector, with a particular focus on cartel prohibitions. He looks descriptively and normatively at agreements that are lawfully exempt from cartel prohibitions – i.e. agreements that restrict competition but nevertheless produce more benefits for customers than disadvantages. Theme II deals with the role of private actors in Public Order and Criminal Law. Mandy van Rooij’s chapter examines to what extent personal liberties and notions of democratic participation should be given consideration when private actors are maintaining public order; with a particular focus on the challenge of maintaining order at large public events such as football matches and dance festivals. She identifies the existence of a context-dependent approach, highlighting the unpredictability, but also the flexibility of such approach in a grey area of the public-private divide. Adam McCann’s chapter provides a law and governance perspective on euthanasia in England, France and the Netherlands. He ascertains to what extent private actors contribute to the creation, application and enforcement of the relevant national laws, and thereby to the public interest in this sensitive area. Critical attention is paid to the differences that exist and how they matter from a broader governance and practice-oriented perspective.

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INTRODUCTION Theme III looks at the role of private actors in Energy Services and Environmental Sustainability. Marlies Hesselman’s chapter assesses how private actors might be engaged and mobilized appropriately in contributing to ‘universal access to modern energy services’, and more specifically, how they can be held effectively accountable for contributions to the overall effort in a complex multi-stakeholder setting. She examines how ‘accountability’ can be appropriately shaped in such a context, and potentially benefit from an international human rights based approach. Yun Ma’s chapter identifies the insufficiency of state action in the quest for nature conservation, and observes the potential role of private actors to aid this endeavor. By utilizing a case study of the U.S., she outlines the interdependency of various policy options for private land conservation, namely mandatory regulation, incentive-based conservation tools and market-based conservation tools. Huanlin Lang’s chapter presents the current status of the law regarding ‘public participation’ in China’s Environmental Impact Assessment. She points out the limitations in its implementation, and provides suggestions on promoting the role of private actors in the protection of China's public environmental interests. Theme IV looks at the role of private actors in the Protection and Dissemination of Information. Vigjilenca Abazi’s chapter identifies the role of private actors in fostering the principle of openness, with particular attention paid to the right to access documents in the European Union. In doing so, she discusses the relevance of information for democracy and the right to access documents as one of the key direct realizations of information flow between government and citizens. Hein Scholtens’s chapter looks at the legal history and development of European copyright law, by focusing on the right of reproduction – i.e. the right to authorize the copying of works – as successively laid down in International Treaties and European Directives. He highlights the transformative nature of multimedia works and the need for an explicit adaptation right in the Copyright Directive Theme V looks at the role of private actors in Private Regulation and Delegated Regulation. Paul Verbruggen’s chapter examines the potential and actual role courts play in holding private regulatory regimes promoted by the EU as forms of ‘New Governance’ accountable for their regulatory activities. He focuses on private regulation in the European advertising industry, arguing that the idea of centralized accountability via courts does not align with the decentralized reality that ‘New Governance’ represents. To offer more accountability, he identifies the vital complementary role to public mechanisms played by private means and forums. Jelle Nijland’s chapter looks at whether Dutch company law provides a governance framework for public limited companies (‘government under-

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS takings’) to sufficiently ensure a balancing between conflicting individual interests and communal interests. He focuses predominately on the question of whether or not the governance of private actors serving public interests could be improved, and if so, how? This book is premised on the notion that it is difficult to evaluate the relationship between private actors and public interests in an abstract manner. Such an attempt often leads to over-simplification and generalizations. A fresh and more careful case-by-case orientated approach is required. This is why we have compiled the above chapters - to reflect on a wide range of diverse issues not only in a detailed manner, but also from the perspective of early experts in their respective fields.

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I. PUBLIC SERVICES AND COMPETITION LAW

Public Procurement Law and In-House Delivery of Public Services IMPROVING A PARADOX Willem Janssen*

Introduction The theme of this book is to critically discuss the role of private actors in relation to public interests. This chapter considers a situation in which private actors may desire to safeguard public interests through the delivery of services, but are not allowed to contribute to them due to preferred governmental performance. In the Netherlands, this becomes even more relevant due to the fact that public authorities are increasingly internalizing public service delivery. This trend is stimulated by the Dutch government’s policy, which strives for a compact administration combined with a diminished belief in competition, but it is also facilitated by the exemptions to public procurement law.1 From a public procurement law perspective, public authorities can choose between internal or external performance, a discretion that allows them either to internalize its performance by carrying it out themselves, possibly in collaboration with other public authorities; or, to externalize its performance of a public service by approaching a third party. 2 The internal performance alternatives are legal exceptions to the European public procurement regime and are therefore exempted from a duty to tender, which can be compulsory without such an exemption. European law and the jurisprudence from the Court of Justice of the European Union (ECJ; the Court), thus, facilitate this freedom to choose for the internalization of service delivery (Sections 1-3).

*

W.A. (Willem) Janssen LL.M. is a PhD Candidate in Public Procurement Law at the Utrecht Centre for Shared Regulation and Enforcement in Europe (RENFORCE) and a member of the interdisciplinary Public Procurement Research Centre . The author would like to thank prof. dr. Elisabetta Manunza and dr. Herman van Harten for helpful comments and suggestions on earlier drafts of this chapter. Contact: [email protected]. 1 The relationship between this governmental policy and the internalization of public services appears counter-intuitive at first sight and is discussed in more detail in Section 3. 2 E.R. Manunza, ‘Naar een consistente en doelmatige regeling van de markt voor overheidsopdrachten’ [Towards Consistent and Efficient Regulation of the Public Procurement Market], in J.M. Hebly, E. Manunza & M. Scheltema (Eds.), Beschouwingen naar aanleiding van het wetsvoorstel Aanbestedingswet [Reflections on the Proposal for a Public Procurement Act], Preadvies voor de Vereniging van Bouwrecht, Instituut voor Bouwrecht, The Hague, 2010, pp. 49-123.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS In this chapter, this development is contextualized by considering four Dutch sectors in which the state’s decision to externalize or internalize public services – or the performance of services of general interest (SGIs) to use the more common terminology on the European level – has become paradoxical.3 This paradox concerns a situation in which, despite the initial introduction of competition by ways of public procurement procedures, the performance of a public service is internalized by a public authority, or, is excluded by the legislature from competition. To illustrate these developments and this paradox, four sectors are considered in which this paradox occurs. Firstly, waste collection and supportive services such as IT illustrate the state’s discretionary power in relation to SGI performance and the consistent application of these exemptions by Dutch courts (Sections 4.1 and 4.2). Secondly, public transport and social support show a situation in which the legislature (partially) reversed its obligatory tendering policy (Sections 4.3 and 4.4).4 Based on these sectorial findings, this chapter concludes that decision-making relating to public services often lacks transparency and objectivity, which influences both public authorities and private actors. For this purpose, it discusses three elements that can improve decision-making relating to this paradox and the choice between internal or external performance. It considers the European internal market reforms, the Dutch Public Procurement Act 2012 (PPA 2012)5 and the US Federal Activities Inventory Reform Act of 1998 (US FAIR Act) 6 to further improve decision-making in relation to public service delivery (Sections 5 and 6).

1. The Freedom to Define and Perform SGIs In order to fully understand this Dutch paradox, it is important to begin by discussing the freedom that EU Member States have to define SGIs. In recent years, the academic debate in Europe has focused on what SGIs are, and to

The term ‘state’ includes the various levels of government and public authorities. ‘SGI’ and ‘public service’ are used interchangeably. 4 In this contribution, a distinction is made between public procurement procedures and other competitive procedures. The term ‘public procurement procedures’ refers to the procedures laid down in the EU Public Procurement Directive 2004/18. The term ‘competitive procedures’ consists of other forms of competitive obligations that lie out outside the scope of this Directive. These obligations have been introduced by the case law of the ECJ. Examples are the award or distribution of service concessions and the award/distribution of limited authorization schemes. 5 Wet van 1 november 2012, houdende nieuwe regels omtrent aanbestedingen (Aanbestedingswet 2012) [Dutch Public Procurement Act 2012], St. 2012, 542. 6 Federal activities Inventory Reform Act 1998, p. 112, STAT. 2382, Public Law 105-270, 105th Congress. 3

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES which kind of services the internal market rules should apply. 7 Despite this extensive debate, the Member States have thus far kept their discretionary power to define their public interests and SGIs. This freedom also allows Member States to decide how these interests should be safeguarded and organized, and if they involve a service, by whom should that service be performed. 8 Article 106(2) Treaty on the Functioning of the European Union (TFEU) depicts this freedom, and the Protocol on Services of General Interest further complements this statement by recognizing: ‘[…] the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users; the diversity between various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations; [...]’9

Despite this distant role of the European Union, the European Commission (Commission) has made many attempts to clarify the various forms of SGIs. The Commission considers SGIs to be ‘services that public authorities of the Member States classify as being of general interest and are therefore subject to specific public service obligations’. 10 These services can be divided into two groups; non-economic and economic activities. Services of general economic interest (SGEI) are seen as economic activities which deliver outcomes that benefit the overall public good that would not, or not sufficiently enough, be supplied by the market without public intervention. Such economic activities are subject to specific European legislation and are therefore covered by the internal market rules (i.e. Lisbon Treaty, state aid, competition and public procurement rules). Social services of general interest (SSGI) also can be either economic or not and include ‘social security schemes covering the main risks of life, such as those linked to health, ageing and disability, and a range of other essential social 7

See for instance: Commission, Communication from the Commission, Services of General Interest in Europe, OJ 1996 C 281/3; Commission, Communication from the Commission, Services of General Interest in Europe, OJ 2001 C 17/4; Commission, Report to the Laeken European Council—Services of General Interest, COM (2001) 598 def, 17 October 2001; Commission, Green Paper on Services of General Interest, COM (2003) 270 final, 21 May 2003; Commission, Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Council of the Regions, White Paper on Services of General Interest, COM (2004) 374 final, 12 May 2004; COM (2007) 725 final. 8 Wetenschappelijke Raad voor het Regeringsbeleid, ‘Het borgen van publiek belang’ [Safeguarding the Public Interest], Rapporten aan de regering, nr. 56. 9 Consolidated version of the Treaty on the European Union, Protocol (No. 26) on services of general interest, OJ C 115, 9.5.2008, p. 308. 10 The European Commission has, despite its competence derived from article 14 TFEU, not initiated strict regulation on this latter topic. Commission, ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A Quality Framework for Services of General Interest in Europe’, COM (2011) 900 final, p. 3.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS services provided directly to the person, such as occupational training, rehabilitation and language training for immigrants’.11 As a consequence of these discretionary powers, Member States have the power to exempt services from the internal market rules by labeling them as a noneconomic SGI. 12 Whether this decision is made at national, regional or local level depends on the division of powers in the respective Member State. In the Netherlands, it is left to the democratic processes to decide what kind of public interests should be safeguarded, and how it intends to promote these interests.13 In addition, this process decides upon who should perform a certain service derived from the public interest. These questions are part of an older and broader debate on the extent of the state’s responsibilities, and their relation with the market.14 It is clear that the influence of EU law is limited to situations in which the market is approached for the delivery of SGIs.

2. The Performance of SGIs: To Internalize or Externalize? Dutch public authorities have various ways of performing SGIs. European Public procurement law adheres to this discretionary power by providing the 11

Ibid., p. 4. Judgment of 12 February 2008 in Case 289/03, British United Provident Association Ltd, BUPA Insurance Ltd. and BUPA Ireland Ltd. v Commission of the European Communities (BUPA) [2008] ECR 81 and Judgment of 22 October 2008 in Case 309/04, TV 2/Danmark A/S and Others v Commission of the European Communities [2008] ECR II-2935. 13 Wetenschappelijke Raad voor het Regeringsbeleid, ‘Het borgen van publiek belang’ [Safeguarding the Public Interest], Rapporten aan de regering, nr. 56. 14 Some argue that certain core activities of the state can be identified. J.W. Sap and others consider safeguarding of (internal) peace and public safety to be public tasks ‘par excellence’. Defending a nation’s boarders and ensuring the administration of justice, are also seen as ‘undisputed’ public tasks. J.W. Sap et al., ‘De publieke taak: een inleiding’ [The Public Task: An Introduction] in J.W. Sap et al. (Eds.), De publieke taak [The Public Task], Publikaties van de staatsrechtkring staatsrechtconferentie 7, Kluwer, Deventer, 2002, p. 4. Hirsch Ballin advocates a wider group of primary tasks. In addition to the structure of the democratic state, namely the police, the administration of justice and defence forces, he also mentions physical infrastructure such as dykes, roads and bridges, and care for cultural infrastructure, such as education. E.M.H. Hirsch Ballin, ‘Risico’s van een vrome leer’ [Risks of the Pious Doctrine] in E.M.H. Hirsch Ballin (Ed.), In ernst. Oriëntaties voor beleid [Orientations for Policy], Sdu Juridische & Fiscale Uitgeverij, The Hague, 1994, p. 70. In De Ru’s view, primary tasks are tasks that are directly linked to the structure of the state. If the state would have no responsibility for the defence forces, the police, law making and the administration of justice, the state itself would not exist. Thus, these core activities are essential for a state to be a state. In addition to primary activities, secondary state activities are activities that are decided upon through democratic decisionmaking. B.P. Vermeulen, ‘De publieke taak: een veel-zijdig begrip’ [The public task: a many-sided concept] in J.W. Sap et al. (Eds.), De publieke taak [The Public Task], Publikaties van de staatsrechtkring staatsrechtconferentie 7, Kluwer, Deventer, 2002, p. 24. These approaches are questioned by A. Hallo de Wolf who states that many allegedly ‘core’ public services have in the past been carried out by private actors and are still carried out by these entities, such as the use of force by private security agencies. A. Hallo de Wolf, Reconciling Privatization with Human Rights, Intersentia, Antwerp, 2011, p. 457. 12

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES legal basis for these alternative performance options. In recent years, many of these exemptions to public procurement law have been developed by the ECJ. The following provides a brief overview of these alternatives. 1. In-house performance: a public authority decides to perform a service by using its own resources, which is thus completely ‘internal’. 15 This means, for instance, that it uses one of its own divisions to collect waste. 2. Quasi in-house performance: a public authority can entrust the performance of a service to an entity over which it exercises control similar to its own departments, and that entity carries out the essential part of its activities for the controlling public authority or authorities.16 In the Netherlands, this can be done on the basis either of private law (e.g. a Dutch B.V., Cooperatie or Stichting 17 ) or public law (e.g. a Dutch Openbaar Lichaam, 18 provided by the Dutch Inter-municipal Statutory Regulations Act).19 3. Inter-municipal collaboration: a public authority can arrange the performance of a SGI by cooperating with other public authorities completely within the public domain. Such performance is exempted from public procurement law based on the criteria derived from the Stadtreinigung Hamburg jurisprudence.20 4. Exclusive right: a public authority chooses to grant another public authority an exclusive right, after which that entity decides on questions of performance. Such a right can, for instance, be granted through a Ministerial Regulation, a local bylaw regulation or is included in the statutory documents of a separate entity.21 The entity is part of its own authority structure. E.R. Manunza & W.J Berends, ‘Social Services of General Interest and the EU Public Procurement Rules’, in U. Neergaard et al. (Eds.), Social Services of General Interest in the EU, Legal Issues of Services of General Interest, T.M.C. Asser Press, The Hague, 2011, p. 365. 16 Judgment of 18 November 1999 in Case 107/9, Teckal Srl v Comune di Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia (Teckal) [1999] ECR I-8121; Judgment of 13 November 2008 in Case 324/07, Coditel Brabant SA v Commune d’Uccle and Région de Bruxelles-Capitale (Coditel) [2008] ECR I-8457; Judgment of 19 April 2007 in Case 295/05, Asociación Nacional de Empresas Forestales (Asemfo) v Transformación Agraria SA (Tragsa) and Administración del Estado (Tragsa) [2007] ECR I-2999. 17 A limited liability company, a cooperative and a foundation hold similar characteristics as these Dutch legal entities. 18 A public form in which public-public collaboration can take place on a municipal level. 19 Wet Gemeenschappelijke Regelingen [Intermunicipal Statutory Regulation Act], Stb. 1984, 669; see also, Judgment of 9 June 2009 in Case 480/06, Commission of the European Communities v Federal Republic of Germany (Landkreise); Judgment of 29 November 2012 in Joined Cases C-182/11 and C183/11, Econord SpA v Comune di Cagno and Comune di Varese and Comune di Solbiate and Comune di Varese (ASL di Lecce) [2012], not yet published. 20 Judgment of 9 June 2009 in Case 480/06, Commission of the European Communities v Federal Republic of Germany (Landkreise) [2009] ECR 4747. 21 Article 18 Directive 2004/18/EC, OJ L 134, 30.4.2004. 15

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 5. Concession: a public authority can grant a concession for the performance of a service, which is common in the field of public transport or the exploitation of parking garages.22 6. Public contract: a public authority decides to completely externalize a service to a third party. To achieve the best quality-lowest price ratio, such externalization is often done by granting a contract via a transparent and competitive procedure. Consequently, public authorities have multiple alternatives to internalize or externalize the delivery of SGIs. 23 This variety of legal alternatives is not problematic as such given that Member States and their public authorities should be able to perform a service themselves in certain policy fields. On the one hand, certain functions, such as the administration of justice or democratic decision-making, may not be externalized. While on the other hand, certain functions such as building maintenance and food services can. More troublesome is to identify the status of services, which are not as ‘black and white’ as the previous examples. This grey area, which includes healthcare, public transport and the collection of waste, is where decisions on public service delivery causes difficulties, often because of their relation with public interests. In relation to these services, good decision-making is even more important to achieve the best outcome for society.

3. Explaining Internalization of SGI Performance As stated before, internal performance of services, and especially public-public collaboration, has gained importance in recent times. 24 In the Netherlands, an increase of collaborations between (local) public authorities has occurred, which

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Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, OJ L 94, 28/03/2014, pp. 1-64. See Judgment of the Court of 7 December 2000 in Case 324/98, Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG [2000] ECR 10745. 23 The Dutch Wet Markt en Overheid [Market and Government Act] leaves these options untouched, because it exempts services of general interest. Wijzigingswet Mededingingswet (invoering regels ondernemingen die deel uitmaken van een publiekrechtelijke rechtspersoon of hiermee zijn verbonden), Stb. 2010, 208. 24 See for instance: Commission Staff Working Paper concerning the application of EU public procurement law to relations between contracting authorities (‘public-public cooperation’), Brussels, 4.10.2011 SEC(2011) 1169 final and Commission interpretative communication on the application of Community law on Public Procurement and Concessions to institutionalised PPP (IPPP), Brussels 2008/C 91/02.

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES consists of 698 collaborations based on public law, and 1022 collaborations based on private law.25 These collaborations within the public domain can, first of all, be explained by a leading vision document of the former Dutch government, which is still being implemented. It demonstrates the thoughts of former Dutch minister, Piet Hein Donner, who advocated a ‘compact’ government. The role of ‘compact’ refers to a strong and small government, which is able to swiftly respond to changing circumstances. It focuses on more efficiency and lower administrative burdens by intensifying collaboration amongst public authorities, and not necessarily on, which seems to be a logical consequence of this policy, a more substantial role for private actors.26 This desire for more collaboration can be explained by the need to spend public funds efficiently. More collaboration amongst public authorities for efficiency gains becomes even more relevant in times of financial crisis.27 Additionally, the Treaty of Lisbon has increased the role of regional and local self-governance, which enforces this development.28 Secondly, a focus on public collaboration and internalization of SGI performance in general is influenced by the current views on the public and private divide. It is fair to say that Member States have become more critical in relation to the role of the market as a performer of SGIs and often only rely on them if the benefits of such performance are clearly present. Introducing competition into markets, for example, is not as commonly accepted, as was the case in the 80s-90s. In those times, liberalization and privatization were introduced in various areas, and public procurement procedures were often introduced if public authorities were to decide to externalize services.29 Monti described the current situation as ‘market fatigue’, which represents a loss in confidence in the market and has thus led to lower acceptance of the market and the actors involved.30 This is, to some extent, caused by the fact that the limi25

Ministerie van Binnenlandse Zaken en Koninkrijksrelaties [Ministery of the Interior and Kingdom Relations], Visiedocument ‘Bestuur en bestuurlijke inrichting: tegenstellingen met elkaar verbinden’ [Vision document ‘Administration and Administrative Design: Connecting Opposites’], 10 October 2011, p. 5. 26 Ibid., p. 5. 27 Comptabiliteitswet 2001 [Government Accounts Act 2001], Stb. 2001, 413. 28 Article 4 TFEU. See Manunza, supra n. 2, p. 76. 29 Wetenschappelijke Raad voor het Regeringsbeleid, ‘Het borgen van publiek belang’ [Safeguarding the Public Interest], Rapporten aan de regering, nr. 56. Parl. Docs. 2012-2013, C, B, ‘Verbinding verbroken? Onderzoek naar de parlementaire besluitvorming over de privatisering en verzelfstandiging van overheidsdiensten’ [Connection lost? Research on the Parliamentary Decision-Making Process Relating to Privatizing Governmental Services]. 30 The combination of market fatigue with ‘integration fatigue’ is considered detrimental for the functioning of the internal market. See, M. Monti, ‘A New Strategy for the Single Market; at the Service of Europe’s Economy and Society’, Report to the President of the European Commission José Manuel Barroso, 9 May 2010, p. 12 (Monti Report).

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS tations of the market, and the services it can provide, have become more visible.31 In this regard, Monti stated that those who propose, instead of oppose, are forced to defend their views on the liberalization of markets and the introduction of more competition.32 Such views enhance the idea that government performance is vital in order to safeguard public interests and limits the possibility of private actors to contribute to public interests.

4. Paradoxical Performance Internalization in Four Dutch Markets The internalization of SGI performance, which has been described in previous paragraphs, and the loss of confidence in market performance which often accompanies it, can be exemplified by assessing the waste collection, supportive services, public transport and social support market. Public procurement law’s exemptions play an important role in these markets. Waste collection and supportive services, such as IT, exemplify the government’s discretionary power in relation to SGI performance, and the consistent application of these exemptions by Dutch courts. The cases of the public transport and social support consider situations in which the legislature (partially) reversed its tendering policy, after which internal performance can gain importance again. These situations can also be seen as an example of Monti’s ‘market fatigue’. 4.1. The Waste Sector: Courts Uphold Internal Performance Exemptions In the Netherlands, municipalities have been granted the responsibility to perform the collection of household waste.33 In order to fulfill this duty, municipalities have, as previously described, various performance alternatives. In the last decade, the Dutch government has attempted to introduce, or further expand, competition in the waste management sector. It aimed at full liberalization of this market by 2050.34 The introduction of more competition is desired in order to maximize the positive effects for the environment at the lowest cost.35 The ‘Classic Directive’ on public procurement law facilitates such a goal by placing this sector under its scope.36 Despite the fact that a greater part For instance, see Parl. Docs. 2012-2013, C, B, ‘Verbinding verbroken? Onderzoek naar de parlementaire besluitvorming over de privatisering en verzelfstandiging van overheidsdiensten’ [Connection Lost? Research on the Parliamentary Decision-Making Process Relating to Privatizing Governmental Services] pp. 27-40. 32 Monti Report, supra n. 30, p. 24. 33 Article 10.21(1) Wet Milieubeheer [Environmental Protection Act], Stb. 1979, 442. 34 VROM-rapport, Toekomstig afvalbeleid: Een eerste stap naar een nieuwe lange termijnvisie voor het afval beleid [Future Waste Policy: A First Step towards a Long-Term Vision for Waste Policy], The Hague, 2003, p. 5 35 F.J. van Ommeren & J. Vermont, ‘Uit- aan- en inbesteden in het publiek- en privaatrecht?’ [In- and Externalizing in Public- and Private Law?], De Gemeentestem, No. 7266, 2007, p. 1. 36 Directive 2004/18/EC, OJ L 134, 30.4.2004. 31

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES of the market is now in the hands of third parties, it can be argued that in recent years public authorities have limited their contribution to this liberalization.37 The collection of waste is historically performed by using the recourses of public authorities, which in 2007 accounted for 25% of all cases. It is performed in alternative ways in 75% of the Dutch municipalities. From this part, 35% of these municipalities leave performance up to market parties.38 The remainder is performed through a collaboration of public authorities. More recent studies suggest a similar situation in other European Member States.39 Internal performance is, thus, substantially present in the waste collection market, which is intended to be entirely liberalized. Market parties in this sector have not hesitated to file court proceedings against these internal performance alternatives by claiming that these contracts should have been tendered under European public procurement law. Two cases before Dutch courts illustrate such actions. In the first case, AVR/Westland, the High Court confirmed the Court of Appeal’s ruling by granting the municipality of The Hague permission to join in the public collaboration of local public authorities. This entity, called ‘HVC’, was established to collect and dispose of household waste. 40 In the years before this, appellant AVR had been contracted for the waste disposal via a public procurement procedure. After the expiry of the contract, the government was allowed to not externalize performance, based on the exclusive right exception.41 The second case involved a situation whereby the public authority of Friesland contracted Afvalsturing Friesland N.V. for their waste collection and disposal services. This local government was exempted from using a public procurement procedure for a different reason as it could rightfully rely on the in-house exception.42 This in-house exception also led to proceedings before the Court of ’s-Hertogenbosch, which rejected the claims of appellant Shanks, relying on the fact that this exception was no longer rightful due to a substantial change in supervision of Attero-Zuid.43 Shanks was unable

37

Manunza, supra n. 2, p. 113. Van Ommeren, supra n. 35, p. 2. Recent data confirms these statistics. See Jaarboek Afval! Editie 2013 [Yearbook Waste! Edition 2013], Uitgeverij Noordhoek, 2013, Para. 3.2. 39 R. Hulst & A. van Montfort, ‘The Netherlands: Cooperation as the Only Viable Strategy’, in R. Hulst & A. van Montfort (Eds.), Inter-municipal cooperation in Europe, Springer, Dordrecht, 2007, pp. 139168; and E. Dijkgraaf & R. Radius, The Waste Market: Institutional developments in Europe, Springer, Dordrecht, 2008. 40 Hof ’s-Gravenhage, 15 December 2009, ECLI:NL:GHSGRL2009:BK6928. 41 Article 18 Directive 2004/18/EC, which is implemented by Article 18 Besluit van 16 juli 2005, houdende regels betreffende de procedures voor het gunnen van overheidsopdrachten voor werken, leveringen en diensten (Bao) Stb. 2005, 408. 42 Hof Arnhem-Leeuwarden, 9 September 2013, ECLI:NL:GHARL:2013:6675. 43 Attero-Zuid was established solely for the purpose of collecting and disposing waste in a specific region. 38

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS to sufficiently prove this, which resulted in this collaboration between municipalities being allowed to continue.44 Despite intended liberalization, many municipalities in previous cases chose to perform the collection of waste entirely within the public domain. Market parties tried, but were unsuccessful in their attempt, to break open these internal performance structures, because the Dutch courts have been consistent in their assessment of these legal exemptions to public procurement law. It also shows that due to the legal alternatives similar services are performed in different ways. 4.2. Supportive Services: Internal Performance Outside the Public Interest Services that support the performance of SGIs, such as IT, can also be performed entirely within the public domain. Briefly noting them is thus justified in this context. In addition to IT, transport, graphic design, and educational services that support the functioning of the state, are also increasingly internalized and are thus also part of the public debate.45 From a public procurement law point of view, the legality of such a legal construction was confirmed by the Court of Utrecht in relation to IT.46 In this case, Amsterdam, Rotterdam, The Hague and Utrecht were able to rely on the quasi in-house exemption. This allowed them to continue their collaboration in the form of ‘Wigo4it’, because it met the criteria of being ‘closely connected’ and had proper ‘supervision’. For that reason, the application of public procurement law exemptions must be seen in a broader sense. Services, in and outside, the public interest can be exempted from public procurement obligations.47 4.3. Public Transport: Inconsistent Obligatory Tendering The case of public transport exemplifies a partial drawback of competition. Public transport is regulated through concessions as opposed to public contracts. These concessions grant a party the right to perform a mode of public transport for a specific route. Service concessions fall outside the scope of EU public procurement law, but their award or distribution is nonetheless subject to principles of transparency and equality.48 A competitive tendering procedure is Rb. ’s-Hertogenbosch, 24 October 2012, ECLI:NL:RBSHE:2012:BY1110. R. de Lange, ‘Bedrijfsleven boos over valse concurrentie door bijklussende overheid’ [Businessworld Angry about False Competition of Double Dipping Government], Het Financieele Dagblad, 4 April 2013, pp. 1-3. 46 Rb. Utrecht, 14 January 2009, ECLI:NL:RBUTR:2009:BG9524. 47 Defining the scope of the public interest, and its implications is an onerous and difficult task. This contribution does not consider it as such, but does recognize its importance. See Wetenschappelijke Raad voor het Regeringsbeleid, ‘Het borgen van publiek belang’ [Safeguarding the Public Interest], Rapporten aan de regering, nr. 56. 48 On 15 January 2014, the European Parliament cast its vote on a New Directive regulating service concessions. Upon publication, Member States have two years to implement this Directive. See: 44 45

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES thus required, which differs from a public procurement procedure.49 Such competition allows third parties, as a rule of thumb, to compete for public transport concessions in the Netherlands. The Dutch regulatory framework of this sector consists of the Passenger Transport Act 2000 (PTA), which was introduced to stimulate the use of public transport and to efficiently utilize public funds.50 In addition, the European PSOregulation is in place and provides guidance on how decentralized governments ensure the quantity, quality and safety of public transport for a reasonable price. The Dutch Public Transport Decree 2000 further explicates the obligations of such a competitive procedure.51 Under the PSO-regulation, local governments are still allowed to apply the in-house exemption to national public procurement rules.52 However, whilst reforming the PTA in 2010, the legislature decided that local public authorities in the Netherlands will be not be able to apply this exemption. Hence, public transport concessions had to be distributed by using a transparent and objective competitive procedure, and internalization was excluded as a performance alternative. Despite these reforms, another amendment of the PTA was passed by the Dutch parliament in October 2012.53 This amendment exempted the four major cities in the Netherlands (Amsterdam, The Hague, Utrecht and Rotterdam) from the obligation to follow a competitive procedure whilst distributing public transport concessions. The discussion in the Dutch Senate clarified that it was intended to provide freedom of choice and local autonomy.54 This amendment that allows these cities to apply the in-house exception, has led to the fact that state owned companies, such as HTM in The Hague, RET in Rotterdam, GVB in Amsterdam Proposal for a Directive of the European Parliament and of the Council on the award of concession contracts (‘Concessions’ Directive) (First reading), 2011/0437 (COD), Brussel 12 July 2013. Previous case law consisted of: Judgment of 7 December 2000 in Case 324/98, Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG (Telaustria) [2000] ECR I-10745, Judgment of 18 July 2007 in Case 231/03, Consorzi Aziende Metano v Comune di Cingia de’ Botti (Coname) [2007] ECR I060373 and Judgment of October 2005 in Case 458/03, Parking Brixen GmbH v Gemeinde Brixen and Stadtwerke Brixen AG (Parking Brixen) [2005] ECR I-08585. 49 See cit. op. supra n. 5. 50 Wet Personenvervoer 2000 [Public Transport Act 2000], Stb. 2000, 314. 51 Besluit van 14 december 2000, houdende vaststelling van een algemene maatregel van bestuur ter uitvoering van de Wet personenvervoer 2000 (Bp 2000) [Public Transport Decree 2000], Stb. 2000, 563. 52 Regulation (EC) No. 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road, and repealing Council Regulations (EEC) No. 1191/69 and (EEC) No. 1107/70. 53 Wet van 5 november 2012 tot wijziging van de Wet personenvervoer 2000 teneinde inbesteding van openbaar vervoer mogelijk te maken in een plusregio die de gemeente Amsterdam, ’s-Gravenhage, Rotterdam of Utrecht omvat (Wet aanbestedingsvrijheid OV grote steden) [Act Altering the Public Transport Act 2000 to Allow Public Transport Internalization of Amsterdam, The Hague, Rotterdam and Utrecht], Stb. 2012, 556. 54 Parliamentary Papers II 2011/12, 32 845, No. 3.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS and GVU in Utrecht, can often continue to operate their services without being influenced by competition. In this regard, it is of interest to consider that the utilization of these concessions is often not economically viable and market parties are compensated by the government. Despite this exemption, the milestone ruling of Altmark in which the Court ruled that subsidies granted to an undertaking providing public transport can be identified as state aid if the price is not the result of a competitive procedure or if the Altmark criteria are fulfilled, is still applicable. 55 An extensive analysis of this situation goes beyond the scope of this contribution, but it does show that state aid rules must nonetheless be complied with. To conclude, this change of legislation in the Netherlands has led to inconsistent obligatory tendering, to say the least, and exemplifies a call from the major cities to keep a broad discretionary power while deciding upon public service delivery. 4.4. Social Support: Obligatory Tendering Pulled Back Entirely In relation to the healthcare market, a similar situation occurred regarding the performance of the Social Support Act.56 This Act incorporates a compensation duty, which means that local authorities have to compensate citizens for the provision of equipment or services in various areas related to the consequences of their impairments. Examples of possible compensation are, ‘assistance with running a household’ and ‘means of transportation’. The Act obliges local governments to externalize the performance of these services via public procurement procedures.57 It is important to note that such a duty to tender is derived from EU public procurement law, which identifies two types of services: IIA and IIB services.58 For IIA services, a strict public procurement regime applies, and for the second, no specific duty to use public procurement procedures exists. The Dutch government stated that assistance with running a household was to be predominantly classified as ‘cleaning services’, which led to a classification under IIA-services. Others claimed the contrary, that it should have been classified as an IIB-service.

55

Judgment of 24 July 2003 in Case 280/00, Altmark Trans GmbH and Regierungspräsidium Magdeburg v Nahverkehrsgesellschaft Altmark GmbH (Altmark) [2003] ECR I-07747. E.R. Manunza, ‘Enkele problemen bij de toepassing van het Europees aanbestedingsrecht in de Nederlandse (rechts)praktijk’ [Some Issues with Applying European Public Procurement Law in the Dutch Jurisdisction], SEW, 2004, p. 72. 56 Wet van 29 juni 2006, houdende nieuwe regels betreffende maatschappelijke ondersteuning [Social Support Act], Stb. 2006, 351. 57 Article 10 Social Support Act. 58 The lists of services are provided by Annex IIA (advertising services, computer and related services, financial services etc.) and IIB (legal services, health and social services etc.) of Directive 2004/18/EC.

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES In 2010, the Dutch parliament adopted three proposals to change the Social Support Act.59 The most important amendment abolished the duty for municipalities to use public procurement procedures. As a consequence, assistance with running a household is now classified as an IIB-service. The legality of this amendment can be questioned in light of European law. In this regard, the Commission responded to questions posed by the Dutch government and stated that most of these services should be performed by market parties after the use of public procurement procedures.60 In the overall assessment of this sector, it is of importance to consider whether the healthcare market in general, and this sector in specific, can benefit from competition. The need to safeguard the basic principles of this market, namely quality, accessibility and affordability, ensures continuous attention for this topic. 61 The vehement discussions in the European Council and Parliament involving the reforms of the Public Procurement Directives exemplify this. It is clear that the healthcare market is a special market, whereby the clash of safeguarding public interests and competition is very much present. 62 Such a debate appears to be less clear for contractible cleaning services, which appear to benefit from competition.

5. Towards a New approach for SGI Delivery Decisions As stated before, the public debate in relation to competition and the Dutch government’s compact government policy influences the decision to externalize or internalize the performance of SGIs. 63 Despite the possible advantages of external performance, public authorities and the legislature have discretionary power to decide upon such performance questions and can go against initial or intended liberalization. The previously described markets have shown that the relation between public procurement law and public service delivery is affected

59

Wijziging van de i.v.m. de kwaliteit van de huishoudelijke verzorging, de kwaliteit van de maatschappelijke ondersteuning en i.v.m bekostiging van het gemeentelijk beleid [Alteration of the Social Support Act], Stb. 2012, 310. 60 Parliamentary Papers II 2009/10, 31 353, No. 10. 61 See for instance: UN Committee on Economic, Social and Cultural Rights (CESCR), General Comment No. 14: The Right to the Highest Attainable Standard of Health (Art. 12 of the Covenant), 11 August 2000, E/C.12/2000/4. 62 M. Canoy, ‘Marktwerking in de zorg; ondernemende zorg of zorgende ondernemers?’ [Competition in the Healthcare Sector; Entrepreneurial Care of Caring Entrepreneurs?], Inaugural lecture University of Tilburg, 6 February 2009. 63 Manunza & Berends, supra n. 15, p. 377: B. Baarsma, ‘Moeilijke marktwerking en meedogenloze mededinging; een welvaartseconomisch perspectief’ [Free Market Difficulties and Ruthless Competition: a Welfare Economics Approach], Inaugural lecture University of Amsterdam, 12 February 2010, p. 8.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS and makes a new approach to the public procurement framework worth considering. In response to these developments, it has been suggested to introduce a transparent and objective legal framework that governs this ‘internal vs. external’ decision.64 The introduction of such a test can result in an improved provision of public services, as it answers the question of who is most suitable to perform a service instead of relying on classifications of services as SGI and SGEI. Manunza suggested to take an approach in which ‘social welfare’ is the key criterion to analyze whether the market or the government should perform an SGI.65 Sanchez adds to such considerations that the legal dimension of public procurement law is often not aligned with the economic restrictive approach ‘towards public make-or-buy decisions’.66 A thorough discussion relating to the scope and content of this framework lies beyond the scope of this contribution.67 The following aims to consider institutional elements that could benefit such an approach on a national or EU level. 68 For this purpose, the internal market reforms, the Dutch PPA 2012 and the US FAIR Act can contribute to constructing an more transparent and efficient framework for public procurement whilst deciding upon public service delivery. 5.1. Internal Market Reforms = Internal Performance Reforms? The internal market, based on principles that aim to open up Europe by removing internal barriers and enforcing cross-border competition, finds itself at a turning point and is currently being restructured and reformed. For the purpose of this contribution, it is important to describe the relevant recent European developments, because internal performance alternatives as exemptions to public procurement law are also under scrutiny. Monti initiated these reforms via his report ‘A New Strategy for the Single Market’ (Monti report), which strived to initiate a re-claiming process of the internal market; a new start. The Monti report identified the internal market’s achievements, but mostly notes its future challenges, and subsequently proposed 64

Manunza, supra n. 2, p. 115. Manunza, supra n. 2, p. 117; Baarsma, supra n. 63, p. 10. 66 A. Sánchez Graells, Public Procurement and the EU Competition Rules, Hart Publishing, Oxford, 2011, p. 232. 67 For this purpose, it is also of interest to consider the Impact assessment of the Commission, the Dutch Maatschappelijke kosten-batenanalyse [Cost-Benefit Analyses] and the Markteffectentoets [Market Effect-Test] in this respect. See Sociaal economisch raad, ‘Overheid én markt: Het resultaat telt! Voorbereiding bepalend voor succes’ [Government ánd Market: The Result Counts! Preparation Decisive for Success], Advies nr. 1 - March 2010. 68 M. Krajewski, ‘Providing Legal Clarity and Securing Policy Space for Public Services through a Legal Framework for Services of General Economic Interest: Squaring the Circle?’, European Public Law, Vol. 14, No. 3, Kluwer, 2008, pp. 377-397. 65

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES possible actions in numerous areas of the European Union, such as the free movement principles, public procurement, SSGIs, regional and industrial policy, and coordination of taxation policies. The report identifies that these areas are the ‘building blocks for reconciliation between the single market and the social and citizens’ dimension in the Treaty logic of a highly competitive social market economy’. 69 Monti’s opening statement, in relation to the internal market, is strikingly clear by claiming that it is less popular than ever, but, at the same time, more needed than ever.70 In his search for solutions, public procurement finds itself in the spotlight of Monti’s report. The vision brought forward by Monti in relation to public procurement clearly shows its importance; ‘EU public procurement law plays a key role in the creation and maintenance of the single market.’71 This statement is underpinned by a twofold reasoning. Firstly, the procurement of goods, works and services by public authorities, make up 17-18% of the European GDP. All public procurement in Europe amounted to approximately 2155 billion Euro in 2008, out of which 389 billion Euro fell under the ambit of the EU Directives on public procurement. Hence, there is a powerful economic drive that goes hand in hand with public procurement. Secondly, it stimulates and allows suppliers and service providers to compete in all Member States, which only enhances the strength of the internal market.72 The Monti report proposes a number of recommendations to reclaim the internal market. Firstly, it proposes to simplify public procurement policy and to make it more effective and less onerous for the authorities involved. In this respect, it notes the need to clarify the rules applicable to ‘in-house’ procurement and to make public procurement more accessible for SME’s. Secondly, Monti expresses the idea of putting public procurement to work for innovation, green growth and social inclusion. Since its publication, the Monti report has been a catalyst of change and many initiatives to ‘reclaim’ the internal market have unfolded. Following these European developments, new proposals for Directives on public procurement have been published.73 On the one hand, these Directives intend to increase the efficiency of public spending to ensure the best possible procurement outcome in terms of value for money. The Commission claims that this is best achieved by modernizing the existing public procurement 69

Monti Report, p. 68. Ibid., p. 12. Ibid., p. 76. 72 Ibid., pp. 76-78. 73 Proposal for a Directive of the European Parliament and of the Council on procurement by entities operating in the water, energy, transport and postal services sectors COM(2011) 895 final, 20.12.2011, Proposal for Directive 896, 20.12.2011 and Proposal for a Directive of the European Parliament and of the Council on the award of concession contracts COM(2011) 897 final, 20.12.2011. 70 71

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS rules. This modernization aims to simplify rules and to provide further flexibility in applying these rules. On the other hand, it enables public authorities to put public procurement to better use and to thus achieve societal goals such as, the protection of the environment, stimulation of innovation and the betterment of social inclusion.74 Following the example of Monti, the Commission also chose to include rules in relation to in-house and public collaboration exemptions.75 The new Directives have been published in April 2014 and still include these exemptions after the European regulatory process. 76 Such rules predominantly codify the existing exemptions based on case law of the ECJ. The codification itself exemplifies the importance of these exemptions to public procurement law.77 Article 12 of the recently adopted Classic Directive codifies the jurisprudence line of Teckal and Commission/Hamburg, but restrained itself from going the extra mile and clarifying them further.78 It did clarify the percentage of commercial activities that a separate – Teckal-like – entity is allowed to perform, which is set at 20%.79 Also, contracts awarded to a controlling ‘mother’ entity or a controlled ‘sister’ entity are included in this doctrine.80 The new Directive also confirms that collaboration between public authorities does not necessarily have to involve services derived from the public interest, also supportive services can be included. Its scope seems to have been broadened extensively by allowing private capital under certain circumstances. 81 In addition, the Commission’s initiative to abolish the exclusive right exemption was taken out on initiative of the Council, leaving a commonly used exemption in place.82 No further guid74

Explanatory Memorandum, Proposal for Directive 896, p. 2. On 15 Januari 2014, the European Parliament cast its vote on the renewed Directive regulating public contracts. Upon publication, Member States have two years to implement this Directive. Article 11 Proposal for a Directive of the European Parliament and of the Council on public procurement (Classical Directive) (First reading), 2011/0438 (COD) Brussels, 12 July 2013. 76 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC, OJ L 94, 28/03/2014, pp. 65-242. Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC, OJ L 94, 28/03/2014, pp. 243-374. Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts, OJ L 94, 28/03/2014, pp. 164. 77 E.R. Manunza & R.G.T. Bleeker, ‘De invloed van het Europees recht op het Nederlandse aanbestedingsrecht’ [The Influence of European Law on Dutch Public Procurement Law], in A. Hartkamp, et al. (Eds.), De invloed van het Europese recht op het Nederlandse privaatrecht [The Influence of European Law on Dutch Private Law], Kluwer, Deventer, 2014, pp. 543-600. 78 Institutional (Teckal) and non-institutional collaboration, previously mentioned as an exemption to public procurement law, have thus transformed into EU secondary law. 79 The Directive sets a larger percentage (80%) than the initial proposal of the Commission (90%) in December 2011. 80 Article 12(2) Directive 2014/24/EU. 81 Article 12(1c) and (2c) 2014/24/EU. 82 Council of the European Union, Proposal for a Directive of the European Parliament and of the Council on public procurement: Presidency compromise text, 2011/0438 (COD). 75

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES ance is provided on what can be identified as SGIs or their relation with public procurement law. Therefore, a standard European approach to this subject will also remain absent in the future.83 5.2. Dutch PPA 2012: Motivating Public Procurement Choices Due to the lack of European improvement on this matter, the following considers the importance of the Dutch Public Procurement Act 2012 (PPA 2012), which has introduced a further emphasis on motivating procurement choices for contracting authorities. This can be necessary in the call for tenders, the relevant documents or the proposed contract.84 However, two choices made before the start of a procedure can also possibly impact the need to motivate the decision to internalize or externalize performance. According to Article 1.4 PPA 2012, contracting authorities must base the choice for the type of procedure, and the choice for tenderers or candidates in this procedure on objective criteria.85 Such a motivation must be provided by the contracting authority upon the request of undertakings.86 This duty to motivate has the potential to improve the choice between internal or external performance, because it could force contracting authorities to examine which performance alternative is most suitable for the performance of their public tasks. In addition, Article 1.4 PPA 2012 proposes to improve the decisionmaking process of contracting authorities by focussing on the ‘societal value’ of tenders. 87 Societal value is described as the proper allocation and possible saving of public funds in an economic sense. 88 It is unclear what the exact meaning of this term is. The Dutch term ‘maatschappelijk’ indicates a ‘social’ notion in the Dutch language. However, the achievement of societal goals, such as social inclusion and sustainability, are seemingly not necessarily intended by this Article. If a market party would decide to contest the internal performance of a service before a Dutch court in the future, the assessment of the court may be different than the cases previously described in which the courts upheld internal performance arrangements. Hence, due to this duty to motivate, not only legal considerations, but also economic considerations can potentially play a role in the court’s assessment. As a result, private actors can gain insight into considerations on which decisions relating to public service delivery are made 83

Preamble No. 11 Proposal for Directive 896. Article 1.5 PPA 2012. 85 Article 1.4 PPA 2012. 86 Article 1.4 a and b PPA 2012. 87 In Dutch: Maatschappelijke waarde. The notion of ‘societal value’ was introduced by an Amendment of MP Koppejan. Parliamentary Papers II 2010/11, 32 440, No. 46. See W.A. Janssen, ‘Maatschappelijk Verantwoord Aanbesteden’ [Societally Responsible Public Procurement], Tijdschrift Aanbestedingsrecht, 2012, pp. 7-17. 88 Parliamentary Papers II 2010/11, 32 440, No. 46. 84

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS and public authorities are, in return, forced to make professional procurement decisions. The introduction of the Commissie van Aanbestedingsexperts (‘Committee of Public Procurement Experts’) can in the future play a role in the adoption of interpretations relating to Article 1.4 PPA 2012.89 Even though their advice is not binding, the Committee aims to provide an alternative to costly litigation by providing advice and mediation for disputes between contracting authorities and applicants. Because the Committee consists of lawyers and economists, their advice might contain a more economic approach instead of a purely legal perspective. 5.3. US FAIR Act: Transparency and Economic Elements In addition to this duty to motivate public procurement choices, regulation from the United States can prove to be an inspiring example.90 In the U.S., a different approach is taken by which the decision to externalize or internalize on a federal level is extensively regulated by the US FAIR Act. It is best described as a, ‘may the best man win’ approach. It introduces the obligation to publish a list of all federal governmental activities. 91 This list divides services into ‘inherently governmental functions’ or ‘commercial services’. Inherently governmental functions are those functions that are so intimately related to the public interest that they mandate performance by government employees. 92 As a rule, these functions are performed by government officials and the performance of commercial services is externalized. This categorization is naturally influenced by the constitutional and legal culture of the United States. However, its framework approach, which includes the right to object and appeal, can still be of interest for EU Member States. The inherently governmental functions, according to the U.S. FAIR Act, fall into two categories. The first being the act of governing, i.e. the discretionary exercise of government authority; and the second being monetary transactions and entitlements.93 In general, agencies have considerable discretion in determining whether particular functions are inherently governmental. Factors that should at least play a role in this analysis are listed as well. These factors contribute to the decision of governmental agencies to claim a function as 89

Besluit van de Minister van Economische Zaken van 4 maart 2013, nr. WJZ / 3008668, tot instelling van de Commissie van Aanbestedingsexperts [Committee of Public Procurement Experts Decree] See: . 90 Manunza, supra n. 2, pp. 116-118. 91 US FAIR Act Section 2: Annual lists of government activities not inherently governmental in nature (a). 92 US FAIR Act Section 5: Definitions (2) (A). 93 US FAIR Act Section 5: Definitions (2) (B).

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PUBLIC PROCUREMENT LAW AND IN-HOUSE DELIVERY OF PUBLIC SERVICES ‘inherently governmental’. They include, amongst other things; if an activity is already performed on the market, the degree to which official discretion would be limited and if a statutory restriction that defines an activity as inherently governmental is in place. Federal agencies are also required by law to give ‘special consideration’ to the performance of functions ‘closely associated with the performance of inherently governmental functions’. However, they are not prohibited from contracting out such functions. If a service is considered to be of commercial nature, a streamlined or standard competitive procedure must be followed.94 In the streamlined competitive procedure, the governmental agency calculates, compares and certifies costs based on the scope and requirements of the activity, in order to determine whether government agency performance or private sector performance is most efficient and suitable.95 In the standard competition process, tenderers compete against one another based on objective and transparent criteria such as, a demonstrated understanding of the government’s requirements, costs, technical approach, management capabilities or personnel qualifications.96 Interestingly, the government agency itself can also submit a tender, which truly allows for comparison of public and private performing actors.97 Challenge and review processes are also in place to give the market a role in this decision-making process.98 ‘Interested parties’ are, according to Section 3 of the Act, allowed to submit a challenge of an omission of a particular activity, or an inclusion of a particular activity on the published list. The scope of this article is broad as it allows private parties and unions to object to the classification of the list. 99 Such procedures can be of interest to the waste sector previously described, as it allows private actors to join the decision-making process of the respective governments.

94

US FAIR Act Section 2: Annual lists of government activities not inherently governmental in nature (d). 95 Circular No. A-76 Attachment B. Public-private competition, C. Streamlined competition procedures. 96 Circular No. A-76 Attachment B. Public-private competition, D. Standard competition procedures. 97 Circular No. A-76 Attachment B. Public-private competition, A. Preliminary planning 8.a. 98 US FAIR Act, Section 3: Challenges to the list. 99 An interested party is defined in Sec. 3 Challenges to the list (b) as (1) A private sector source that: (a) is an actual or prospective offeror for any contract, or other form of agreement, to perform the activity; and (b) has a direct economic interest in performing the activity that would be adversely affected by a determination not to procure the performance of the activity from a private sector source. (2) A representative of any business or professional association that includes within its membership private sector sources referred to in Paragraph (1). (3) An officer or employee of an organization within an executive agency that is an actual or prospective offeror to perform the activity. (4) The head of any labor organization referred to in Section 7103(a)(4) of Title 5, United States Code, that includes within its membership officers or employees of an organization referred to in Paragraph (3).

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 6. Concluding Remarks and Stabilizing the Balance To conclude, Dutch public authorities have various alternatives for the performance of SGIs and supportive services. The sectors discussed have exemplified the paradox in which, despite the initial introduction of competition by ways of public procurement procedures, the performance of a public service is internalized by a public authority, or, further exempted by the legislature from competition. The European reforms in relation to the internal market will not change the discretionary power that public authorities have for this purpose. Nor will the new public procurement directives sufficiently clarify the exemptions to European public procurement law in relation to internal performance. The hesitation of public authorities to externalize services can be seen in strong contrast with the previous period of extensive market performance. Finding the right balance between the two should be the goal of public authorities in order to secure the best performance of a public service. The legality of the performance alternatives in public procurement law, combined with the discretionary power of governments, can lead to unnecessary internalization of publics service delivery. To improve the democratic decision-making relating to public service delivery, elements of the Dutch PPA 2012 and the US FAIR Act have briefly been touched upon. Integrating these latter two elements in a framework approach, can result in more transparency and objectivity which would benefit both private actors and public authorities. The goal of such a coherent legal framework should be to objectively identify the advantages of various performance modalities and to come to the best performance of a public service.

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The Scope for Exempting Anti-Competitive SelfRegulation from the Cartel Prohibition Mart Kneepkens*

Introduction Self-regulation by companies is commonly applied as a means to regulate an industry. It implies that businesses commit themselves, without any compulsion by law, to a certain conduct. Such an agreement between companies may serve a public interest, meaning that the self-regulation strives for goals endorsed or set by the government (e.g. the legislature, a ministry or a governmental supervisor). From society's perspective the choice for self-regulation1 may have certain advantages over governmental regulation,2 for example when the industry has more sector expertise useful for designing effective rules, or if the design, introduction and enforcement of self-regulation are cheaper and faster. To illustrate the topic of this chapter, the banking sector is used as an example. Self-regulation is omnipresent in the banking sector. Some 'official' examples for the Dutch banking market are the code of conduct for mortgage loans,3 the code of conduct for the processing of personal data by financial institutions4 and the basic banking covenant (convenant inzake pakket primaire betaaldiensten).5 But there are also many 'unofficial' examples, such as the agreement not to accept distribution fees from investment funds as of 1 January 20146 and the agreement on a uniform treatment of the monthly repayments of study debts.7

*

M. (Mart) Kneepkens is a PhD Candidate at the faculty of Law, Economics and Governance, Utrecht University. 1 For the purposes of this chapter, self-regulation is defined as a voluntarily concluded agreement between at least two undertakings that aims to regulate the conduct of these undertakings on the market. 2 See for an overview of the advantages and disadvantages of self-regulation: B.E. Baarsma, ‘Afwegingskader bij het gebruik van zelfreguleringsinstrumenten’, Tijdschrift voor Toezicht, Vol. 1, No. 3, 2010, p. 12. 3 See: . 4 See:. 5 See: . 6 See: . This agreement is replaced by a law with the same effect, per 1 January 2014. 7 See: .

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Often self-regulation by banks aims to achieve goals that are endorsed by the government (such self-regulation is hereinafter referred to as ‘banks’ selfregulation’). Nevertheless, self-regulation may fall within the scope of the anticartel rules. The EU cartel prohibition is laid down in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and the Dutch cartel ban is included in Article 6(1) of the Dutch Competition Act (DCA) (hereinafter together: 'the cartel prohibition'). Banks' self-regulation may be prohibited by the cartel prohibition if it appreciably restricts competition. 8 Consequently, a clash between two public policies may arise: the cartel prohibition blocks the furtherance of certain goals of public banking policy. For example, certain provisions of an older version of the code of conduct for mortgage loans, aiming to prevent the over-indebtedness of borrowers, violated the cartel prohibition.9 Furthermore, it is plausible that the abovementioned agreement not to accept distribution fees from investment funds violates the cartel prohibition, as it restricts the commercial strategy of banks and deprives investors of the possibility to opt for services funded through distribution fees. Both types of self-regulation, however, despite their anti-competitive effects on balance, may be beneficial for consumers and society. So, a blockade of these regulations by the cartel prohibition could result in a negative outcome for society if on balance the benefits of the self-regulation outweigh its anti-competitive effects.10 The cartel prohibition does not constitute an absolute ban on anti-competitive agreements. The law provides for a legal exemption possibility (‘the exemption possibility’) for agreements violating the cartel prohibition. The exemption possibility is laid down in Article 101(3) TFEU and Article 6(3) DCA. Briefly put, the exemption possibility implies that agreements that restrict competition but nevertheless produce more benefits for customers than disadvantages, are exempted from the cartel prohibition. However, the exemption possibility only applies if four conditions are met. In this chapter, the following two questions with regard to the first of these four conditions are answered: what kind of benefits of banks’ self-regulation can lawfully be taken into account in the exemption possibility? And for which types of benefits should this be possible?

8

The cartel prohibition is applicable to agreements that are voluntarily concluded between undertakings. Even if the government promotes or endorses such agreements, the cartel prohibition applies. However, the cartel prohibition does not apply if the government makes the conclusion of agreements compulsory. (E.g.: Judgment of 11 November 1997 in Case C-359/95, Commission of the European Communities and French Republic v Ladbroke Racing Ltd. [1997] ECR I-6265, Para. 33.) 9 See: ACM Cases 235 and 1189, Contactorgaan Hypothecair Financiers en Gedragscode Hypothecaire Financieringen, 4 May 2000. 10 UK Office of Fair Trading Discussion Note, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits, 2010, Paras. 3.23-3.32.

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EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION This chapter is organized as follows. First, the relevant legal framework of competition law is set out (Section 1). Next, the goals of competition law (Section 2) and banking regulation (Section 3) are discussed. Subsequently, the current application of the first condition of the Exemption Possibility is set out (Section 3). Then a normative view on the substance and application of this condition is presented (Section 4). This chapter ends with a number of conclusions (Section 5).11

1. The Legal System of Competition Law As mentioned above, the exemption possibility only applies if four conditions are met. To benefit from this provision, the agreement must: 1. contribute to improving the production or distribution of goods or to promoting technical or economic progress (‘the first condition’); 2. allow customers a fair share of the resulting benefits (‘the second condition’);12 3. not apply restrictions which are not indispensable to the attainment of the benefits (‘the third condition’);13 and 4. not eliminate a substantial part of competition in the market (‘the fourth condition’).14 The first condition will be further discussed below, since it is crucial for the application of the exemption possibility to banks’ self-regulation to establish which type of effects produced by the self-regulation fall within definition of the first condition.15

11

Other methods than applying the exemption possibility, which reconcile competition law with possibly anti-competitive self-regulation have been proposed, but these are not further discussed in this chapter. One such method is to keep certain agreements out of the scope of the cartel prohibition because of their social or regulatory nature. See: R. Whish, Competition Law, Oxford University Press, Oxford, 2009, pp. 126-131; G. Monti, EC Competition Law, Cambridge University Press, Cambridge, 2007, p. 113. 12 Briefly put, this condition stipulates that the disadvantages of the reduction of competition, that the direct or indirect buyers of the goods or services concerned experience, must be exceeded by the benefits produced by the agreement. 13 Briefly put, this condition stipulates that the restriction must be proportionate and therefore that the agreement may only restrict competition to the extent necessary for the attainment of the agreement’s benefits. 14 Briefly put, this condition stipulates that regardless of the benefits produced by the agreement, it may not eliminate competition completely or for a major part. 15 In this chapter, the last three conditions are not further discussed, but it is important to acknowledge that fulfilment of these conditions will always be required for the exemption possibility to apply to anti-competitive self-regulation.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Public enforcement of the DCA is carried out by the Dutch competition authority (i.e. the Dutch Authority for Consumers and Markets; ‘ACM’).16 The authorities enforcing the EU competition rules in the Netherlands are both the European Commission (‘the Commission’) and the ACM. In addition, the cartel prohibition can be enforced by private parties: a private party can initiate proceedings for a civil court ruling and such a court may declare an agreement void if it is not compatible with EU or Dutch competition law. Undertakings that want to benefit from the exemption possibility have to make their own assessment of the facts and the law, and decide whether this rule is applicable. There is no need to obtain a prior supervisory or judicial statement declaring the exemption possibility applicable. It is, however, therefore also not possible to gain legal certainty that an agreement is indeed exempted from the cartel prohibition.17

2. Competition Law Goals When establishing the scope of the exemption possibility, a key question is: which effects can be taken into account in the context of the first condition? It is proposed here that all effects aimed at achieving the same underlying goal of the anti-cartel rules are candidates for inclusion in the balancing act of the exemption possibility. Since such interests have the same aim as the anti-cartel rules there is no reason why agreements serving these interests should not, in the appropriate circumstances, trump the cartel prohibition. Such a teleological approach is consistent with the European Court of Justice (ECJ) main method of interpretation of the law. 18 Since it was the explicit intention of the Dutch legislature that the interpretation of the Dutch cartel rules closely follows its EU counterpart,19 it is appropriate to accept the subsequent findings for the Dutch cartel prohibition too. The underlying goals of the anti-cartel rules are set out below.

16

The ACM was formed on 1 April 2013 and took over the tasks of the former competition authority, i.e. the Nederlandse Mededingingsautoriteit. In this chapter, references to ACM activities before this date, in fact refer to activities of its predecessor. 17 Consequently, it is specifically important that undertakings can appreciate what the substance of the exemption possibility is; as discussed below, unfortunately the relevant case law and decisional practice of the authorities are not equal. 18 This main interpretation method can be described as purposive or teleological: ‘The Court rather examines the whole context in which a particular provision is situated, and gives the interpretation most likely to further what the Court considers that provision in its context sought to achieve’. See: P. Craig & G. de Búrca, EU Law, Text, Cases, and Materials, Oxford University Press, 2011, p. 64. 19 Parliamentary Papers II 1995/96, 24 707, No. 6, p. 10. See also: Dutch Supreme Court (Hoge Raad) 14 October 2005, ECLI:NL:HR:2005:AT5542, Para. 3.5.

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EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION 2.1. EU Competition Law 2.1.1. Introduction Since the ECJ holds the ultimate authority to interpret the TFEU, its view on what the goals are, is decisive. Unfortunately, from the case law of the ECJ no consistent and full-fledged picture of the goals of the competition rules can be derived.20 Through the decades, scholars have tried to further substantiate the goals of EU competition law. Economists have especially been influential in this context. Nowadays there is a mainstream consensus, based on interpretation of the case law and economic theory, that EU competition law promotes at least three different goals. 2.1.2. Economic Prosperity Economic theory predicts that markets with perfect competition maximize society’s overall welfare. In this theoretical context, ‘welfare’ has a technical, limited meaning.21 It is a certain measure of economic wealth and cannot be equated with well-being – in this chapter it is referred to as ‘economic welfare’. In addition, it is generally assumed that competition is a strong driver for innovation.22 Innovation, in turn, is considered to be the main force behind the increase in wealth for societies.23 Economists generally accept that welfare in the technical sense is a good indication of the economic wealth produced by the market. They, therefore, favour competition as it is assumed to maximize society’s wealth. Many scholars therefore argue that maximizing economic welfare should be a goal of competition law, perhaps even the only goal.24 Indeed, considering one of the ultimate aims of the EU – i.e. the promotion of the well-being of its peoples25 – it is sensible to regard the furtherance of the EU citizens' economic prosperity the ultimate goal of EU competition law.

20

In its recent case law, the ECJ often mentions four goals of EU competition law: the protection of 1) the interests of consumers (i.e. direct and indirect buyers), 2) the interests of competitors, 3) the structure of the market and 4) competition as such. See e.g., Judgment of 7 February 2013 in Case C-68/12, Protimonopolný úrad Slovenskej republiky v Slovenská sporiteľňa a.s. (Akcenta) [2013] ECR I-000, Para. 18. The ECJ has, however, not elaborated on what it considers the exact meaning of these goals. 21 Economic welfare measures in money terms the actual and perceived wealth that is generated on a particular market. 22 Commission Notice, ‘Guidelines on the application of Article 81(3) of the Treaty’, OJ 2004 C 101/08, Para. 92. See also: R. Whish, Competition law, Oxford University Press, Oxford, 2009, pp. 5-6. 23 J.F. Brodley, ‘The economic goals of antitrust: efficiency, consumer welfare, and technological progress’, New York University Law Review, Vol. 62, No. 5, 1987, p. 1026. 24 E.g. O. Odudu, The boundaries of competition law, Oxford University Press, 2006, p. 173; B.E. Baarsma, ‘Moeilijke marktwerking en meedogenloze mededinging. Een welvaartseconomisch perspectief’, TPEdigitaal, Vol. 4, No. 1, 2010, p. 164. For the purposes of this chapter, it is not necessary to conclude whether competition law must promote ‘consumer welfare’ or ‘total welfare’. 25 Article 3(1) TEU.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 2.1.3. Market Rivalry Scholars have suggested that competition as the ‘process of market rivalry’ should be regarded an independent goal of competition law. 26 Indeed, in for example the GlaxoSmithKline case the ECJ accepted that that the process of market rivalry is an objective of EU competition law. 27 The protection of competition as the process of market rivalry means that it is a policy goal to foster the battle between suppliers for gaining customers; customers are generally won through lower prices or improved or new products (i.e. innovation). The goals of economic welfare and market rivalry are intertwined and a wise application of the cartel rules may strike a careful balance between these two. On the one hand, maximizing economic welfare can be considered the ultimate underlying goal of EU competition law. On the other hand, market rivalry is generally considered to be the best way to maximize economic prosperity and this process is therefore protected. Rivalry may, however, be restricted to a certain extent if it is likely that such a restriction results in even more economic prosperity. The protection of market rivalry is an intermediate objective with regard to the ultimate goal of economic prosperity; it is a means to an end.28 2.1.4. Market Integration One of the most important goals of the EU is to create a common market without trade barriers; also referred to as ‘the single market imperative’. The EU courts have therefore, from the early days of the EU on, consistently held that agreements between undertakings that hinder the integration of the national markets into a single European market, are prohibited by Article 101(1) TFEU.29 For the purposes of this chapter, it is assumed that banks’ self-regulation does not hinder the creation of the EU single market and the single market imperative as a goal of EU competition law is therefore not further addressed.

See e.g. H. Schweitzer, ‘Comment on Maier-Rigaud’, in D. Zimmer (Ed.), The Goals of Competition Law, Edgar Elgar Publishing, Cheltenham, 2012, p. 173; O. Andriychuk, ‘Rediscovering the Spirit of Competition: on the Normative Value of the Competitive Process’, EUI Working Article Law 2011/01, European University Institute, 2011, p. 9. 27 Judgment of 6 October 2009 in Case C-501/06, GlaxoSmithKline Services Unlimited v Commission of the European Communities [2009] ECR I-9291, Para. 63. See also: A. Jones & B. Sufrin, EU Competition Law, Text, Cases, and Materials, Oxford University Press, Oxford, 2011, p. 51; B. van Rompuy, Economic Efficiency: The Sole Concern of Modern Antitrust Policy? Non-efficiency Considerations under Article 101 TFEU, Kluwer Law International, Alphen aan den Rijn, 2012, pp. 198-199. 28 See e.g. the speech of Kroes, at the time EU Commissioner of DG Competition, ‘Industrial Policy and Competition Law & Policy’, Speech/06/499, 14 September 2006, p. 7. 29 E.g.: Judgment of 13 July 1966 in Case 32/65, Italian Republic v Council of the European Economic Community and Commission of the European Economic Community [1966] ECR 389, p. 408 (English version). 26

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EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION 2.2. Dutch Competition Law The Dutch cartel prohibition mirrors its EU counterpart to a great extent and it follows from the legislative history of the DCA that the Dutch prohibition must closely follow the EU anti-cartel rules. 30 It also follows from the legislative history that the underlying goal of the DCA is the improvement of welfare.31 Furthermore, in the Explanatory Memorandum of the DCA it is mentioned that the DCA aims to prevent the negative economic effects of restrictions of competition. 32 This statement clarifies that the DCA cares about undesirable economic consequences and not so much about competition as such. This is a clear indication that safeguarding market rivalry is an objective of the DCA, although merely an intermediate objective. There is one EU competition law goal that can be deemed not to be relevant for the DCA beforehand: the single market imperative. In contrast to EU competition law, and indeed to the wider EU project, market integration has never been a consideration in Dutch competition law. 2.3. Conclusion It is concluded that EU and Dutch competition law has two goals 1) the furtherance of economic prosperity and 2) the protection of market rivalry. The protection of market rivalry can be considered an intermediate objective in the ultimate pursuit of maximizing economic prosperity. Economic welfare is regarded to be an adequate approximation for economic prosperity.

3. Banking Regulation Goals 3.1. Introduction In the Netherlands, governmental banking regulation is made by the EU and national legislatures. The goals these legislatures want to achieve by introducing these regulations have been stated by them, but their statements are generally broad and vague, and therefore non-guiding. To gain a thorough understanding of the goals of banking regulation, a sensible approach is to start with identifying the broad goals formulated by the legislatures and then explore the supervisors’ policies and scholarly literature on these goals, to discover the results that the regulations may aim to achieve. 30

A key difference between the EU and Dutch anti-cartel rules is that the former only applies if trade between EU Member States is influenced by the agreement concerned, while the latter only applies if the agreement affects the Dutch market(s). So, if an agreement affects the Dutch market and influences inter-state trade, both Articles 101 TFEU and 6 DCA may be applicable. 31 Parliamentary Papers II 2005/06, 30 071, No. 6, p. 15. 32 Parliamentary Papers II 1995/96, 24 707, No. 3, p. 9.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 3.2. Justifications for Regulation Scholars discussing justifications for intervention on markets by governmental institutions, including regulation, usually – explicitly or implicitly – distinguish between two types of justifications.33 The first category consists of the justifycations for correcting the effects that divert markets from operating completely efficient; the second category includes all other justifications, for example ethical or social justifications. Governments usually, amongst others, strive for maximum economic prosperity for their citizens. Therefore, correcting the effects that divert the market from being completely efficient is commonly acknowledged as a rationale for regulation. 34 These effects causing market inefficiencies are called ‘market failures’. There are many different market failures in banking markets; indeed, banks’ self-regulation is usually aimed at remedying market failures. For example, in banking markets the customers usually do not have all available information about the products or services they purchase, or about the banks offering such products or services: they have imperfect information. In addition, these customers generally know less than the banks that serve them: there is information asymmetry in the market. Imperfect information and information asymmetry may lead to market outcomes with less economic welfare than under perfect competition: consumers may buy less bank products than they would in the event of full information access, or they purchase the wrong products. 35 Information disclosure requirements, such as those included in the code of conduct for mortgage loans and the Dutch Financial Supervision Act (Wet op het financieel toezicht), may to a certain extent remedy these market failures. Negative externalities are another type of market failure. Negative externalities are costs for third parties flowing from a product, which the buyers and sellers of this product do not bear. For example, because of the interconnectedness of banks, the failure of one bank may endanger the whole financial system. However, when determining how much risk they are prepared to take, individual banks do not take into account the potential costs of their failure for other banks and society. Regulations that limit the risks that bank may take or that increase their capacity to bear losses, reduce the effect of these negative externalities.36 E.g.: M. Kerste et al., ‘Publieke belangen en hypotheekregulering’, SEO report no. 2011-19, SEO Economisch Onderzoek, 2011, p. 47, available at: . 34 See e.g. D.W. Carlton & J.M. Perloff, Modern Industrial Organization, Pearson, Boston, 2005, p. 686. 35 There may be incentives for a bank not to provide all information on its products, e.g. because full disclosure of the product’s features may reveal that the product does not match the consumer’s needs or that the product is not as good as a competitor’s offer. See: P. Cartwright, Banks, Consumers and Regulation, Hart Publishing, Oxford, 2004, p. 17. 36 E.g., in the abovementioned ACM-case on the code of conduct for mortgage loans, it was argued by the banks that the reduction of over-indebtedness would also benefit the stability of the financial system. 33

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EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION The second category of justifications consists of all other justifications. Such justifications include income or risk redistribution 37 and safeguarding public values, such as honesty and fairness. Indeed, policymakers do not just adopt consumer protection rules that correct market failures, but they also aim to protect consumers on ethical grounds.38 For example, the government may want to prevent mortgage-takers’ over-indebtedness because of the severe social consequences of home evictions, even if the borrower and lender understand the credit risks and are willing to take them.39 Another example is the prevention of fraud and other crimes. It is considered an effective way of fighting crime if criminals are prevented from having financial resources available, or from enjoying the fruits of their illegal activities.40 Banks cooperate in various forms to fight crime.41 Rules that aim to fight crime are not (only) meant to remedy market failures; they are (also) based on security considerations. 3.3. Conclusion on the Goals of Banking Regulation The justifications for regulating the banking sector, through governmental or self-regulation, can be divided into two categories. On the one hand the presence of market failures may justify regulation; such regulation aims to improve the functioning of the markets. The remedying of market failures increases economic welfare and therefore presumably economic prosperity. On the other hand there are non-market failure justifications, such as risk redistribution, ethical consumer protection (for example through paternalism) and the prevention of crime. These regulations aim to achieve goals that are not related to the functioning of the markets and do not necessarily increase economic prosperity.

ACM Cases 235 and 1189, Contactorgaan Hypothecair Financiers en Gedragscode Hypothecaire Financieringen, 4 May 2000, Paras. 50, 87. 37 An example of risk redistribution is Article 7:529(1) of the Dutch Civil Code. Pursuant to this provision a consumer who did not comply with the applicable security rules and whose payment account is illegally used, has an own risk excess of maximum EUR 150. 38 In practice, a consumer protection rule may simultaneously aim to achieve ethical goals and to a remedy market failure. 39 M. Kerste et al., ‘Publieke belangen en hypotheekregulering’, SEO report no. 2011-19, SEO Economisch Onderzoek, 2011, p. 47. 40 Algemene leidraad ter voorkoming van witwassen en financieren van terrorisme (WWFT) en Sanctiewet (SW), p. 1; and Parliamentary Papers II 2001/02, 28 106, No. 2, p. 2 (Nota Integriteit Financiële sector en terrorismebestrijding). 41 See e.g. the Convenant Samenwerking en informatie-uitwisseling Electronic Crimes Task Force, 14 March 2011; available at: .

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 4. The First Condition of the Exemption Possibility 4.1. Introduction As explained in Section 1, the exemption possibility can be applicable provided that the agreement concerned amongst others ‘contributes to improving the production or distribution of goods or to promoting technical or economic progress’. Hence, it is important to establish which effects produced by the agreement fall into this category. In this chapter, the beneficial effects of agreements considered in the context of the exemption possibility are categorized into (1) effects that improve the price, quality, range or service (‘PQRS’) of the product governed by the anticompetitive agreement, and (2) all other beneficial effects. This categorization is taken from the UK’s competition authority (the former Office of Fair Trading, now the Competition and Markets Authority), which refers to the PQRS-effects as ‘direct economic benefits’; this term is also used in this chapter. The second category is dubbed non-PQRS-effects. Direct economic benefits can be deemed to constitute the costs and qualitative efficiencies mentioned by the Commission in its 2004 Article [101(3)] Guidelines42 (see Section 4.2.2, below) and are the archetypes of effects that can be decisive under the first condition of the exemption possibility. Non-PQRS-effects include both economic benefits, such as the safeguarding of financial stability and certain consumer protection effects, and non-economic effects,43 such as the contribution to ethical consumer protection, risk distribution or justice. The economic non-PQRS-effects are, in contrast to the direct economic benefits, dubbed indirect economic benefits. To conclude, for the purposes of analyzing the case law and the authorities’ decisions, three types of effects are considered in this chapter: (1) direct economic benefits, (2) indirect economic benefits and (3) non-economic effects.44

Commission Notice, supra n. 22. See also UK Office of Fair Trading Discussion Note, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits, 2010, Paras. 3.6-3.7. 43 Non-economic non-PQRS-effects are termed ‘non-economic effects’. 44 As the case law and authorities’ decisions do not follow a comprehensive, sound general policy, the exact definition of these categories cannot be given. For example, it is uncertain when exactly, according to the Commission, a benefit is ‘economic’. In the normative framework presented below such a definition is provided. 42

36

EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION 4.2. Case Law on and Application of the Exemption Possibility 4.2.1. The Exemption Possibility – Case Law of the EU Courts It is beyond doubt that direct economic benefits can be considered decisive in the application of the exemption possibility. However, the case law of the EU courts on non-PQRS-effects – both economic and non-economic – is scarce and ambiguous. It is clear, however, that the EU case law allows for a broad interpretation of the first condition of Article 101(3) TFEU. For example, in 1977 the ECJ accepted that supporting employment is an objective that can lead to an exemption based on Article 101(3) TFEU. 45 Furthermore, the ECJ considered in the 1983 Binon Judgment that protecting the plurality of the media was a benefit that must be taken into account in the EU exemption possibility. 46 In addition, in 1996 the EU General Court accepted that the objective of providing a varied programming of cultural, educational, scientific and minority TV-programs was a consideration on which an exemption could be based. 47 More generally, the General Court stated in this case: ‘[…] in the context of an overall assessment, the Commission is entitled to base itself on considerations connected with the pursuit of the public interest in order to grant exemption under Article [101(3) TFEU]’.48

Hence, with regard to the question whether non-PQRS effects can be decisive, this statement is rather clear: they can be decisive, since an exemption can be based on public interest considerations which should be understood to include non-PQRS effects. Unfortunately, the ECJ has not yet been so explicit on this question. Nevertheless, the Binon Judgment shows that even non-economic effects can be decisive.49 To conclude, it follows from the case law that both indirect economic benefits and non-economic effects can be decisive in the application of the exemption possibility.

45

Judgment of 25 October 1977 in Case 26/76, Metro SB-Großmärkte GmbH & Co. KG v Commission of the European Communities (Metro I), Para. 43. 46 Judgment of 3 July 1985 in Case 243/83, SA Binon & Cie v SA Agence et messageries de la presse [1985] ECR 2015, Para. 46. 47 Judgment of 11 July 1996 in Case T-528/93, Metropole télévision SA and Reti Televisive Italiane SpA and Gestevisión Telecinco SA and Antena 3 de Televisión v Commission of the European Communities (Métropole) [1996] ECR II-649, Paras. 116, 118. 48 Case T-528/93, Métropole, Para. 118. 49 The ECJ Judgment in the Asnef-Equifax Case also implies that indirect economic benefits can be decisive; Judgment of 23 November 2006 in Case C-238/05, Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito, SL and Administración del Estado v Asociación de Usuarios de Servicios Bancarios (Ausbanc) (Asnef-Equifax) [2006] ECR I-11125, Para. 67.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 4.2.2. The Exemption Possibility - Commission and ACM The Commission The Commission’s policy on non-PQRS-effects may be divided into two periods: the period before 1 May 2004 and the period after this date.50 Before 2004, the Commission had in several cases included non-PQRS-effects in the balancing act of Article 101(3) TFEU.51 Examples of such non-PQRS-effects are cultural considerations,52 energy supply security, 53 environmental effects 54 and employment effects.55 Nevertheless, it was unclear whether the non-PQRSeffects alone could be decisive, or that they constituted merely benefits worth mentioning alongside certain direct economic benefits, but not capable of neutralizing the anti-competitive effects. Before 2004, the Commission appeared to consider both direct economic benefits and indirect economic benefits decisive for the purposes of the exemption possibility. An oft-cited example of the Commission's approach is the CECED case.56 In this case, the Commission assessed an agreement between producers of domestic appliances on the phasing out of the market of energy inefficient products washing machines. According to the Commission, Article 101(3) TFEU could only exempt environment protection agreements if the agreements would ‘yield economic benefits outweighing their costs’57 (emphasis added). The ‘economic benefits’ were present in the form of a reduction of negative externalities (i.e. the emission of carbon dioxide).58 The Commission was able, apparently, to calculate how much society would benefit in monetary 50

Before 1 May 2004, the Commission was the only institution authorized to apply Article 101(3) TFEU. Undertakings wishing to benefit from the exemption possibility of Article 101(3) TFEU had to notify their agreement to the Commission and subsequently the Commission could issue a decision declaring the exemption applicable. This notification system was abolished per 1 May 2004 and replaced by the current self-assessment system (see Section 1.). Likewise, only the ACM could grant an exemption pursuant to Article 6(3) DCA before 1 May 2004; the Dutch system went through an equal system change as the EU’s system. 51 In his book, Townley elaborates on various different public policy effects that have been considered in the EU exemption possibility. See: Ch. Townley, Article 81 EC and Public Policy, Hart Publishing, 2009, pp. 142-168. See also: I. Lianos, ‘Some Reflections on the Question of the Goals of EU Competition Law’, CLES Working Article Series 3/2013, University College London, 2013, p. 45: See: . 52 See: Commission’s XXIIIrd Report on Competition Policy 1993, Para. 177 (explaining the Commission’s willingness to accept individual resale price maintenance clauses if this would be necessary to enable publishers to produce books of smaller print runs). 53 Commission Decisions: IV/33.151 – Jahrhundertvertrag, and IV/33.997 – VIK-GVSt, both of 22 December 1992, OJ 1993 L 50/14, Paras. 31-32. 54 Commission Decision IV/34.252 – Philips-Osram, 21 December 1994, OJ 1994 L 21 378/37, Para. 27. 55 Commission Decision IV/34.456 – Stichting Baksteen, 29 April 1994, OJ 1994 L 131/15, Para. 27. 56 Commission Decision IV.F.1/36.718 – CECED, 24 January 1999, OJ 2000 L 187/47. See also: Commission’s Case EACEM in Commission’s XXVIIIth Report on Competition Policy 1998, pp. 151152. 57 Commission Decision IV.F.1/36.718 – CECED, Para. 55. 58 Commission Decision IV.F.1/36.718 – CECED, Para. 56.

38

EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION terms from the reduction of carbon dioxide emissions flowing from the agreements concerned. Subsequently, it performed the balancing act of Article 101(3) TFEU and weighed ‘society’s costs savings’ against the expected anticompetitive effects (i.e. price increases). Furthermore, it is also clear that pursuant to the Commission’s approach non-economic effects cannot be decisive for the purposes of the exemption possibility. This approach became standard policy. For example, in the Commission's 2004 Article [101(3)] Guidelines, the Commission stated: ‘Goals pursued by other Treaty provisions can be taken into account to the extent that they can be subsumed under the four conditions of Article [101(3) TFEU].’ 59 The Commission expressed that it would only consider effects to comply with the first condition of the EU exemption possibility if these effects could be translated into ‘economic efficiency gains’60 or benefits that have some economic importance.61 For analytic purposes, the Commission divided these efficiency gains into two categories: cost efficiencies and efficiencies of a qualitative nature. These efficiency gains can be equaled with direct economic benefits. So, the Commission adopted in its 2004 Article [101(3)] Guidelines a restrictive approach with regard to the consideration of non-PQRS-effects under Article 101(3) TFEU, especially with regard to non-economic effects. The Commission clearly did not want to open the doors for private parties pushing away a strong EU competition policy with a claim to benefiting of all kinds of other policy goals.62 Nowadays, the Commission's approach seems to be even stricter. In the old 2001 Horizontal Guidelines, the Commission discussed an example based on the CECED case and it stated: ‘The net contribution to the improvement of the environmental situation overall outweighs increased costs’ (emphasis added), though it avoided translating this environmental improvement in economic terms.63 In the new 2011 Horizontal Guidelines the Commission discussed the same example, but it did not mention ‘environmental improvements’ as reasons for an exemption at all; the only benefits mentioned are an extended offer of washing programs and lower running costs in the form of reduced consumption 59

Commission Notice, supra n. 22, Para. 42. The Commission cites, in support of its stance, two cases of the EU courts. However, it is not at all evident that these judgments do support the Commission's approach. 60 Ibid., Paras. 33, 59. 61 Ibid., Para. 50. 62 J. Faull & A. Nikpay, The EC Law of Competition, Oxford University Press, Oxford, 2007, p. 294, n. 684. 63 Commission Notice, ‘Guidelines on the applicability of Article 81 of the EC Treaty to horizontal cooperation agreements’, OJ 2001C 3/2, Para. 198.

39

WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS of water, electricity and soap.64 Hence, the Commission seems to limit down the scope of eligible efficiency gains to direct economic benefits, excluding indirect economic benefits. The fact that the Commission does not present the remedying of negative externalities, i.e. reducing the carbon dioxide emissions, as a reason to grant an exemption anymore, casts doubts on the current willingness of the Commission to accept an exemption of self-regulation remedying such a market failure. The ACM With regard to the ACM's policy on the application of Article 6(3) DCA before 2004, the ACM followed the Commission’s policy with regard to indirect economic benefits,65 in line with the legislature’s intention.66 However, from the start the ACM's approach towards non-economic effects was clear: such effects cannot be decisive in the balancing act of Article 6(3) DCA.67 The practice of the ACM after 2004 reveals that it has no objections against treating indirect economic benefits as decisive for the balancing act of the Dutch exemption possibility. For example, in 2013 it analyzed a part of a selfregulatory agreement between certain energy companies and environmental organizations, endorsed by the Dutch cabinet (i.e. the SER Energy Agreement for Sustainable Growth).68 The part analyzed by the ACM governed the closure of five inefficient power stations, so that pollution could be reduced. The ACM basically applied the Commission’s approach in the CECED case: it quantified the monetary value of the pollution reductions and compared this with the monetary value of the anti-competitive effects.69 So with regard to indirect economic benefits, the ACM currently seems to take a broader view than the Commission. With regard to non-economic effects, the ACM has not given signals that its pre-2004 position has changed. Indeed, the 64

Commission Notice, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, OJ 2011C 11/1, Para. 329. 65 See e.g. ACM Case 492, Vereniging van Bloemenveilingen in Nederland (Flower Auctions), 9 July 1999, Paras. 71-75; Case 528, Vereniging De Nederlandse Dagbladpers (Newsarticle Publishers), 21 December 1999, Paras. 20-23. 66 Parliamentary Papers II 1996/97, 24 707, No. 6, p. 54. 67 See e.g. ACM Case 528, Vereniging De Nederlandse Dagbladpers, Paras. 20-23. 68 ACM Memorandum, Analyse van de Autoriteit Consument en Markt met betrekking tot de voorgenomen afspraak tot sluiting van 80er jaren kolencentrales in het kader van het SER Energieakkoord, 26 September 2013, . 69 The ACM’s position is also expressed in: ACM opinion (informele zienswijze) on Management plan MSC shrimp fishery of 18 April 2011, pp. 5-6; ACM Notice on competition law and sustainability, De beoordeling van mededingingsbeperkingen als gevolg van duurzaamheidinitiatieven in de praktijk, 2013, p. 7; .

40

EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION Minister of Economic Affairs seems to have indicated recently that noneconomic effects cannot be considered in the Dutch exemption possibility.70 4.2.3. Case Law on and Application of the Exemption Possibility - Conclusion The case law of the EU courts allows for a wide variety of effects to be included in the balancing act of the exemption possibility: direct and indirect economic benefits, as well as non-economic effects can be included. The Commission adopts a more restrictive approach. Its position is clear on direct economic benefits and non-economic effects: the former category can be included, the latter cannot. There is some uncertainty about the Commission's position regarding indirect economic benefits; it seems not quite willing to include these in the balancing act of the exemption possibility. The ACM's position is clearer: direct and indirect economic benefits are eligible for inclusion in the balancing act of the exemption possibility, while non-economic effects are not. It would be helpful for undertakings if the ECJ would now, after 1 May 2004, be explicit on whether its old, pre-2004 approach remains applicable, or whether it currently takes another view on indirect and non-economic effects. This is especially relevant with regard to non-economic effects. The EU courts’ case law in which non-economic effects were accepted, was decided when the pre2004 notification system was still in place (see note 50 above) and therefore created the possibility for the Commission to balance competition versus noneconomic interests. It remains to be seen whether now, after the abolition of the notification system, the courts are still prepared to benedict the balancing of these different interests by private parties.71 4.3. A Normative View on Indirect Economic Benefits Above it is set out what the current status is of the case law and the policy of the Commission and ACM on the application of non-PQRS-effects, both economic and non-economic. Below a normative view on this topic is presented; i.e. it is considered whether the case law and decisional practice follow the most appropriate approach. An underlying principle of the normative view presented here is that agreements that achieve the same goal as the goal of the cartel prohibition, i.e. the maximization of economic welfare, may not be blocked by this provision. Furthermore, 70 71

Parliamentary Papers II 2012/13, 33 622, No. 7, pp. 6-7. A change in the EU courts’ position would be interesting, as the change of the enforcement system after 1 May 2004 did not include a change in the substance of the cartel prohibition or the exemption possibility.

41

WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS it is relevant to acknowledge that the anti-competitive effects of an agreement can be translated into economic welfare terms. Economic welfare terms can in theory be monetized, although this may not always be possible in practice. Through the monetization of the economic welfare effects of a competition restriction and the agreement’s benefits, both types of consequences are expressed in the same denominator and can be objectively compared or balanced. Consequently, it is here held that all and only those benefits that can be convincingly translated into monetized economic welfare terms must be eligible for the inclusion in the balancing act of the exemption possibility. Such benefits are hereinafter dubbed ‘economic effects’. 4.3.1. A Normative View on Non-Economic Effects The intrinsic problem with regard to including non-economic effects in the balancing act of the exemption possibility is that non-economic effects and anticompetitive effects cannot be compared well. 72 Indeed, these two types of effects do not have the same denominator and there is no other predetermined method to compare these effects. It can therefore not be established whether the economic welfare decrease due to the anti-competitive effects is sufficiently neutralized by economic welfare increases. For example, to the extent selfregulation prevents the social, non-monetary harm of home evictions and social exclusion due to over-indebtedness, such effects should not be considered in the balancing act of the exemption possibility. When comparing non-economic effects and anti-competitive welfare costs, it is of course possible to argue that the economic welfare costs are ‘worth’ the furtherance of the non-economic values. Nevertheless, there is no objective standard for testing whether such an argument is correct. It is advocated here that only the legislature should be allowed to rank different policy goals. Indeed, in democratic societies only the elected governments have the legitimacy to set the hierarchy amongst policies.73 If non-economic effects would be decisive in the balancing act of the exemption possibility, the undesirable result would be that private parties are authorized to decide that competition policy must be trumped by another public policy. Furthermore, it may be questioned whether the competition authorities can legitimately balance competition policy against various other policies. They probably cannot, mainly because non-economic effects and anti-competitive effects cannot be compared UK Office of Fair Trading Discussion Note, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits, 2010, Paras. 3.53-3.56. 73 E.g., Wetenschappelijke Raad voor het Regeringsbeleid (Dutch Scientific Council for Government Policy), ‘Het borgen van publiek belang’, WRR-rapport 56, Sdu Uitgevers, The Hague, 2000, pp. 38, 48. 72

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EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION well 74 and because competition authorities are not to make priority choices between the government's policies.75 The abovementioned normative view differs from the EU courts’ case law (see Section 4.2.1), to the extent that the courts have held that non-economic effects can be decisive in the balancing act of the exemption possibility. So, it is here held that this case law has undesirable consequences, since it allows for the possibility that private parties can balance incommensurable public policy values. Indeed, the EU courts have not touched upon the issue of how to balance such incomparable values. They may have thought this not necessary, since the relevant judgments all date from the period in which the Commission was the only entity that could grant an exemption pursuant to the EU exemption possibility. As the Commission resembles a political body, the courts may have deemed the Commission suited for balancing incommensurable public policy values. As of the abolition of the notification system, this argument would no longer hold. It is here held that if the EU courts would maintain their positions with regard to non-economic effects, it would be irresponsible if they would not provide clear guidance to private parties on how to balance different values. Nevertheless, in practice this discrepancy between the EU case law and the proposed, normative approach can be resolved – or evaded, to be more precise. Indeed, it does not follow from the case law that non-economic effects must trump anti-competitive effects. It is, in first instance, up to the contracting parties, and in second instance to the competition authorities and courts, to perform the balancing act in each individual case. The solution is that if, contrary to the normative approach proposed above, the parties would be compelled or would choose to include non-economic effects in the balancing act, it should always be held that they failed to substantiate that the noneconomic benefits outweigh the anti-competitive effects (i.e. condition 2 of the exemption possibility; see Section 1). This outcome is well arguable (and desirable), simply because there is no objective convincing matter in which a party could prove that the non-economic effects do outweigh the anticompetitive effects.76

UK Office of Fair Trading Discussion Note, Article 101(3) – A Discussion of Narrow versus Broad Definition of Benefits, 2010, Paras. 3.57-3.60. Parliamentary Papers II 2012/13, 33 622, No. 7, p. 8. 76 Admittedly, in the unlikely situation that a legitimate governmental institution (e.g. the legislature) has explicitly stated and substantiated that in an individual case the non-economic effects outweigh the anti-competitive effects, this approach may not be optimal. Nevertheless, in such a situation it may often be rather easy for the institution to adopt a regulation which effects that the non-economic effects will be materialized. 74

75

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 4.3.2. A Normative View on Indirect Economic Benefits Contrary to non-economic benefits, it is in principle possible to adequately compare indirect economic benefits and anti-competitive effects, since both types of effects share the same denominator, i.e. economic welfare. In addition, because of the underlying goal of competition law (i.e. the maximization of economic welfare) it is desirable to deem all economic effects – both direct and indirect economic benefits – to have a decisive nature. For example, to the extent self-regulatory information disclosure rules aim to prevent harm due to consumer over-indebtedness, such harm could be the decline in a borrower's spending power due to substantial repayment obligations; the result of avoiding this harm can be presented in monetary terms. Consequently, this result should be considered under the exemption possibility. Hence, the main test for an exemption is whether the agreement increases economic welfare. Indirect economic benefits may clearly increase economic welfare, for example through self-regulation remedying market failures.77 There may be some objections against considering all economic effects of an agreement as decisive. Some of them are discussed below and it is explained why they do not give reason enough to change the above conclusion. Quantifying Indirect Economic Benefits Is Difficult It is here reiterated that effects are only deemed to be economic, if they can convincingly be translated in monetized economic welfare terms. A consequence of the proposed approach is that in theory the benefits of many non-competition policies could be included in the balancing act of the exemption possibility, for example if they can be understood as market failure remedies.78 It may, however, in practice be problematic to make a sound and credible calculation or estimation of the monetary benefit that is generated by the market failure remedy. 79 If no solid quantification of an economic benefit can be made, for example because there are no sound economic methods to do so, or because the effects cannot be measured well, it is not appropriate to exercise the balancing act. Indeed, it is then not possible to make a proper comparison between the agreement’s benefits and the anti-competitive effects.80

77

Which does not imply, however, that the increase in economic welfare lands with the buyers of the product concerned, so that it is not automatic that the second condition of the exemption possibility is also fulfilled. 78 P. Kalbfleisch, ‘The Assessment of Interests in Competition Law: A Balancing Act’, in M. Monti et al. (Eds.), Economic Law and Justice in Times of Globalization, Nomos Publishers, Baden-Baden, 2007, pp. 467 & 468. 79 P. de Bijl & Th. van Dijk, ‘Mededingingsbeleid en publieke belangen: een economisch perspectief’, Markt & Mededinging, Vol. 4, 2012, pp. 152, 153. 80 So, rejecting benefits that cannot be convincingly translated into monetized economic welfare terms is not merely a practical consequence due to lack of evidence, but is a matter of principle, too.

44

EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION Although this may in practice limit the possibility to include indirect economic benefits effects in the balancing act of the exemption possibility, this is no reason to object in general to this approach. Firstly, problems with translating policy effects into economic terms are not only likely to arise with regard to indirect economic benefits, but also with certain direct economic benefits. As the Commission itself acknowledges, qualitative efficiencies such as innovative improvements, may also be difficult to quantify. 81 This difficulty to translate innovation effects in economic terms is, however, no reason not to allow such efficiencies to outbalance any anti-competitive effects. Secondly, in practice the balancing act of the exemption possibility does not require a precise calculation of the economic effects of the anti-competitive effects on the one hand and the economic benefits on the other hand. It often suffices to establish the nature of both the anti-competitive effects and the economic benefits, and their probable impact: ‘The analysis of pro-competitive and anti-competitive effects under [Article 101] is often a question of probabilities. What the undertaking invoking [Article 101(3)] is required to do is to make a convincing case in its favour.’82 Some even argue that in practice no real balancing of the anti-competitive effects and the economic benefits takes place. 83 So, the translation of the benefits of policies into economic terms need not be precise and this reduces in practice any quantifying problems. Authorities and Courts Lack the Capability to Assess Indirect Economic Benefits This brings us to a related objection, i.e. the claim that competition authorities and courts – both civil and administrative courts – are not capable of balancing anti-competitive effects against indirect economic benefits. In this respect, it is important to acknowledge that the balancing of anticompetitive effects against direct economic benefits by the competition authorities and courts is, since the abolishment of the notification system as of 1 May 2004, no longer an issue. Furthermore, direct economic benefits relate to a variety of welfare increasing effects, including research and development benefits, which are uncertain and may only materialize after several years. Valuing these direct economic benefits can be very difficult and may require an in-depth study of the case, but nevertheless it is nowadays widely accepted that competition authorities and courts are capable of doing this. With regard to their

81

Commission Notice, supra n. 22, Para. 103. J. Faull & A. Nikpay, The EC Law of Competition, Oxford University Press, Oxford, 2007, p. 304. See also: ACM Notice on competition law and sustainability: De beoordeling van mededingingsbeperkingen als gevolg van duurzaamheidinitiatieven in de praktijk, 2013, p. 5. 83 See e.g.: P. Nicolaides, ‘The Balancing Myth: The Economics of Article 81(1) & (3)’, Legal Issues of Economic Integration, Vol. 32, No. 2, 2005, p. 143; P. Kalbfleisch, supra n. 78, p. 465. 82

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS capability of assessing indirect economic benefits, as a matter of principle the complexity of the case should therefore not be a problem. In practice, the real difficulty may be to translate public policy effects into economic terms, but this does not mean that the authorities and courts should not be allowed to adjudicate on a case in which such a translation can be made. Indeed, amongst others the CECED case,84 the Flowers Auction case85 and the SER Energy Agreement case 86 show that the Commission and ACM, respectively, are capable of including indirect economic benefits when applying the exemption possibility. To conclude, indirect economic benefits should in principle be included in the balancing act of the exemption possibility, because they constitute economic effects. Although the inclusion of indirect economic benefits may in practice cause certain problems, these may not be insurmountable and are in any event no reason to unconditionally reject such an inclusion. 4.4. A Normative View – Conclusion There is no debate on whether direct economic benefits should be included in the balancing act of the exemption possibility: all agree they should. There is no consensus with regard to other types of effects. In this chapter, it is advocated that non-economic effects should not be included, since non-economic effects and anti-competitive effects cannot be objectively compared. Favouring one over the other therefore requires a subjective – i.e. political – choice and the making of such choices should remain within the governmental realm.87 However, all economic effects, including indirect economic benefits, should be included in the balancing act of the exemption possibility. Indeed, economic effects and anti-competitive effects can in principle be presented in the same denominator, namely monetary economic welfare terms. Furthermore, since the underlying goal of competition law is the furtherance of economic prosperity that can be approximated by economic welfare, it is desirable that indirect economic benefits can be decisive in the balancing act of the exemption Commission Decision IV.F.1/36.718 – CECED. ACM Case 492, Vereniging van Bloemenveilingen in Nederland (Flower Auctions). ACM Memorandum, Analyse van de Autoriteit Consument en Markt met betrekking tot de voorgenomen afspraak tot sluiting van 80er jaren kolencentrales in het kader van het SER Energieakkoord. 87 Cf. e.g. O. Odudu, The boundaries of competition law, Oxford University Press, Oxford, 2006, p.163 et seq.; but see e.g.: Ch. Townley, Article 81 EC and public policy, Hart Publishing, Oxford, 2009, p. 255 et seq. 84 85 86

46

EXEMPTING ANTI-COMPETITIVE SELF-REGULATION FROM CARTEL PROHIBITION possibility. Although doing so may in practice give rise to problems, these are not fundamental obstacles. So, if banks’ self-regulation improves the functioning of markets by remedying market failures, its effects are economic welfare effects. If these benefits can be convincingly translated into monetary terms, they should be held eligible for inclusion in the balancing act of the exemption possibility.88 Usually, ethical or social justifications for self-regulation do not result in benefits that can be measured in monetized economic welfare terms. Consequently, such benefits should not be deemed eligible.

5. Conclusion Banks' self-regulation serves the public interest in that it pursues goals that are endorsed by the government. Such self-regulation, however, may be blocked by the cartel prohibition if it produces anti-competitive effects. Whether this is desirable from society's point of view depends on the magnitude of the anticompetitive effects and the nature and scope of the self-regulation's public benefits, but it is clear that automatic priority for competition policy may on balance be detrimental for society. In that respect, it is relevant that the law stipulates that competition interests do not have absolute priority: the exemption possibility allows for the exemption of agreements from the cartel prohibition, provided that four conditions are met. Consequently, it depends on the interpretation of the substance of these conditions which types of self-regulation can be exempted. In this chapter, the substance of the first condition, regarding the nature of the effects that can be balanced against the anti-competitive effects, is discussed from descriptive and normative points of view. The case law of the EU courts allows both economic and non-economic benefits to be considered in the EU exemption possibility. The Commission, however, is not prepared to consider non-economic effects as decisive in the balancing act of the exemption possibility. Its stance with regard to indirect economic benefits seems dismissive. Banks' self-regulation that produces indirect economic benefits or non-economic effects may therefore be met with hostility from the Commission. With regard to the Dutch exemption possibility, the legislature and the ACM accept that direct and indirect economic benefits can be decisive in the balancing act of the Dutch exemption possibility. Non-economic effects cannot be included in the Dutch exemption possibility. 88

Which does not mean that these effects increase the economic welfare of the buyers concerned; i.e. the test of the second condition.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS In this chapter, it is proposed that the current status and application of the law should be changed. The law should allow the full application of the exemption possibility to self-regulation that yields ‘economic effects’ as defined in the normative view, while this rule should not be available for the other (public policy) effects of self-regulation. The rationale behind the proposed approach is that both economic effects and anti-competitive effects may be presented in economic terms; the consequences of these two types of effects can therefore be compared objectively. Furthermore, since the underlying goal of competition law can, by approximation, be considered to be the maximization of economic welfare, it is desirable that all economic effects can be decisive in the balancing act of the exemption possibility. Although in practice there may be difficulties, these problems are not fundamental obstacles to this conclusion. Of course this does not mean that competition effects must always take priority over non-economic public policy effects. The only consequence of the presented normative view is that if the government wants to achieve these other effects, it cannot pursue this via anti-competitive self-regulation, so that it must use other means – e.g. governmental regulation, if permissible. All in all, anti-competitive self-regulation is not automatically prohibited by competition law. Depending on the types of effects it produces, such selfregulation may be exempted. If the type of effect is eligible for inclusion in the balancing act of the exemption possibility, it must still be established that the other three conditions of this provision are met. It will depend on the substance of the self-regulation whether this is the case. But in principle it is possible that undertakings pursue goals endorsed by the government, even if this would result in a restriction of competition.

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II. PUBLIC ORDER AND CRIMINAL LAW

Private Powers for Public Order ON THE PROTECTION OF PERSONAL LIBERTIES WHEN PRIVATE ACTORS MAINTAIN PUBLIC ORDER AT PUBLIC EVENTS Mandy van Rooij*

Introduction Veronica Sunset Grooves, held in August 2009 in the Dutch municipality of Hoek van Holland, was supposed to be an amusing beach dance party, but the presence of a group of notorious hooligans caused negative tension even before it had started. 1 This led to severe riots and violence and the police had to intervene by firing multiple shots in self-defence, resulting in one fatal casualty.2 Nearly a year later, 21 people were killed by suffocation and more than 500 people were injured at the outdoor dance festival Love Parade in Duisberg, Germany, due to severe overcrowding and panic among visitors. 3 In the last decade, several disturbances of the order also took place during and after football matches, such as the assault by several hooligans at the Maasgebouw in the Dutch municipality of Rotterdam in September 2011, and the clash between supporters of FC Twente and FC Utrecht nearly three months later in the municipality of Utrecht.4 All these incidents raise questions on the role and responsibility of the organizers of the particular event.5 Maintaining public order and dealing with criminal behaviour may traditionally be a public task, but private actors who are organizing events which are accessible by the public also have a significant

*

A.E. (Mandy) van Rooij is a PhD Candidate at the department of Constitutional and Administrative Law at the Faculty of Law, VU University Amsterdam (contact: [email protected]). She would like to thank L.C. Groen, A.R. Neerhof, A.E. Schilder and C.E.C. Jansen for their valuable comments on previous drafts of this paper. 1 E.R. Muller et al., Strandrellen in Hoek van Holland, COT/Boom Juridische uitgevers, The Hague 2010, pp. 11, 20-22. 2 Ibid., pp. 104-114. 3 D. Helbing & P. Mukerji, ‘Crowd Disasters as Systematic Failures: Analysis of the Love Parade Disaster’, EPJ Data Science, Vol. 1, No. 7, 2012. 4 Resp. E. van der Torre et al., Relminuten bij het Maasgebouw. Een onderzoek naar aanleiding van de ongeregeldheden bij het Maasgebouw op 17 september 2011, Auditteam Voetbal en Veiligheid, 2012; S. Barlage et al., Tussen ratio en intuïtie. Een onderzoek naar aanleiding van de ongeregeldheden tijdens en na de wedstrijd FC Utrecht – FC Twente op 4 december 2011, Auditteam Voetbal en Veiligheid, 2012. 5 E.R. Muller et al., Ordeverstoringen en groepsgeweld bij evenementen en grootschalige gebeurtenissen, Boom Lemma uitgevers, The Hague, 2011.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS responsibility to take measures in order to avoid escalation and prevent disturbance of the order.6 Private actors who are hosting a public event can use private law instruments, such as contracts, to regulate the order at their events. It is customary to regulate access to the event and the behaviour of visitors thereat in general terms and conditions applicable in the contractual relationship between the organizer and visitor. General terms and conditions can also entail sanctions to ensure compliance. Sometimes these regulations and sanctions go far beyond the possibilities of public law instruments. For example, event organizers prescribe constant camera surveillance or a standard body search at the entrance, whilst the government needs specific legitimate reasons to do so. When visitors do not act in conformity with the terms of the contract, they can be removed from the event and banned from future attendance. This shows how private actors affect personal liberties of citizens, such as the right to privacy as well as free movement in the public domain. This chapter concerns the legitimacy of private law instruments when used by private actors to maintain public order. The dimensions of legitimacy focused on in this chapter are in regard to the protection of personal liberties and fundamental rights, and the democratic involvement and participation of those bound by such instruments. Furthermore, solely non-governmental – private – actors organizing public events are addressed, when they use ‘ordinary’ contracts, assembled through offer and acceptance by the visitors. The first question is whether ideas on legitimization of power and protection against abuse of power, which have been developed in legal philosophy, are also relevant for a normative framework applicable to private actors contributing to public order. The second question is to what extent these ideas can be used in a specific case, when Dutch contract law is applicable. First, I will assess in Section 1 two case studies in which private actors regulate and sanction disorderly behaviour exhibited during events accessible to the public by using contracts, namely football events and dance events. A close evaluation of these cases results in a determination of some specific characteristics of the practice in which private actors contribute to public order by using contracts. Then in Section 2, I will discuss several legal theories on the tension of power, public order, and personal liberties. Thereafter, in Section 3, I will discuss to what extent consideration is given to the general ideas following 6

See L. Johnston & C. Shearing, Governing Security: Explorations in Policing and Justice, Routledge, London, 2003.

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PRIVATE POWERS FOR PUBLIC ORDER from these theories in Dutch contract law, taking into account the abovementioned specific features of private actors contributing to public order. This leads to concluding remarks in Section 4.

1. Case Studies on Private Actors Contributing to Public Order 1.1. Introduction of the Cases The first question of this chapter is how private actors regulate and sanction certain types of disorderly behaviour of visitors of large public events. This question will be explored with two case studies. The aim of Section 1 is to determine specific characteristics that may be reasons to adopt a different approach of the protection of personal liberties in these private law relationships, compared to commercial transactions between two equal parties in general. The first case concerns football matches in the Dutch Premier League. Although different football clubs are hosting these matches throughout the season, the Royal Dutch Football Association (hereafter KNVB7) is an important actor in determining and executing the behavioural rules for visitors during football matches. I will discuss both the position of the individual football club and the KNVB. Since the general terms and conditions of the KNVB are applicable on all entrance tickets to football matches in the Premier League and also lower divisions of football, this case provides a general idea on how private law instruments are being used to regulate and maintain order during football matches. The second case concerns the organization of dance events by ID&T Company. This commercial company organizes eight large dance events in the Netherlands every year. 8 These dance events are widely popular, for example the 2014 edition of the event Sensation hosted 40.000 visitors and was sold out within a few hours.9 ID&T is not the only company organizing large indoor and outdoor events and other event organizers may use different terms and conditions. Therefore, this case study is meant to be illustrative of how private law instruments are being used to regulate and maintain order during dance events.

7

In Dutch: Koninklijke Nederlandse Voetbal Bond, commonly abbreviated as KNVB. This company also organizes events in other European countries, the United States of America and Chili, but I focus in this paper on the regulations and sanctions at their Dutch events. More information on ID&T Company is available at: . 9 ‘Sensation Amsterdam 2014 binnen een dag uitverkocht’, NU, 19 March 2014. See: . 8

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS In both cases I examine the scope and content of the contractual terms as well as case law on the application of these terms. These case studies are narrowed down to an examination of the rules and sanctions that are regulated in the contract and applicable general terms and conditions.10 1.2. Football Events: Royal Dutch Football Association (KNVB) At football matches nuisance and antisocial behaviour are not the exception and there is a real risk of escalation into severe violence. The recent course of events at the 2014 Dutch Cup Final, during which supporters threw fireworks on the football field and caused severe damage to the stadium, show disturbances at football events are a pressing problem of the present day. 11 As mentioned before, besides the individual football clubs, the KNVB is an important actor in football competitions. The association is involved in the organization of approximately 33.000 matches in different leagues.12 The general mission of the KNVB is to oversee the quality of football. The association believes that football as a sport contributes to a social and healthy society. However, the association also acknowledges that it has the task to create and maintain a safe and respectful football climate. Even though the mission statement of the KNVB doesn’t explicitly mention controlling public order as a task, providing clear rules and sanctions on nuisance and anti-social behaviour falls within the scope of the mission to create a safe football climate, for players as well as spectators. A football match can only be attended by visitors who are in possession of an entrance ticket. It is possible to purchase a ticket for one match, or a club card that grants access to all home matches of one football club. In both cases the visitor enters into a contractual relationship with the specific football club. The football clubs have declared the general terms and conditions of the KNVB, referred to as KNVB Standard Terms 2013/14, applicable on the sale of all tickets and club cards.13 In principle the visitors do not have a contractual relationship with the KNVB, but the football clubs have authorized the KNVB to enforce the sanctions on their behalf, so indirectly the KNVB is involved in the execution of the contractual terms, including the general terms. 14 However, 10

The factual practice on how these regulations and sanctions are executed by the private actors and their security personnel is interesting, but falls outside of the scope of this paper. For more on this, see T. Jones & T. Newburn, Private Security and Public Policing, Oxford University Press, Oxford, 1998. 11 ‘Vuurwerkincident Ajax-PEC Zwolle; een reconstuctie’, NOS, 21 April 2014. See: . 12 See: . 13 In Dutch: KNVB Standaardvoorwaarden 2013/’14, available at: . 14 Article 10.5 KNVB Standard Terms 2013/’14. A.J. Wierenga & J.G. Brouwer, ‘Bestrijding voetbalvandalisme via het privaatrecht’, in J.G. Brouwer & A.E. Schilder (Eds.), Van een andere orde. Over private ordehandhaving, Boom Juridische uitgevers, The Hague, 2014, pp. 98-99.

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PRIVATE POWERS FOR PUBLIC ORDER concerning the random public outside of the stadium – who did not purchase a ticket and who are not on the premises of the football club – the club and the KNVB lack power to impose restrictions on the basis of the Standard Terms.15 The Standard Terms are published on the website of the KNVB. They contain a mix of specific and broadly described behavioural rules for visitors. Article 8, for example, entails specific rules in the form of a detailed list of prohibited objects and behaviour in order to protect the health and safety of the public and public order. It is for example prohibited to bring glass, cans and poles into the stadium as well as ‘banners and/or other objects on which, in the opinion of […] the security personnel […] are discriminatory and/or provocative texts, images or shapes are depicted’.16 This list is very specific, although it is not a closed list. Furthermore, Article 8 grants the football club and security personnel competencies with a wide discretion to act: ‘It is prohibited in the stadium to […] have in possession resources which, in the opinion of the […] security personnel […] cause unnecessary nuisance and/or inconvenience to others or may give rise to and/or may cause harm to any other person or property.’17

Also: ‘It is prohibited to behave in a way that others may experience as provocative, threatening or offensive’.18 The open formulation of Article 8 indicates that the KNVB, the football club and its security personnel have discretionary powers.19 The general terms also prescribe that security personnel are entitled to perform a body search in order to check if any prohibited items are in the visitor’s possession if there is suspicion of a criminal act or if the visitor grants permission to do so.20 However, if the permission is not granted, the security personnel may refuse entrance and remove the visitor from the premises. Other sanctions can be found in article 10, such as a national stadium ban and fines up to EUR 450 per incident. 21 The KNVB is entitled to impose these sanctions if ‘according to report of a football club or the public prosecutor inside and/or outside the stadium as part of an event’ a person violated the terms, 15

Hof The Hague 8 September 2006, ECLI:NL:GHSGR:2006:AY6000, Nos. 14-16. Also see Rb. Maastricht 4 September 2006, ECLI:NL:RBMAA:2006:AY7409, No. 3.5. Article 8.1 KNVB Standard Terms 2013/’14. 17 Article 8.4 KNVB Standard Terms 2013/’14. 18 Article 8.5 KNVB Standard Terms 2013/’14. 19 See Rb. Leeuwarden 15 May 2009, ECLI:NL:RBLEE:2009:BI4091, No. 4.4. 20 Article 8.7 KNVB Standard Terms 2013/’14. 21 See further Wierenga & Brouwer, supra n. 14, pp. 85-90. 16

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS committed a criminal offence, is suspected of football-related misconduct, or behaved undermining the prestige or impairing the importance of football. 22 Since it is unclear beforehand what is considered to be ‘behaviour undermining the prestige of importance of football’ Article 10 also indicates a wide discretion for the football clubs and the KNVB. However, for the execution of these open formulated terms, the KNVB has adopted the Guidelines Term Stadium Ban 2013/14 in which the scope of the above-mentioned open terms are further specified.23 According to these guidelines, the term of the stadium ban depends on the severity of the misconduct and varies from three months for not being able to show identification papers in the stadium to twenty years for assault that leads to death. The KNVB and individual clubs do however deviate from these guidelines; in 2011 football club Ajax sanctioned a supporter for entering the football field and attacking a player of the opposing team by imposing a stadium ban for thirty years.24 The KNVB explicitly states in Article 10 that these sanctions shall all be imposed without judicial intervention. For the execution of the stadium bans the KNVB has created a self-binding Behaviour Code Stadium Bans, 25 in which Article 15 grants a person the right to complain within fourteen days at the Commission Stadium Bans if he doesn’t agree with the sanction. 26 This commission, however, cannot be considered to be an independent review, in comparison with judicial review, because its members are appointed by the KNVB itself. Aside from this complaints procedure, it remains possible for the visitors affected to seek remedies via a civil procedure.27 1.3. Dance-events: ID&T Company An orderly situation during dance events is also not a given, considering severe crowding and the use of mood altering substances by the public. ID&T is a commercial company organizing electronic music events and experiences.28 The mission of ID&T is in their own words is: to create dance events that bring people together and have fun. Controlling public order may not be their core business, but during the course of an event the security is highly professional. Article 10.2 KNVB Standard Terms 2013/’14. In Dutch: Richtlijn termijn stadionverboden 2013/’14, available at: . 24 ‘30 jaar Arena-verbod voor hooligan’, NOS, 24 December 2011, see: . At the time the ban was issued the criminal trial was still pending, resulting in four months imprisonment. 25 In Dutch: Gedragscode Stadionverboden, available at: . 26 Article 14 Behaviour Code Stadium Bans. Wierenga & Brouwer, supra n. 14, pp. 114-116. 27 Rb. Maastricht 23 July 2009, ECLI:NL:RBMAA:2009:BJ3510, No. 4.1. 28 See: . 22 23

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PRIVATE POWERS FOR PUBLIC ORDER ID&T also primarily uses general terms and conditions to impose rules and sanctions. Entrance to their events can only be granted if an entrance ticket is purchased. In the process of purchase, reference is made to the applicability of general terms and conditions, which are also published on the website of the specific event. The general terms of ID&T Company also contain a mix of specific and broadly prescribed prohibited objects and behaviour. In Article 16 the company reserves the right to search the clothes of visitors to the event prior to entry and during the event. The visitor who denies this can be refused access to the event without refund of the admission fee or can be removed immediately. The list of prohibited items in Article 17 is also specific, but not exhaustive: glass, plastic bottles, drinks, food, drugs, cans, fireworks, animals, weapons and/or dangerous objects are prohibited. Furthermore, confiscated goods are not returned and will be destroyed. There is not a specific list of behavioural rules; Article 22 states that the visitor is: ‘bound to comply with all rules, house rules and/or amendments and instructions from the ID&T Company [...], the operators of the site where the event is held, the security personnel [...] and other authorized persons’.

Such rules are said to be expressed at the premises or location of the specific event and if possible beforehand on the website of the specific event. This means that at the time of the purchase these rules may not yet have been set. In case of violation of these terms and the rules expressed at the event itself, the security personnel has the right to immediately remove the visitor. 29 Also in general, Article 18 states that ID&T company is ‘entitled to refuse or remove certain persons, if in its opinion it is necessary for maintaining public order and security during the event [...]’. This can be considered as a wide discretion as well. Even though this is not prescribed in their general terms, ID&T Company also bans specific people due to disorderly behaviour. For example in 2012 ID&T banned the boxing professional Badr Hari from all future ID&T events for life, because he caused severe physical injuries to another visitor.30

29

Articles 17.2 and 22.2 General Terms and Conditions Applicable between ID&T Companies and Its Visitors. 30 ‘ID&T: levenslang toegangsverbod voor Badr Hari’, RTL News, 7 December 2012. See: . At the time the ban was issued, criminal trial was still pending, resulting in 18 months imprisonment.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS If a visitor doesn’t agree with the execution of the contractual terms or considers it to be wrongful, he is entitled to seek remedies via a civil procedure. There is no case law available concerning the practice of the ID&T Company. Most cases on security measures during comparable public events concern liability for damages suffered by visitors at the site.31 The general outcome of these cases is that event organisations have a duty of care for the safety at their event, but they are not liable if they have taken sufficient precautionary measures. 1.4. Three Specific Characteristics Traditionally contractual relationships can be characterized as horizontal, based on autonomy of both parties, concerning one or more obligations that lead to tangible advantage.32 In my observation, the foregoing cases show three specific characteristics. Executing the Contractual Terms Serves the Order in the Public Domain The regulations in the general terms and conditions concern behaviour exhibited at areas that are accessible to the public and therefore contribute to order in the public domain. ‘Accessible to the public’ means that admission to the area is available to an undetermined group of people, who may have access as long as they behave in conformity with the purpose of the area.33 The purpose of the before-mentioned public events is to provide entertainment. This serves a social need and private actors are willing to fulfil this need because of commercial reasons. These areas accessible to the public can be distinguished from ‘general public places’, such as the public streets, public waters and public parks, because access to these places is not limited for a certain purpose.34 As to areas accessible to the public, the managing actor – which may very well be a private actor – plays an important role in determining the extent of access and the purpose of use.35 Private actors can choose to make an event available to the public, although in most cases they will need a certain event license to do so, granted by the municipality.36 When an event is in fact open to the public, according to Dutch 31

E.g., HR 23 February 2007, ECLI:NL:HR:2007:AZ6219, NJ 2008, 492; Hof Amsterdam 25 October 2007, ECLI:NL:GHAMS:2007:BB6504, GJ 2007/167; Rb. Middelburg 19 January 2011, ECLI:NL:RBMID:2011:BP3939; Rb. Utrecht 7 March 2007, ECLI:NL:RBUTR:2007:BA0230. 32 F.W. Grosheide, Karakteristiek van het privaatrecht, Ars Aequi Libri, Nijmegen, 2001, pp. 10-11; P.H.M. Gerver, H. Sorgdrager & R.H. Stutterheim (Eds.), Het systeem van het Nederlandse privaatrecht (founded by A. Pitlo), Gouda Quint, Arnhem, 1995, no. 21. 33 Parliamentary Papers II, 2000/01, 27 732, No. 3. 34 H.Ph.J.A.M. Hennekens, Openbare-orderecht, Kluwer, Deventer 2007, Para. 1.3. 35 HR 18 May 2004, ECLI:NL:PHR:2004:AO2599, NJ 2004, 527, HR 12 October 2004, ECLI:NL:HR: 2004:AP4260, NJ 2004, 662 (Zweetvoetenman). 36 Regulated at the level of the municipality in the General Local Ordinance. E.g., Rb. Amsterdam 29 May 2008, ECLI:NL:RBAMS:2008:BD2795.

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PRIVATE POWERS FOR PUBLIC ORDER law it is the task of the mayor of the municipality where this takes place, to monitor the affairs at the event. 37 He is entitled to give orders to secure the safety and health of the public. However, the competence of the mayor doesn’t relieve the event organizer of his responsibilities to maintain order at his event. It is generally an obligation in the event license for the organizer to control the order at their event and ensure the safety and health of the public.38 Accordingly, even if security and control of public order is not the core business for the event organizer, it becomes an obligation due to the event license. Visitors can hold the organizer liable for damages caused by a disorderly affair during the event.39 Hence, the event organizer has a responsibility to effectively contribute to public order in order to prevent damages for the rest of the public. The Contract Affects Personal Liberties and Accessibility of Social Resources The foregoing leads to the idea that the public visiting football matches and dance festivals has a legitimate interest in an orderly and safe environment during the event. On the other hand, the public also has a legitimate interest in the accessibility of public goods and services, since these fulfil a certain social need.40 In my view, football and dance festivals contribute to the wellbeing and the quality of life of people. Both the KNVB and ID&T company also stress the importance of their events in their mission statements: football contributes to a social and healthy society and dance events bring people together to have fun. Von Hirsch and Shearing call means, like such public events, which contribute to the quality of life of citizens, ‘social resources’.41 Public events are part of the social life and contribute to the self-fulfilment of citizens outside the private domain of their homes.42 One can argue that if certain personal liberties are compromised in order to gain access, this has a negative effect on the accessibility. The aforementioned regulations impose restrictions on the accessibility of the public events, as it asks visitors from the outset to abandon aspects of their personal liberties by accepting the general terms and conditions, a necessity for gaining the right to access. A search of clothes and camera surveillance affect the privacy of

37

Article 174 Municipality Act. ABRvS 7 May 2004, AB 2004, 254 (Volksfeesten Albergen). 39 See case law supra n. 31. 40 Scientific Council for Governmental Policies (in Dutch: Wetenschappelijke Raad voor het Regeringsbeleid), Borgen van publiek belang (Reeks rapporten aan de regering nr. 56), Sdu Uitgevers, The Hague, 2000, pp. 19-20. 41 A. von Hirsch & C. Shearing, ‘Exclusion from Public Space’, in A. von Hirsch, D. Garland & A. Wakefield, Ethical and Social Perspectives in Situational Crime Prevention, Hart Publishing, Oxford 2002, pp. 83-84. 42 Ibid., 2002, pp. 83-85. 38

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS citizens. 43 If thereafter sanctions are indeed being imposed, a person is then effectively removed or banned in the future, affecting his freedom of movement. 44 Also, if confiscated goods are destroyed, this affects property rights.45 Therefore, visitors have to endure limitations of these rights in order to attend football matches and dance events. If personal liberties have to be partly compromised in order to gain access, the accessibility of social resources is to some extent restricted. On the other side of this argument, the restrictions are supposed to contribute to personal safety during the event and this can also be considered a fundamental interest of the visitor. This shows the ambiguity of the security measures enforced on visitors. Nevertheless, security measures imposed by private organizers of large public events affect personal liberties of potential visitors. Visitors Have Limited Power to Alter the Terms or Choose Alternative Suppliers In the foregoing, it was observed that the object of the contract concerns the accessibility to social resources, whilst in return personal liberties are possibly compromised. Nevertheless, the contract cannot be concluded without consent of both parties, so the visitors do have a choice in avoiding the negative consequences simply by rejecting the terms. In the case of football matches and dance festivals it is not possible – or not successful anyway – to propose modification of the terms of the contract in order to avoid breaches of personal liberties. The contract on entrance of public events can be characterized as a ‘take it or leave it contract’, also referred to as adhesion contracts or standardized contracts.46 Such contracts are, in principle, not impermissible at all; it is inherent to the nature of commercial transactions. However in contracts concerning football matches, an additional characteristic may be observed: this particular social resource is not available at an alternative supplier. The KNVB has a unique monopolistic position, since their general terms and conditions are applicable on all entrance tickets in the Premier League, as well as lower leagues. As said before, all football clubs have authorized the KNVB to act on their behalf, so even without a direct contractual relationship, the KNVB is entitled to impose sanctions. In other words: whoever 43

See Article 8 European Convention on Human Rights (ECHR), horizontal effect is acknowledged in HR 9 January 1987, NJ 1987, 928 (Edamse bijstandvrouw). See further on personal data collection by the KNVB, Wierenga & Brouwer, supra n. 14, pp. 100-110. 44 See Article 2 Fourth Protocol of the ECHR. Even though horizontal effect of this article is not acknowledged, nevertheless the general idea of the liberty of movement can be seen as a legitimate interest of citizens, also in horizontal relations. See further A.E. van Rooij, ‘Private ordehandhaving op voor het publiek toegankelijke plaatsen’, in J.G. Brouwer & A.E. Schilder (Eds.), Van een andere orde. Over private ordehandhaving, Boom Juridische uitgevers, The Hague, 2014, pp. 49-79. 45 Acknowledged as a fundamental right in Article 1 First Protocol of the ECHR. 46 See N.S. Wilson, ‘Freedom of Contract and Adhesion Contracts’, International and Comparative Law Quarterly, Vol. 14, 1965, pp. 172-193.

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PRIVATE POWERS FOR PUBLIC ORDER wants to be present a professional football match, has to deal with the terms the KNVB proposes. The market of dance events on the other hand is more diffuse. Although ID&T Company is considered to be a leading actor in the dance music industry, there are many alternative market players organizing similar events. One could argue that if the general terms of one player are too stringent, the consumer can choose to enjoy himself elsewhere.

2. Theories on Power, Public Order and Personal Liberties 2.1. Ideas Developed in Legal Philosophy In the previous section, certain characteristics of private parties contributing to public order were determined. These characteristics show the tension between power, public order as a public interest, and personal liberties as private interests. This can hardly be characterized as a new development, as such tension is basically at the core of several philosophical theories developed during the Enlightenment. John Locke and Jean-Jacques Rousseau, among others, have developed theories in which the legitimization of governmental power and the protection against abuse of power is explained by constructing a social contract.47 The social contract is generally based on the idea that it is in the best interest of people to accept certain restrictions on their personal freedom, for the purpose of protection of the remaining personal freedom in an orderly society.48 The question is to what extent these classical theories are also relevant for the present day society in which private parties are added to the equation, since they also contribute to the public interest of public order and security. Even though Locke and Rousseau have different views on the form of this social contract and the status of the parties herein, these theories have in common that they presume society needs to appoint a certain body to enforce laws in order to prevent disorder and thereby protect the remaining personal freedom of the people. However, because of the reciprocity in the social contract, these powers cannot be unlimited. Certain safeguards have to be taken into account to prevent abuse. 49 Locke acknowledges some ground principles for the freemen: the fundamental right to life, physical integrity and freedom are personal and not 47

J. Locke , Second Treatise of Government, originally published anonymously in 1689, available at: ; J.J. Rousseau, Du contrat social ou droit politiques, originally published in 1762, recent edition: J.J. Rousseau (Ed. & Transl. by V. Gourevitch), The Social Contract and Other Later Political Writings, Cambridge University Press, Cambridge, 1997. 48 D. Boucher & P. Kelly, ‘The Social Contract and Its Critics: An Overview’, in D. Boucher & P. Kelly (Eds.), The Social Contract from Hobbes to Rawls, Routledge, London, 2004, pp. 1-34. 49 R. Nehmelman & C.W. Noorlander, Horizontale werking van grondrechten, Kluwer, Deventer, 2013, p. 16.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS transferable and authority is granted under the rule of law and separation of powers.50 He considers this to be of natural law; even before or without a civil government to enforce certain laws these principles should be respected. It is important to realize that in the vision of Locke these personal liberties are of horizontal effect and citizens can invoke them against one another.51 Rousseau focuses more on the principle of democracy as he finds all actions of the governmental body should be determined by participation of the people.52 The classical contract theories aim to explain the legitimacy of authority of a government over individual citizens to which they did not actually give their consent. This focus can be explained by the spirit of the age; Sixteenth Century Europe entered an era of classic absolutism and the contract theories were a reaction to the excessive powers of absolute monarchs.53 However, in contemporary contract theories, such as that developed by John Rawls, it is also acknowledged that private organizers contributing to public interests should be taken into account. 54 Rawls argues that the whole network of actors should strive for justice and should take certain fundamental rights into account when distributing social goods. His ideas however are rejected by Robert Nozick.55 Nozick’s view on natural law is very restricted, he merely acknowledges property rights, the right to self-determination and the right to self-defence.56 In other words; as long as people have self-determination and therefore have the ability to refuse certain disadvantageous terms, they cannot claim any extra protection of personal liberties. Even though the foregoing social contract theories are primarily focused at legitimacy of unilateral governmental actions, they are also relevant in other arrangements – in which private actors are active players – if these arrangements show certain similarities to governmental control. Unilateralism, in which one actor can subject another to restrictions even against one’s will, is one similarity. I will refer to this as ‘power’ in the next section. A second similarity is the contribution to the public interest, such as order in the public domain, which is discussed in Section 2.4.

50

In Second Treatise: Chapter IX of the ends of political society and government, Secs. 123-142. Nehmelman, supra n. 49, p. 17. 52 In The Social Contract: Chapter II.5 (The limitations of the sovereign power). 53 R.C. van Caenegem, An Historical Introduction to Western Constitutional Law, Cambridge University Press, Cambridge, 2000, pp. 91-107. 54 J. Rawls, A Theory of Justice, Belknap Press of Harvard University Press, Cambridge, 1971 (revised edition 1999). 55 R. Nozick, Anarchy, State, and Utopia, Basic Books, New York, 1974, pp. 183-231. 56 B.E.P. Driessen, Van utopie naar anarchie. Een kritische studie van de politieke theorie van Robert Nozick, Voorschoten, 1990, p. 66. 51

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PRIVATE POWERS FOR PUBLIC ORDER 2.2. ‘Power’ as Reason for Extensive Protection of Personal Liberties The ability of governments to unilaterally subject their citizens to restrictions is an important element in social contract theory. The two case studies have shown that event organizers constitute rules and sanctions in their general terms and visitors have very limited abilities to change these rules and sanctions if they want to visit this particular event. If one of the parties is restricted in achieving his goals in the contractual negotiation, does this mean the event organizer has power similar to governmental power? Formally the relationship of private parties can be distinguished from the relationship of governments and their citizens, because private parties operate in a horizontal relationship with one another based on consent, whilst the government can operate unilaterally.57 One can question whether more modes of power can be found in society, apart from governmental power. Max Weber developed a substantive approach, in which empirical research is necessary for the determination of power. If a certain actor is able to realize his own will even against the will of others, according to Weber, this is in an indication of power.58 If an actor wants to exercise power on a more stable basis, he also needs domination or authority. 59 It depends on the reality of the individual and his cultural universe whether a certain actor has power and domination, which means empirical research on specific social actions is needed to establish what is a dominant actor.60 According to Weber’s theory it is possible to have more than one dominant actor in a society, however, an entity that in the end successfully claims a monopoly on the legitimate use of violence is a state.61 Weber’s theory on domination provides a possible tool to analyse the developments of legality and power in today’s society so the relevant questions on legitimacy, such as the applicability of certain safeguards, are exposed.62 A critical element in discussing power is to what extent the ‘powers’ of the private actor are based on consent by the subjects. A subsequent step is to determine to what extent an actor is able to fulfil his own interests, whilst possibly to the disadvantage of other parties. This cannot be seen as a dichotomy in which an 57

Grosheide, supra n. 32, pp. 10-11. M. Weber, Wirtschaft und Gesellschaft, originally published in 1922. Recent edition: G. Roth & C. Wittich (Eds.), Max Weber on Economy and Society, University of California Press, Berkeley, 1978; J. Kocken, ‘Questioning Legitimacy’, in L. Huppes-Cluysenaer, R. Knegt & O.W. Lembcke (Eds.), Legality, Legitimacy and Modernity: Reconstructing Max Weber’s Concept of Domination (Recht der werkelijkheid, Vol. 29, No. 3), Reed Business, The Hague, 2008, pp. 8-9. 59 Kocken, ibid., p. 9. 60 K. Allen, Max Weber. A Critical Introduction, Pluto Press, London, 2004, p. 175. 61 M. Weber, Politics as Vocation (Politik als Beruf), originally published in 1919. 62 N.F. van Manen, ‘Legitimacy and Types of Legality’, in L. Huppes-Cluysenaer, R. Knegt & O.W. Lembcke (Eds.), Legality, Legitimacy and Modernity: Reconsidering Max Weber’s Concept of Domination, The Hague, 2008, pp. 85-86. 58

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS actor either does or does not have power, but it is rather a sliding scale. In order to determine the actual ‘degree’ of power in a specific case, empirical research on the specific circumstances of each case is necessary. In the case of public events, the event organizers are able to realize their will to enforce regulations and sanctions against the visitors, even though this harms the personal liberties of the visitors. This power is based on the contract, to which the visitors consented. Weber calls this ‘legal authority’.63 But why do these visitors accept terms that may possibly lead to severe breaches of personal liberties? A probable element is reciprocity; the individual who accepts such limitations thereby gains a right, in this case the right to access a specific event.64 Establishing certain limiting terms is justified by freedom of contract and if a person does not agree he is free to decline and enjoy the services elsewhere. However, if the individual is hindered to enjoy comparable rights elsewhere, for example because in the case of the KNVB, the individual will be inclined to accept the terms anyway. This, it is argued here, is an indication of power. 2.3. ‘Public Interest’ as Reason for Extensive Protection Personal Liberties? In the previous section, it was discussed how ‘power’ can be defined and determined in a specific case. The two case studies on event organizers also showed another specific characteristic; the organizers contribute to order at public areas and thereby serve the fundamental public interest of public order. In this section, I will examine whether this is a useful criterion for assessing the desired protection against possible abuse of power in a specific case. According to Clapham it is impossible to truly separate a private sphere from a public sphere. In order to prevent artificial deficiencies, he argues that international treaties in which human rights are protected, such as the ECHR, should also have effect for non-state actors. 65 He uses the development of private prisons, private health care facilities, and private policing powers to show how artificial the public-private divide really is. 66 To determine the M. Weber, ‘The Types of Legitimate Domination (1914)’, in C. Calhoun, Classical Sociological Theory, Blackwell Publishing, Malden, 2007, pp. 256-257. 64 W.G.M. Salet, Om recht en staat. Een sociologische verkenning van sociale, politieke en rechtsbetrekkingen (Series: Voorstudies en achtergronden Wetenschappelijke Raad voor het Regeringsbeleid, V83, 1994), Sdu Uitgevers, The Hague, 1994, pp. 35-45. 65 A. Clapham, Human Rights in the Private Sphere, Clarendon Press, Oxford, 2002, pp. 124-133. See Nehmelman & Noorlander, supra n. 49, pp. 61-66 for an overview of Clapham’s theory. 66 Nehmelman & Noorlander, supra n. 49, pp. 64-65. Clapham cites P. Cane, ‘Public and Private Law: A Study of the Analysis and Use of a Legal Concept’, in J. Eekelaar & J. Bell (Eds.), Oxford Essays in Jurisprudence: Third Series, Clarendon Press, Oxford, 1987, pp. 57-61. See further J.M. AmayaCastro, Human Rights and the Critiques of the Public-Private Distinction, VU University, Amsterdam, 2010. 63

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PRIVATE POWERS FOR PUBLIC ORDER applicability of obligations derived from such international treaties the nature of the activity should be taken into account; the identity of the actor is no longer relevant. This is in line with Weber’s empirical approach. Even though the ideas of Clapham may be appealing, it is difficult to determine to what extent an activity has a public nature in order to justify applicability of fundamental rights. Clapham focuses primarily on private actors involved in armed international conflicts and in that context security can definitely be considered to have a public nature, even if private companies join forces.67 The particular cases I pointed out in this paper may concern mainly the leisure of people and not survival in areas of armed conflict, yet the open accessibility of large events and the severe security risks thereat are in my opinion reference points for adopting the idea that security measures during such events are to a certain extent of public nature. However, prevention of damages in itself has a private nature as well. Can one really determine whether the measures undertaken by the private organizers of events are truly aimed at protecting public order, or are these measures primarily aimed at preventing damages, whereby public order is a mere side effect? Both motives are legitimate. These questions make the determination of the nature of the action rather difficult. I do agree with Clapham that there is a grey area in which it is not clear what is public or private, or in which the division feels artificial. The formal nature of the actor itself is therefore not sufficient to determine the desired protection of personal liberties and more context is necessary. Jurgens and Van Ommeren also find the public-private distinction to be context-dependant.68 Aside from the difficulties in assessing the nature of activities, I find the nature of the activity in itself is not enough to determine whether a more stringent regime is justified. In private relations which can be characterized as horizontal and in which both parties enjoy freedom of contract, there is also no indication to assume the application of fundamental rights, even if the object of the contract concerns a good or service of public or social value.69 If the characterization as ‘private’ seems artificial often other underlying reasons lead to this conclusion, such as the absence of choice, a monopoly position, or governmental influence. In the end this leads back to ‘power’ as a distinctive feature.

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A. Hallo de Wolf, Reconciling Privatization with Human Rights, Intersentia, Antwerp, 2011, Chapter III. G.T.J.M. Jurgens & F.J. van Ommeren, ‘The Public-Private Divide in English and Dutch Law: A Multifunctional and Context-Dependant Divide’, The Cambridge Law Journal, Vol. 71, No. 1, 2012, pp. 172-199; G.T.J.M. Jurgens & F.J. van Ommeren, De opmars van het onderscheid tussen publiekrecht en privaatrecht in het Engelse recht, Boom Juridische uitgevers, The Hague, 2009, pp. 108-110. 69 B.J. de Vos, Horizontale werking van grondrechten. Een kritiek, Maklu, Apeldoorn, 2010. 68

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 3. Power and Personal Liberties in Dutch Contract Law 3.1. Freedom of Contract and Its Restrictions In the foregoing sections, ideas on power, public order and personal liberties were described. In this section, I will assess to what extent these ideas are incorporated in the Dutch contract law. Limitations concerning access to and behaviour at public events are based on freedom of contract of the parties. Freedom of contract comprises the principle that all private bodies have the freedom to determine with whom to conclude a contract, as well as the freedom to determine the content and the moment of concluding. 70 It also implies the freedom not to conclude a contract with a certain party. The ratio of freedom of contract is that the individual is able to develop his personal life in society and to look after his property interests, as he wishes.71 The principle of freedom of contract in itself is not codified in the Dutch Civil Code, but the Civil Code does prescribe certain limitations thereof. Freedom of contract is considered of great importance in private law matters, but this freedom is not unlimited. The rights and entitlements of others and of society impose restrictions on freedom of contract. 72 A relevant question is: when do the rights of one party outweigh the freedom of contract of another party, whilst in private law relationships both parties are deemed to be equal? In some situations, horizontality between parties was believed to be a structural fiction and this has led the legislator to arrange additional provisions in the Civil Code to protect weaker parties. For consumer relations such additional provisions are adopted concerning general terms and conditions.73 Since these – sometimes extensive – general terms are drafted by a professional supplier in accordance with his own interests, the consumer may be at a disadvantage.74 The two case studies showed that event organizers indeed use general terms and conditions to prescribe behavioural rules and sanctions. Article 6:233 of the Civil Code is at the heart of the regime on general terms and conditions in consumer relations and determines when general terms are voidable. A term is voidable when the term is unreasonably onerous having regard to the nature and content of the contract, the knowable interests of parties, and the

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J. Hijma et al., Rechtshandeling en Overeenkomst, Kluwer, Deventer, 2010, No. 14. Asser/Hartkamp & Sieburgh 6-III* 2010/58. 72 Asser/Hartkamp & Sieburgh 6-III* 2010/57. E.g. Article 3:40 Civil Code sets the limitations of the content of contracts, such as public order and morality. 73 Section 6.5.3 in the Dutch Civil Code. This is the implementation of EU Directive 93/13/EEG. 74 Definition of consumer: Article 7:5 Civil Code. 71

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PRIVATE POWERS FOR PUBLIC ORDER specific circumstances of the case.75 The case studies showed that the general terms and conditions used by the KNVB and ID&T Company contain mainly open norms for controlling order during public events. The use of open norms in contracts is in itself not uncommon and not unreasonable as such. Open formulated contractual terms contribute to the flexibility of contracts, since they are sufficient to serve a wide variety of circumstances and can be adapted to the specific circumstances of each case. 76 The interpretation of open contractual terms is not only based on the literal text, but also on the meaning parties could reasonably attach to it. 77 Accordingly, when regulations are enforced and sanctions are imposed, both on the basis of open formulated general terms and conditions, reasonableness also has to be taken into account. But how can it be determined what is reasonable? Reasonableness and fairness are of fundamental importance in contractual relations. According to Article 6:2 Civil Code: ‘The creditor and debtor must behave themselves towards each other in accordance with the standards of reasonableness and fairness.’ Reasonableness and fairness can be considered to be an open formulated behavioural norm for parties towards one another. 78 If civil proceedings are initiated, a judge will decide what was to be considered reasonable in that specific case. Article 3:12 Civil Code states that when determining what reasonableness and fairness demands in a specific case ‘one has to take into account the generally accepted legal principles, the fundamental conceptions of law in the Netherlands and the relevant social and personal interests which are involved in the given situation.’ From case law certain factors of influence can be derived, such as the behaviour of parties and their qualities, negotiating position and specific interests, including personal liberties.79 In the next section, I will examine these factors in the case of event organizers contributing to public order. 3.2. Different Factors Influencing Reasonableness and Fairness Firstly, the standards of reasonableness and fairness in a specific case are influenced by the behaviour of parties. Objectionable conduct, which is attributable to one of the parties, is generally of disadvantage to the culpable

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Article 6:233(a) Civil Code. Certain specific terms are determined to be unreasonable and therefore voidable in Article 6:236 Civil Code, this is referred to as a ‘black list’, or presumably unreasonable in Article 6:237 Civil Code, which is a ‘grey list’. 76 E.F.D. Engelhard, ‘Handhaven van en door het privaatrecht’, in E.F.D. Engelhard, Handhaving van en door het privaatrecht, Boom Juridische uitgevers, The Hague, 2009, p. 28. 77 HR 13 March 1981, NJ 1981, 635 (Ermes/Haviltex). 78 P.S. Bakker, Redelijkheid en billijkheid als gedragsnorm, Kluwer, Deventer, 2012, Chapter 1. 79 P.T.J. Wolters, Alle omstandigheden van het geval. Een onderzoek naar de omstandigheden die de werking van de redelijkheid en billijkheid beïnvloeden, Kluwer, Deventer, 2013. Wolters uses the term ‘factor’ rather than the more common ‘reference points’, see Para. 1.4.2.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS party.80 The Supreme Court for example determined that it was not reasonable for a tenant to invoke certain rights to his protection, after he had severely misbehaved towards his neighbours.81 When interpreting the meaning of open formulated contractual terms, the judge is likely to decline an interpretation that is likely to favour a party that has behaved culpably objectionable towards his counterparty. The degree of the culpability determines the extent of the disadvantage.82 On the other hand, if objectionable behaviour misses culpability, this may lead to a more beneficiary approach of reasonability for the acting party.83 This means that the behaviour of visitors, including the culpability of disorderly behaviour, influences the interpretation of content and effects of the open behavioural norms and sanctions. A second factor concerns the qualities of the contracting parties. The Dutch Supreme Court often states that ‘social position’ is relevant for determining the requirements of reasonableness and fairness.84 When assessing the social position, consideration is given to the professionalism of the parties; a natural person who in that particular case is not acting in the course of a profession or business is generally better protected than a professional party.85 This means for example that, in general, contractual terms are to be explained in favour of the nonprofessional party, like the visitors of public events organized by a professional agency or club. The specific regime on general terms and conditions in the Civil Code also aims to protect nonprofessional parties. The underlying idea is that professional parties have more knowledge and expertise than consumers and other natural persons. However, professionalism merely establishes a presumption on the appropriate protection, but the specific circumstances of the case concerning knowledge, expertise and negotiating position of both parties can refute such presumptions.86 Another relevant quality of the contracting parties is their ability to defend their own interests in negotiation; to what extent does a party actually have the power to alter the content and execution of the agreement to its own benefit?87 The case studies have shown that visitors are not able to change neither the core terms nor the general terms of the agreement at all. When one party has to 80

Wolters, ibid., pp. 111-114. HR 1 July 1983, NJ 1984, 149 (Herzfeld/Groen). Wolters, supra n. 79, p. 111. HR 19 May 1967, NJ 1967, 261 (Saladin/HBU); HR 20 February 1976, NJ 1976, 486 (Pseudo-vogelpest). 83 HR 22 January 1993, NJ 1993, 598 (Rupako/Karsten). 84 E.g. HR 19 May 1967, NJ 1967, 261 (Saladin/HBU). See further R.P.J.L. Tjittes, De hoedanigheid van contractspartijen, Kluwer, Deventer 1994. 85 Wolters, supra n. 79, pp. 143-144. 86 Wolters, supra n. 79, pp. 144-145. It is also relevant whether the weaker party has expert assistance or could have claimed this, Wolters, supra n. 79, Para. 4.4. 87 Wolters, supra n. 79, Para. 4.7. 81 82

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PRIVATE POWERS FOR PUBLIC ORDER depend on its counterparty this also influences the negotiation position of both parties. This occurs for example when one of the parties is a governmental actor, a monopolist, or a supplier of essential services.88 This has led some scholars to argue that monopolists have a greater responsibility to ensure that the content and outcome of the contract is fair.89 However, not all relations of dependence can be characterized as ‘power’ nor are they all problematic in the face of reasonableness and fairness. One relevant question is whether the counterparty is the only available supplier. In the case of the KNVB, there is not an alternative, since its general terms are applicable on all professional football matches. Furthermore, one could question whether not concluding this contract with these terms lead to disadvantages compared to concluding the contract.90 The outcome of the last question also depends on the interests which are served by concluding and executing the specific contract. The third and last factor of influence for the requirements of reasonableness and fairness that I will discuss concerns the foreseeable interests that are involved.91 The general rule is that greater interests lead to a stricter regime of reasonableness and fairness.92 However, the different kinds of interests can be rather incomparable; fundamental interests and equity interests of individuals as well as general interests of society as a whole.93 Protection of fundamental rights is of great weight when assessing reasonableness. Health, housing, liberty and security can be considered to be of fundamental importance to individuals. 94 Many of these interests are recognized as human rights in constitutional arrangements, also in Chapter 1 of the Dutch Constitution, and international treaties, such as the ECHR and its Protocols, although these documents are primarily focused on governmental control. Nonetheless, these norms do play a role in assessing the scope of reasonableness in a given case, since according to Article 3:12 Civil Code (as set out above) fundamental conceptions of law need to be taken into account.95 This is a form of indirect application of human rights

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Wolters, supra n. 79, pp. 192-193. Wolters, supra n. 79, pp. 192-193, citing J.C. van Oven, ‘De tequeri debes. (Naar aanleiding van H.R. 11.11.’60 N.J. 60.599)’, NJB 1961, pp. 5-6. 90 D.P. Ruitinga, Misbruik van economisch overwicht als grond voor het aantasten van overeenkomsten, Kluwer, Deventer, 1982, pp. 2-4. 91 Wolters, supra n. 79, Chapter 6. 92 Wolters, supra n. 79, p. 230. Presence or absence of disadvantage may be of influence as well. 93 Wolters, supra n. 79, pp. 236-239 and Para. 6.4. 94 According to Article VI-5:202 (3) Draft Common Frame of Reference (DCFR). 95 See Van Rooij, supra n. 44, on horizontal effect in the case of private parties maintaining public order. Also O.O. Cherednychenko, Fundamental Rights, Contract Law and the Protection of the Weaker Party, Sellier European Law Publishers, München, 2007. 89

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS in horizontal relations; not applying the human right as such, but putting weight upon the interest a person has in exercising this right.96 However, the case studies on public events show it is not always apparent how fundamental rights should be weighed against equity interests of the event organizer and the general interest of public order. Is the liberty of movement within the public domain for the purpose of gaining access to social resources of greater importance than the security of the public at these public places? And what is the value of the right to privacy if a systemized breach of this right does in fact prevent disorder and protects the health and security of the public? If one party claims an interest in a fundamental right this merely establishes a presumption of a result in favour of this party. Specific interests of the counterparty can refute this presumption. Another general rule implies that reasonability only favours the general interest in case of objective signs of severe breaches thereof.97 After all, party autonomy and freedom of contract are also considered to be of general interest. This shows that a thorough review of the specific circumstances of the case is necessary for the determination of what is reasonable.

4. Concluding Remarks Private actors increasingly contribute to public order and this raises questions on legitimacy and applicable norms. In the course of finding a suitable framework for assessing these fundamental questions, the first part of this chapter focused on the relevance of ideas in legal philosophy on power, public order and personal liberties. The second part of this chapter examined whether these ideas can be operationalized in specific cases, having regard to Dutch contract law. This chapter examined two cases in which private parties contribute to public order: the Dutch football association KNVB and ID&T, a commercial company organizing large dance events. Both parties use contractual terms to maintain public order. I observed three specific characteristics. First, event organizers are not only entitled to take such measures, but they also should do so since they are responsible for the order at their public events. Second, imposing regulations affects personal liberties of the visitors and therefore affects the accessibility of a social resource. Third, visitors have limited possibilities to alter the contractual terms in order to avoid breaches of their personal liberties. I have determined Wolters, supra n. 79, p. 96. See J.M. Smits, ‘Constitutionalisering van het vermogensrecht’, in Preadvies voor de Nederlandse Vereniging voor Rechtsvergelijking, Kluwer, Deventer, 2003. 97 Wolters, supra n. 79, pp. 249-259. 96

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PRIVATE POWERS FOR PUBLIC ORDER that the KNVB is a monopolistic actor in its field, and this definitely indicates power. ID&T, however popular among the public, does not hold a monopolistic position in the dance industry. It may be considered a leading company, but many similar suppliers are available in a competitive market. Then I discussed several ideas developed in social contract theories. The question is whether these ideas provide a relevant normative framework for private actors? First of all it is important to realize these theories focus on governments. A fictional social contract can serve as a justification of breaches of personal liberties by a governmental body. In return the government needs to respect certain personal liberties. Analogous application of this idea on private actors is only appropriate when actions of these private actors show relevant similarities to governmental actions. The possibility to unilaterally impose restrictions to others is one similarity. In the case studies, restrictions are based on consent, and freedom of contract is primarily the justification for breaches in personal liberties. However, if one actor is to a great degree able to realize his will against the will of others, this indicates power and suggests unilateral imposed restrictions after all. Another similarity is the contribution to the public interest. In my opinion though, the mere contribution to public interest is in itself not sufficient to justify the applicability of public law safeguards to the behaviour of private actors. If the public-private divide feels artificial, additional or underlying reasons can be perceived, for example the existence of an economic monopoly or governmental influence. Power seems to be the most important reason to adopt a more stringent protection of personal liberties compared to normal commercial transactions. This leads to the question whether the idea that power and protection of liberties are reciprocal, can be operationalized in the law applicable in a specific case, like in the cases studied in section 1. In Dutch contract law, these ideas can indeed influence the application of the general open norm prescribing that parties in a contractual relationship must act according to the demands of reasonableness and fairness to one another. Party autonomy and freedom of contract constitute a horizontal relationship, but reasonableness serves as a correctional mechanism when there appears to be a societal unacceptable outcome in a specific case. Case law also indicates the open norm of reasonableness and fairness provides reference points to a more stringent protection when a party, contributing to public order, is in a position of power. Reasonability generally favours a person,

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS such as a visitor of a public event, if his counterparty is a professional party, like the KNVB, especially if this party is holding a monopolistic position and is able to defend his own interests in negotiation, and especially if this contract results in breaches of personal liberties. On the other hand, if the weaker party behaves culpable objectionable, this will be to his disadvantage. In the end, examining the specific context of each specific case seems inevitable. Professionalism, knowledge, expertise, specific interests and behaviour of both parties are tools to determine the mutual relationship and necessary correction to establish a reasonable outcome. This context-dependant approach might lead to a certain degree of unpredictability, but this chapter attests that the flexibility of such an approach contributes to the desired protection of personal liberties in a grey area of the public-private divide.

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Euthanasia in England, France and the Netherlands A LAW AND GOVERNANCE PERSPECTIVE Adam McCann*

Introduction This chapter provides a law and governance perspective on euthanasia 1 in England, France and the Netherlands. It ascertains to what extent private actors contribute to the creation, application and enforcement of the relevant national laws, and thereby to the public interest in this sensitive area. Critical attention is paid to the differences that exist and how they matter from a broader governance and practice-oriented perspective. Given the subject matter of this book, some general theoretical remarks may be made on the concept of a ‘public interest’. This chapter is premised on the notion that in justifying any legal or political decision made in the ‘public interest’ the individual essentially serves as the priority.2 On the one hand, there exists a negative obligation upon the state to ensure the absence of outside interference with individual normative choices. A general example of this in casu is the right to determine the time and manner of one’s own death. On the other hand, there is a positive obligation upon the state to ensure basic individual well-being. This in turn may require limiting certain normative choices. Sticking with the above example, the degree of self-determination an individual may have in the time and manner of his/her death may be justifiably restricted in order to protect vulnerable individuals in that society. In its most simplified understanding, any measure adopted in ‘the public interest’ requires a just and suitable balance between freedoms and limitations that ultimately refers back to the individual.3

*

A. (Adam) McCann is a PhD Candidate at the Centre for Law & Governance and Research Fellow for Endowed Chair Law & Governance at the Rijksuniversiteit Groningen. Earlier versions of this chapter were presented during conferences at Georg-August-Universität-Göttingen, University of Exeter and Vrie Universiteit Amsterdam. The author would like to warmly thank Dr. Heleen Weyers and Prof. Aurelia Colombi Ciacchi for their invaluable feedback. 1 It is important to note from the outset and throughout this chapter, the use of the single term ‘euthanasia’ refers to both voluntary active euthanasia (‘VAE’) and assisted suicide (‘AS’) where the distinction between the two is not relevant. Note: the abbreviation ‘PAS’ is used when specifically referring to physician assisted suicide. 2 See D. Von der Pfordten, ‘Five Elements of Normative Ethics – A General Theory of Normative Individualism’, Ethical Theory and Moral Practice, Vol. 15, No. 4, 2012, pp. 449-471. 3 For a deep discussion on understanding justice as a demand of individual freedom (involving positive demands and non-interference demands) see the seminal work of A. Sen, ‘The Idea of Justice’, Penguin, London, 2009, Chapters 11-14.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS This chapter will focus on the weighing up and balancing (which is an ongoing process) of the competing freedoms and limitations surrounding euthanasia in three Western European jurisdictions, and the role (if any) of private actors in reaching this balance. The nations selected for analysis are not representative of Western Europe as a whole, but they do however provide sufficiently different political, cultural and legal traditions to be worthy of comparison. France and England represent civil and common-law jurisdictions respectively, both of which are entrenched in ecclesiastical traditions (albeit to different degrees) and formally prohibit voluntary active euthanasia (VAE), although only the latter formally prohibits assisted suicide (AS). Whilst the Netherlands with its unique history of secularization, represents a nation in which VAE and AS have been regulated and legalized under certain conditions. Section 1 and 2 outline, respectively, the theoretical underpinnings and the definitions used throughout the chapter. Section 3 offers a descriptive analysis by looking at the law on euthanasia ‘in the books’ in the three above-mentioned nations. Section 4 comparatively identifies such law ‘in action’ – focusing on empirical data and the application and enforcement of the law. Section 5 contains a critical comparative analysis of the law ‘in the books’ v the law ‘in action’. Section 6 identifies the actors and institutional architecture at play in the creation of the respective laws. This critical, and somewhat prescriptive, analysis is carried out in light of the theoretical underpinnings in Section 2 and findings in Section 5. Finally, brief conclusions will be made in Section 7.

1. A Law and Governance Perspective Both ‘law’ and ‘governance’ are contested concepts whose meaning and interrelationship cannot just be assumed or taken for granted. 4 Hence, working definitions must be made from the outset. A starting definition of ‘governance’ a contrario is rejected – instead the concept will be defined as what it is, albeit rather abstractly, instead of what it is not. This chapter amalgamates a combination of ‘governance’ definitions 5 in contemporary literature. Governance is most broadly understood as: decision

See N. Walker & G. de Búrca, ‘Reconceiving Law and New Governance’, EUI Working Paper Law, Vol. 10, 2007, p. 1. 5 For an overview of various definitions of ‘governance’ see D. Levi-Faur, ‘From Big Government to Big Governance?’, in D. Levi-Faur (Ed.), The Oxford Handbook of Governance, Oxford University Press, Oxford, 2012, pp. 3-18. 4

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS making to steer and co-ordinate activity 6 by formal or informal groups or institutions.7 Social groups, collective entities and human relationships are all species of governance.8 Command and control by public actors in the modern democratic state, namely by government, is only one form of governance. Herein, a ‘governance perspective’ examines not only the relevant actors and institutional architecture in decision-making, but also the nature of the instruments that thereby arise. ‘Law’ is conceptualized here in a functional sense – to balance interests and to regulate behaviour accordingly. It must be differentiated from ‘other social norms’ 9 as a specific instrument to balance interests and regulate behaviour. It contains certain distinct characteristics: namely, its processes and form are categorically binding and marked by a certain formality.10 Accordingly, the scope of application of the ‘governance perspective’ (given above) may be narrowed down to instruments that only possess the characteristics of ‘law’. The focus is on policy and decision-making (actors and institutional architecture) in the creation, application and enforcement of the law (categorically binding and formal instruments). Considering the recent working paper of Colombi Ciacchi and von der Pfordten,11 law and governance may be said to cover four highly abstract relations: the through-relation, the inrelation, the as relation and the against-relation.12 Such characterizations sup-

6

See J. Pierre & B.G. Peters, Governance, Politics and the State, Macmillan, Basingstoke, 2000; See also J. Kooiman, Governing as Governance, Sage, London, 2003. See J.N. Roseanu, ‘Governance in the 21st Century’, Global Governance, Vol. 1, 1995, pp. 13-43; See M. Zürn, S. Wältï, & H. Enderlein, ‘Introduction’ in M. Zürn, S. Wälti & H. Enderlein (Eds.), Handbook of Multi-Level Governance, Edward Elgar, Cheltenham, 2010, pp. 1-13; See T. Risse, ‘Governance in Areas of Limited Statehood’, in D. Levi-Faur (Ed.), The Oxford Handbook of Governance, Oxford University Press, Oxford, 2012, pp. 699-716. 8 See A. Colombi Ciacchi & D. von der Pfordten, ‘Exploring the Relationship between Law and Governance: A Proposal’, in A. Colombi Ciacchi (Ed.), Governance Meets Law (forthcoming 2015). 9 Examples of ‘other social norms’ may vary from mere clubhouse rules to important political processes. Regarding the latter example, the fundamental view of the CLS movement that ‘the law is inseparable from politics’ is not shared in this chapter. Indeed, the CLS, natural law theorists and legal positivists agree that ‘law’ and ‘politics’ are related, what distinguishes the respective theories is the degree of intensity regarding the interrelationship between the two. Also see D. von der Pfordten, ‘What Is Law? Aims and Means’, Archive for Philosophy of Law and Social Philosophy, Vol. 97, 2011, p. 151. 10 Note, ‘law’ is not differentiated here from ‘other social norms’ by recognizing it purely as a de facto matter of top-down state power (legal centralism is rejected). Non-state law may still be considered ‘law’ if it acquires a certain formality and bindingness in its realization. For further reading on non-state law, see M. Hertogh, ‘What is Non-State law? Mapping the Other Hemisphere of the Legal World’, in J. van Schooten & J.M. Verschuuren (Eds.), International Governance and Law: State Regulation and Non-State Law, Edward Elgar, Cheltenham, 2008, pp. 11-30. 11 See Colombi Ciacchi & von der Pfordten, supra n. 8. 12 The through, in and against relationships are characterized by their ‘relativity’. The governance as law relationship is characterized by its ‘identity’. See ibid. 7

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS port the NewGov theory whereby different modes of governance are dependent variable along a continuum of extremely formal to very informal.13 ‘Governance through the law’ is at the more formal end of the continuum. This entails decision and policy-making predominately (or exclusively) by public actors14 in the creation, application and/or enforcement of the law. Here, law and politics are tightly intertwined. ‘Governance in the law’ refers to the hybrid interaction between public and private actors embedded in the creation, application and/or enforcement of the law. It is important to note that this mode of governance still necessitates decision and policy making by public actors, but to a lesser extent than above. We are now sliding down the continuum, whereby formal actors considerably rely upon informal actors (such as experts, stakeholders, NGOs), and vice versa. ‘Governance as law’ involves decision and policy-making predominately by private actors that results in a type of non-state law. This governance is at the more informal end of the continuum, whereby private actors are solely/mainly responsible for the creation, application and/or enforcement of the law. Examples of this are lex mercatoria15 or the ICANN system of control (management of internet domain names, regional internet registries etc.). Finally, governance against the law covers societal selforganisation in breach of the law. This mode of governance is entirely informal and has a conflicting relationship with the law. Based on such foundations, this chapter examines concrete relationships between law and governance from both a doctrinal16 and sociological17 perspective – with a particular focus on the effect of state politics18 and the desire (or not) for more private actor involvement. From the former (doctrinal) perspective, the relationship between law and governance in a specific instance, and hence the subsequent balance of identified conflicting interests, must comply See C. Radaelli, ‘Executive Summary – Exploratory Workshop on Soft Law, New Policy Instruments and Modes of Governance in the European Union’ (2005) NewGov Integrated Project 7 on Citizens’ and Governance in a Knowledge-based Society. Available at: . 14 In a modern state, these actors are those in the executive, the legislative or judicial branch of control. On a supra-national level, for example in the EU, these actors are those in the Commission, the Parliament, the European Council, the Council of the EU and the CJEU. 15 See G. Teubner, ‘Breaking Frames: Economic Globalization and the Emergence of Lex Mercatoria’, European Journal of Social Theory, Vol. 5, 2002, pp. 199-217. 16 Whereby, the relationship between law and governance can be understood as a normative basis for lawmaking and adjudication. See D. von der Pfordten, ‘A Philosophical Perspective on the Relationship between Law and Governance’, in A. Colombi Ciacchi (Ed.), Governance Meets Law (forthcoming 2015). 17 Whereby, the relationship between law and governance can be looked upon as an actual social fact or in relation to other social facts or institutions, like the relationship of law to politics or to the economy. See von der Pfordten, ibid. 18 See M. Zamboni, Law and Politics: A Dilemma for Contemporary Legal Theory, Springer, 2010. 13

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS with the evaluative concept of ‘good governance’.19 Rothstein argues that the ‘good governance agenda’ is a clear case where normative theory and empirical approaches should merge.20 Bearing this in mind, this chapter argues that the evaluation of the creation, application and enforcement of formal, binding rules on euthanasia – and indeed the content of the rules themselves – must be measured against certain normative rationales. Broadly speaking, it must be participatory, consensus oriented, accountable, transparent, responsive, effecttive, coherent, proportionate and in accordance with the rule of law (namely, human rights and legal certainty). Arguably, this is most pressing when particularly fundamental interests of the society are at stake. From the latter (sociological) perspective, the politicization of the law 21 – whereby the law is heavily dependent upon politics, manifested namely in ‘governance through the law’ – brings about clear benefits: the law becomes more justified and legitimate, at least formally, via a consensus in the political community; it is universal, and it acquires stronger legitimacy, accountability and certainty. Equally, the constitutive juridification of politics22 brings about benefits: the law provides procedural rules on how to pass or effectuate political acts, content rules that limit political power and protect individual rights, and institutional rules giving one part of a political system exclusive competence relative to another. However in regard to particularly controversial moral issues23 (such as LGBT rights, assisted reproduction, stem cell research, treatment of drug users or 19

Admittedly, this is somewhat of an idealist concept that is difficult to satisfy in its entirety. Here, it is based on concepts of good governance given by the OECD, UNESCO and the European Commission. For further reading on this concept, see G.H. Addink, ‘Governance and Norms: An Interdisciplinary Approach of Good Governance’, in A. Colombi Ciacchi et al. (Eds.), Law and Governance: Beyond the Public-Private Law Divide, Eleven International Publishing, The Hague, 2013, pp. 243-275. 20 B. Rothstein, ‘Good Governance’, in D. Levi-Faur (Ed.), Oxford Handbook of Governance, Oxford University Press, Oxford, 2012, pp. 143-154. 21 See von der Pfordten, supra n. 16. For further reading on this see J. Ferejohn, ‘Judicializing Politics, Politicizing Law’, Law and Contemporary Problems, Vol. 65, No. 3, 2002, pp. 41-67. 22 See A.M. Magnussen & A. Banasiak, ‘Juridification: Disrupting the Relationship between Law and Politics?’, European Law Journal, Vol. 19, No. 3, 2013, pp. 325-339; L. C. Blichner & A. Molander, ‘What is Juridification?’, ARENA Centre for European Studies, University of Oslo, Working Paper, No. 14, 2005. 23 See for an analysis of the dynamics between politics, the law and moral issues such as abortion, samesex marriage, assisted reproduction, stem cell research and euthanasia: I. Engeli, C. Green-Pederden & L. Thorup Larsen, Morality Politics in Western Europe: Parties, Agendas and Policy Choices, Palgrave Macmillan, Houndmills, Basingstoke, 2012. However for the purpose of this chapter, ‘politicization’ is not defined as it is in the aforementioned study - whereby it is understood as ‘a state of controversy in which political parties mobilize support by dramatizing an issue and increasing the stakes of policy decisions’ (ibid., p. 41). Instead, here an issue is understood to be ‘politicized’ when it is largely dependant on the influence of politics. Thus, if the creation or reform of a law on a particular issue is largely dependant upon the will of politicians, it is thereby ‘politicized’ – this is regardless of whether a party mobilizes support for it or not, or regardless of whether it is on the political agenda or not.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS offenders, etc.), it is difficult to ignore the potential negative effects of the overpoliticization of the law and the over-juridification of politics. Such negative effects are, namely, the public exposure of private relationships to partisan and polarized ideologies, unchangeable last-word decisions without experimenting on new methods, and the inflexibility of law because of no-clear-winner political situations. When the dynamics between law and politics results in such disadvantages (ascertained from a doctrinal perspective) the situation arises whereby a commensurate change in the relationship is justified. Returning to the case at hand, the law on euthanasia is a highly polarizing and politicized issue.24 Giving its illegal nature in almost all nation states,25 euthanasia is readily equated with exclusive state command and control, characterized by the role of public institutions and actors – politicians, members of the judiciary, public prosecutors and law enforcement officers. It provides a classic example of governance through the law. Inevitably (and indeed necessarily), the surrounding politics is subject to strict institutional rules and constitutive norms. Important questions thereby arise: to what degree are the respective laws on euthanasia politicized? What affect does the particular institutional architecture have on the balancing of the competing interests? And, would an alternative governance approach to said law be more, or less desirable?

2. Definitions For the purpose of this paper, voluntary active euthanasia (VAE) is understood as when a person ends the life of another person at the latter’s explicit request (usually by administering a lethal injection). Assisted suicide (AS) refers to the voluntary termination of one’s own life by self-administering drugs with the assistance of another person. The above definitions are to be clearly distinguished from other medical behaviour that shortens life (MBSL), which are often attributed to the word ‘euthanasia’: 26 passive euthanasia (refusal of treatment, or withholding/withdrawing treatment due to ‘medical futility’) and indirect euthanasia (medical 24

See ibid. As will become evident throughout this chapter, the Netherlands is an exception in this regard. Note also Belgium and Luxemburg have adopted similar rules to the Dutch, but these jurisdictions will not be examined here. 26 These distinction/subcategories of ‘euthanasia’ are largely thought of as outdated and problematic, and will not be used in this chapter. The single term ‘euthanasia’ is used exclusively herein to mean both VAE and AS where the distinction between the two is not relevant. See for the definition of ‘euthanasia’ in the strict sense and in the Dutch and Belgian context J. Griffiths, H. Weyers and M. Adams, Euthanasia and Law in Europe, Hart, Oxford, 2008, p. 2. 25

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS treatment to alleviate pain, which has direct life shortening effects). These latter end-of-life decisions are considered, under certain circumstances, as permissible medical practice27 and are not covered by the term ‘euthanasia’ in this chapter.

3. The ‘Law in the Books’ 3.1. England (i) VAE VAE is an act of homicide under English law. Depending on the circumstances in question, the act may be considered outright murder, attempted murder, or may fall under the defence of diminished responsibility, and thus is regarded as voluntary manslaughter. Neither the consent of the victim28 nor the offender’s motives29 are relevant in relation to his/her guilt or innocence. Nor would it be relevant that the patient was in any event dying, since hastening of death is sufficient to establish criminal liability. A physician who performs VAE would also face disciplinary charges by the General Medical Council, which requires its members ‘to act within the boundaries of the law’.30 (ii) AS A person commits an offence under Section 2 of the Suicide Act 196131 if she or he does an act capable of encouraging or assisting the suicide or attempted suicide of another person, and that act was intended to encourage or assist suicide or an attempt at suicide. It carries a maximum penalty of 14 years imprisonment. Here, the Director of Public Prosecutions (DPP) must apply a two-stage test when deciding to prosecute: it must first be ascertained if sufficient evidence exists, and if so, whether a trial would be ‘in the public interest’.

‘Permissible’ here does not mean such behavior is subject to tight control. It means that a resulting death can be reported as a ‘natural’ one and the case is subject to no specific control through the criminal law. 28 Common law tradition has always been ‘to uphold the human life as sacred and inalienable’. The preservation of life has consequently been accorded priority over the autonomy of the individual and as a result the consent of the victim has never been recognized as a defence to a criminal homicide. See M. Otlowski, Voluntary Euthanasia and the Common Law, Clarendon Press, Oxford, 1997, p. 21. 29 Note importantly: it is an established rule of English criminal law that ‘motive’ or ‘intent’ is not subjective, but may be inferred objectively from the degree to which the result was reasonably foreseeable. 30 General Medical Council, Guidance on Good Medical Practice, 2013. 31 Amended by Section 59 of the Coroners and Justice Act 2010. 27

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Following a High Court decision in 2009, 32 the DPP was ordered to issue a policy of factors for and against prosecution ‘in the public interest’.33 The list of factors subsequently drawn up is not exhaustive and each case must be considered on its own facts and merits. Ultimately, the DPP insists that nothing in this policy amounts to an assurance that a person will not be prosecuted if she or he assists the suicide or attempted suicide of another person. It states that prosecution is less likely provided the suspect was motivated by compassion, the assistance was only minor, the suspect sought to dissuade the victim and the suspect was reluctant in the face of a voluntary, clear, settled and informed decision on the part of the victim to commit suicide. There is no factor relating to the victim’s condition, such as unbearable pain and suffering. There is also no direction as to what assistance is deemed ‘minor’ or how to prove the deceased had executed a ‘voluntary, clear, settled and informed decision’. There are 16 factors in favour of prosecution, such as: the suspect was acting in his or her capacity as a medical doctor or nurse and the victim was in his or her care; the suspect gave assistance to more than one victim who were not known to each other; or the suspect stood to gain or was paid. The DPP acknowledged that family members who assist the facilitation34 of a suicide abroad (i.e. to a jurisdiction whereby assisted suicide is conditionally lawful, namely Switzerland) will be considered to have performed acts contrary to the law. 3.2. France (i) VAE VAE is an act of homicide under French law.35 Specifically, the administration of a poisonous substance that causes death (such as opioids/benzodiazepines) carries a maximum sentence of 30 years imprisonment.36 A doctor may also face medical disciplinary proceedings for performing VAE.37 (ii) AS As suicide is not a criminal offence, complicity or assistance in suicide is subsequently considered lawful. In theory, the prosecution of a person present at

32

R (on the application of Purdy) v Director of Public Prosecutions [2009] UKHL 45. Policy for Prosecution in Respect of Cases of Encouraging or Assisting Suicide issued by the DPP in February 2010, available at: . 34 Such as: assisting in making the travel arrangements, sending documentation and/or making the payment. 35 Article 221-1 Penal Code. 36 Article 221-5 Penal Code. 37 Article 38 Medical Code of Conduct. 33

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS the time of the suicide is possible on the ground of the ‘duty to rescue’.38 The penalty may range from a fine up to 5 years imprisonment. Prosecution under this offence is subject to the discretion of the public prosecution authorities. If physician assisted suicide involves only the prescription of drugs and not the presence of the doctor at the moment the drugs are actually administered, the only sanction under French law would be disciplinary.39 Furthermore, in 1987, a new crime of ‘incitement to suicide’ was created. This offence requires a form of incitement over and above merely assisting in the commission of a suicide – it mainly applies to media publications or information booklets. Aside from these exceptions, assisted suicide is not a crime in France. 3.3. The Netherlands (i) VAE and AS In 2002, the Termination of Life on Request and Assisted Suicide Act (hereafter referred to as the ‘2002 Act’) came into effect. This allows a physician to perform VAE and AS, provided s/he complies with the due care criteria and notifies the municipal pathologist of this act. Both VAE and AS remain criminal offences40 if not performed by a physician, or if performed by a physician but not in accordance with the ‘2002 Act’. The conditions in order to lawfully perform VAE or PAS stipulate: -

-

the patient’s request was voluntary and carefully considered the patient’s suffering was unbearable, and there was no prospect of improvement the doctor informed the patient concerning his situation and his prospects the doctor and the patient were convinced that there was no reasonable alternative in light of the patient’s situation the doctor consulted at least one other independent physician who must have seen the patient and given a written opinion on the due care criteria [i.e. the preceding four items] the doctor terminated the patient’s life or provided assistance with suicide with due medical care and attention the doctor reported the case to the municipal pathologist

It is also important to note that no physician is ever obligated to grant a request for VAE or AS. In case the physician should refrain, he/she can refer a patient to 38

Article 223-6 Penal Code. Article 40 Medical Code of Conduct. See S. Hennette-Vauchez, ‘France’, in J. Griffiths, H. Weyers & M. Adams (Eds.), Euthanasia and Law in Europe, Hart, Oxford, 2008, p. 386. 40 Articles 293 and 294 of the Dutch Penal Code, respectively. 39

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS a colleague. However, there is no duty to directly refer to another physician who is willing to comply with the request. Also, the often-supposed requirement that the patient must be in the ‘terminal phase’ or that the illness is ‘terminal’ is not included in the statute. Nor is there any restriction to suffering of a purely ‘somatic’ origin.41 Although the test for ‘unbearable suffering’ is subjective to the patient’s perspective, ‘it is also subject to the qualification by the more objective requirement that this must be “understandable” (invoelbaar) to a doctor and an independent consultant, (and also ex-post to the Regional Review Committee, explained below)’.42 The requirements that the patient’s condition must have ‘no prospect of improvement’ and ‘no reasonable alternative form of treatment’, is a matter of objective medical expert opinion. The ‘2002 Act’ also established a ‘notification procedure’, whereby the physician is obligated to notify the municipal pathologist of every instance of euthanasia based on a pre-defined ‘reasoned report’ containing all circumstances of the case at hand. The pathologist does not turn the report over to the Public Prosecutors Office, but to the ‘non-criminal’ Review Committees. These Committees determine, on careful examination of the report, if the applicable criteria of due care have been satisfied. They notify the Public Prosecutor only if they consider the due care criteria have not been fulfilled.

4. The ‘Law in Action’ In examining the governance dimension of a particular law, it is not enough to look at what the rules are (Section 3, above), but it is also essential to account for what happens to them ‘in action’. This part descriptively outlines in the respective jurisdictions: (i) the limited empirical evidence of euthanasia and (ii) the application and enforcement of the law on euthanasia. 4.1. Empirical Evidence of Euthanasia 4.1.1. England The leading statistical research on end of life decisions in England, dating from the early 1990s, 2006 and 2009 comes from Professor Clive Seale.43 In his latest

41

Note it is of course still required that the patient is decisionally competent. Furthermore, non-somatic cases require that an independent psychiatrist is also consulted. 42 See Griffiths, supra n. 26, p. 90. 43 Professor of Medical Sociology at Queen Mary University of London. See written evidence given by C. Seale to the Commission on Assisted Dying ‘Hastening Death in End-of-Life Care: A Survey of Doctors’, available at: .

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS representative survey, 3733 medical practitioners working throughout the UK responded to an anonymous questionnaire. Out of the total number of deaths attended by the respondents, 0.21% involved the ‘termination of life with an explicit request from the patient’, in other words VAE. Taking into account the annual deaths attended by the responding doctors, this survey estimates approximately 151 deaths were due to VAE. 44 Extrapolating this to the annual population of total UK deaths,45 approximately 1,070 deaths may be a result of VAE per year. There were no reported cases (in the survey) of actual physician assisted suicide. In response to further questions in the survey, it is relevant to point out that 2% (approx. 1,440 of the 72,071) of the reported deaths were a result of pain alleviating treatment, which was ‘partly intended to end life’, while another 15.1% (approx. 10,880 of the 72,071) with the knowledge of ‘probable or certain hastening of end of life’. Acknowledging the inherent difficulties in such questionnaires regarding accuracy, they do provide some degree of indication that VAE is occurring in secret.46 Furthermore, it is demonstrated that a high number of deaths resulted from pain alleviation in the knowledge of probable or certain hastening of life. The survey did not suggest higher levels of life shortening actions, or higher levels of sedation, for the very elderly or for elderly women, or for those recorded as having dementia.47 It is also relevant to take into account instances that did not involve medical professionals, i.e. the occurrence of ‘mercy killings’ by family members. Again it is difficult to obtain sound data, but Home Office records show that from 1990/91 to 2004/05 there were a total of 57 homicide cases that can be described as ‘mercy killing’. Regarding AS, 91 cases have been brought to the attention of the DPP between April 2009 and February 2014.48 A large number of these cases involved what has become known as ‘suicide tourism’. This occurs when a patient travels abroad to a jurisdiction were s/he is legally permitted to commit suicide in the presence of family/friends and an experienced end of life care-giver. The most 44

Note the confidence interval (CI) level of these estimates is 95%. According to the Office for National Statistics, there were 509,090 deaths registered in England and Wales that year. 46 Furthermore, such surveys indicated the large number of MBSL occurring; of which VAE is only a small part. 47 C. Seale written evidence to the Commission on Assisted Dying ‘Hastening Death in End-of-Life Care: A Survey of Doctors’, available at: . 48 Cases of assisted suicide are recorded centrally by Crown Prosecution Services, and are available at: . 45

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS popular choice of jurisdiction is Switzerland, where AS is lawful, provided there exists evidence that the assistor’s motive was ‘unselfish’. Dignitas (based in Zurich), one of the most infamous associations, recorded 893 members from the UK alone.49 From 1998 to December 2013, a total of 244 Britons have actually availed of assistance in dying at said clinic.50 4.1.2. France A 2010 anonymous survey, 51 funded by the Ministry of Health, provides an indication of the number of physician performed VAE occurring in France. The results are based on a representative 52 sample of 4,891 deaths. Accordingly, 0.2% of these deaths were preceded by the use of a drug to deliberately end life at that patient’s request. Considering there are approximately 500,000 deaths a year, this survey indicates that around 1,000 of these deaths are a result of VAE (physician performed). Furthermore, 29.2% of deaths (in the survey) involved the intensification of treatment to alleviate pain, knowing that the decision may or will hasten death. No physician-assisted suicides were recorded. Also it must be noted that from 1998-2013, a total of 159 patients have travelled from France to Dignitas in Switzerland to commit suicide.53 Aside from this survey (notably the first and only one of its kind in France to offer any data on end-of life decision making), a Parliamentary working committee explicitly acknowledged the practice of clandestine euthanasia.54 4.1.3. The Netherlands The Netherlands is one of the few Member States where relatively reliable data on the incidence of euthanasia is available. Empirical data obtained from 1990 to 2012 55 via interviews, questionnaires, nation-wide surveys and annuals reports of the Regional Review Committee are useful for ascertaining the effect the law has in practice. However desirable, it will not be possible to go into this data in great detail, instead a brief outline will be given.

Statistics on ‘Accompanied Suicide of Members of Dignitas, by Year and by Country of Residency’, see: . Ibid. 51 ‘End-of-Life Medical Decisions in France: A Death Certificate Follow Up Five Years after the 2005 Act of Parliament on Patients’ Rights and End of Life’, BioMed Central Palliative Care. Available at: . 52 In terms of age, sex, place of death and region of death. 53 See Dignitas Statistics, supra n. 49. 54 Respecter la vie, accepter la mort, Rapport No. 1708 de la mission d’information parlementarie sur l’accompagnement de la fin de vie, Assemblée Nationale, 2004, Vol. 1, p. 145. 55 At the time of writing the 2013 Annual Report is still not complete. 49

50

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS According to the 2012 Annual Report of the Review Committee, there were 4,188 reports of euthanasia in the Netherlands. 56 This is an increase of 13% compared to 2011. It is difficult to identify exactly what percentage these numbers represent the actual number of euthanasia being performed. Research stated in 1990 that only 19% of all cases were being reported. This figure subsequently rose to 41% in 1995, 54% in 2001,57 and 80% in 2005 and 2010.58 Since the introduction of the Regional Review Committee and the 2002 Act, the low rate of reporting appears to be less of an issue. Most unreported cases seem to involve the administration of high dose opioids (rather than the drugs recommended for euthanasia) with resulting uncertainty in the physician's mind about whether this constituted euthanasia or pain relief with life shortening effect. For example, according to an alternative analysis59 whereby the opioid cases are subtracted, the 54% reporting rate for 2001 rises to 90%.60 Further valuable information may be obtained by examining the characteristics of deaths due to euthanasia. In 2005, it was reported that in 92% of actually performed cases, the estimated life shortening effect was less than one month (with 50% of these estimated to have shortened life by less than one week).61 In 2012, according to the Regional Review Annual Report, 78% of cases involved a patient suffering from cancer. A General Practitioner conducted 90% of all cases reported, while 79% of all cases were carried out in the patient’s home.62 Statistics regarding the type of patients receiving euthanasia may also shed some light on the risk legalisation incurs for vulnerable members of society and the potential ‘slippery slope’ to an increase in non-voluntary termination of life. The Dutch results do not appear to support either claim. The frequency of ending of life without explicit request did not increase since euthanasia has been legalized. 56

See the 2012 Annual Regional Review Report, available at: . 57 Note, a more refined analysis came to the conclusion that this reporting rate was about 70%: see M. Rurup et al., ‘Trends in gebruikte geneesmidden bij euthansie en samenhang met hat aantal meldingen’ Nederlands Tijdschrift voor Geneeskunde, Vol. 150, 2006, pp. 618-624. 58 A. van der Heide et al., Tweede Evaluatie Wet toetsing levensbeëindiging op verzoek en hulp bij zelfdoding, The Hague, ZonMw, 2012, pp. 31, 105. See also A. van der Heide, Evaluatie Wet toetsing levensbeëindiging op verzoek en hulp bij zelfdoding, The Hague, ZonMw, 2007, pp. 102, 112, 116, 119, 174. 59 See G. den Hartogh ‘Mysterieuze cijfers: meldingspercentage van euthanasie kan niet meer stijgen’, Medisch Contract 2003, 58, pp. 1063-1066 and D. van Tol, Grensgeschillen: een rechtsociologisch onderzoek naar het classificeren van euthanasie en ander medisch handelen rond het levenseinde, PhD Dissertation, University of Groningen, 2005. 60 Also, the reporting rate of 80% in 2010 rises to 92%, see Van der Heide et al., Tweede Evaluatie Wet toetsing levensbeëindiging op verzoek en hulp bij zelfdoding, The Hague, ZonMw, 2012, p. 290. 61 Characteristics of deaths due to MBPSL in the Netherlands, 2005, See B. Onwuteaka-Philipsen et al., Evaluatie Wet toetsing levensbeeingiging op verzoek en hulp bij zelfdoding, The Hague, ZonMw, 2007, pp. 103, 113, 117, 120, also see Griffiths, supra n. 26, p. 155. 62 See the Annual Regional Review Report 2012, supra n. 56.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Also, there is no evidence for a higher frequency of euthanasia among the elderly, people with low educational status, the poor, the physically disabled or chronically ill, minors or racial or ethnic minorities, compared with background populations.63 Furthermore, a total of 11 people have travelled from the Netherlands to Dignitas in Switzerland for assisted suicide since 1998. 4.2. Application and Enforcement of the Law 4.2.1. England Due to the absolute criminal nature of euthanasia in England, it is natural that top-down command-and-control ensues (governance through the law). The only actors involved in the application and enforcement of the law are public 64 – namely, members of the judiciary, public prosecutors, and law enforcement officers. One of the first court cases to deal with VAE in England was the 1957 case of R v Adams.65 The physician administered large doses of morphine and heroine in order to ease the suffering of a terminally ill elderly patient who died as a result. The Court applied the doctrine of ‘double effect’ and acquitted the physician of murder. This doctrine states that a physician who prescribes pain relief that s/he knows will hasten the patient’s death, will not be guilty of murder unless her/his primary purpose was to cause the patient’s death. The reluctance to criminally charge a physician acting out of compassion was evident again in the R v Lodwig case.66 Dr. Lodwig gave his patient, who was in the terminal stages of cancer, a mixture of potassium chloride and lignocaine. This was ‘to treat uncontrollable pain’. The patient died a few minutes after the administration. Despite initially prosecuting Dr. Lodwig, the prosecutor offered no evidence against him during the proceedings, resulting in a not guilty verdict. Notwithstanding the certain forseeability of fatality given the dosage administered, it was held that he did not intend the death (i.e. the Court applied the doctrine of ‘double effect’). Two years latter in R v Cox, 67 a rare occasion occurred whereby the court convicted the physician in question. The deceased, who had been a patient of M.P Battin et al., ‘Legal Physician-Assisted Dying in Oregon and the Netherlands: Evidence Concerning the Impact on Patients in “Vulnerable’ Groups”, Journal of Medical Ethics, Vol. 33, No. 10, 2007, pp. 591-597. 64 Arguably, one unique exception to this arises when private actors are required to act as jurors in trials before the Crown Court and Criminal Circuit Court. 65 R v Adams (unreported). See H. Palmer, ‘Dr. Adams Trial for Murder’, CrimLRev, 1957, p. 365. 66 See The Times (16 March 1990). 67 R v Cox [1992] 12 BMLR 38 (Winchester Crown Court). 63

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS Dr. Cox for 13 years, had rheumatoid arthritis, complicated by gastric ulcers, gangrene, and body sores. She was crippled from her condition and in great pain. Furthermore, there appeared to be evidence of a persistent request from the deceased for help in ending her life. However, unlike the Adams and Lodwig cases where the physicians faced a charge of murder, Dr. Cox was charged with attempted murder. This was because the deceased’s corpse had been cremated before the police investigation could prove actual causation. Nonetheless, he was found guilty due ‘to the most clear and compelling evidence’ from his own records that he did not just foresee, but in fact intended to cause her death. In sentencing, Justice Ognall proclaimed that Cox had betrayed his unequivocal professional duty, and required as a matter of principle, to be handed down a term of imprisonment. He was given a 12-month prison sentence, ‘but in recognition of the fact that the public interest would not be served immediately’ it was suspended. Furthermore, the General Medical Council (GMC) did not erase his name from the medical register and merely censored his conduct while undergoing re-training. Mention must also be made of the Dr Martin trial. The physician in question had been accused of acclerating the death of three patients. Despite, being acquitted of the criminal charges by the Teeside Crown Court, the GMC (in discplinary hearings) found that in two of those instances the administration of drugs ‘more than minimally or trivially contributed to the deaths’ of the patients, and that the injections given by Dr Martin ‘were not clinically justified’.68 He was accordingly struck off the Medical Registrar. As regards recent instances of ‘mercy killing’, one particular high profile court decision must be noted.69 In the 2010 Gilderdale decision,70 a 12 person jury in Lewres Crown Court found a mother not guilty of the attempted murder of her daughter. The deceased was suffering unbearably from a severe irreversible form of ME causing her to lose over half her bone density. Food and liquid were provided through a tube and morphine for pain management was given by a timer-controlled syringe delivering around 210mg of morphine a day. Over the 21 years she suffered from this condition, she repeatedly requested assisted

N. Bunyan, ‘GP Howard Martin Accused of Ending the Life of More Patients’, The Telegraph, 30 July 2010; See also ‘Dr. Howard Martin: Timeline of Investigation in Patient Deaths’, The Telegraph, 14 March 2013. 69 See also the 2010 Criminal Court of Appeal decision in Inglis [2010] All ER (D) 140, where the defendant was convicted of murder. In this instance of ‘mercy killing’, the deceased was in a severe coma and unable to make a voluntary request. 70 See R v Kay Gilderdale (Lewes Crown Court, 2010) see BBC report available at: . 68

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS suicide.71 However, despite the accused’s guilty plea to assisted suicide and the advice of the trial judge, Mr Justice Bean, to pursue a charge of this offence (applying the DPP guidelines), the DPP chose to file for the charge of attempted murder. Upon a verdict of not-guilty, Mr Justice Bean exercised ‘his freedom to comment on the values underpinning the law’,72 by paying tribute to the jury for showing ‘decency’ and ‘humanity’ and questioning the merit of applying the charge of assisted suicide to the defendant.73 Regarding the 91 investigations of AS brought to the attention of the authorities,74 65 were not proceeded with by the DPP and 13 cases were withdrawn by the police. There are currently 8 on-going investigations, and 1 case of assisted attempted suicide was successfully prosecuted. Regarding the single prosecution, the accused was handed a 12 year jail sentence after being found guilty of knowingly helping the victim attempt a suicide, by supplying the means (a lighter and petrol) to set himself a light. This was quite an exceptional case in light of the others. A number of these investigations involved ‘suicide tourism’, whereby sufficient evidence existed to prosecute75 but having weighed up the factors, the DPP decided against sanctioning such behaviour in the ‘public interest’. A number of high profile individual claims have come before the High Court, the Court of Appeal and the Supreme Court, all seeking a declaration that the current law on VAE and AS is incompatible with the Human Rights Act 1998 (namely the right to private life).76 Recently a claim was also made seeking to permit the defence of necessity should a doctor perform VAE as the only means to end suffering. Both of these claims were rejected in turn.77 It was consistently 71

She did attempt to commit suicide on her own a number of times but due to her disability had failed, causing further injury and suffering. S Shetreet & S. Turenne, Judges on Trial: The Independence and Accountability of the English Judiciary, Cambridge University Press, Cambridge, 2013, p. 373. 73 C. Gammell & T. Whitehead, ‘Why Was Kay Gilderdale in Court Charged with Attempted Murder?’, The Telegraph, 12 May 2014, available at: . The prosecution’s decision was also criticized in mainstream media and by other members of the judiciary. See for example, A. Hirsch, ‘Kay Gilderdale Case: A Clear Verdict on the Law’s Confusion on Assisted Suicide’, The Guardian, 25 January, 2010. 74 The following data on such cases is from the Crown Prosecution Central records, supra n. 47. 75 In these cases, the DPP has the choice to prosecute family members and/or doctors who assist in helping a person travel to Switzerland for assisted suicide. 76 See Pretty v Director of Public Prosecutions [2001] EWHC Admin 788 (QB); Pretty v DPP [2002] 1 AC 800 (HL); R (on the application of Purdy) v Director of Public Prosecutions [2009] UKHL 45; Nicklinson v Ministry Of Justice [2012] EWHC 2381 (Admin); Nicklinson and Lamb v Ministry of Justice [2013] EWCA Civ 961. R (on the application of Nicklinson and another) (Appellants) v Ministry of Justice (Respondent); R (on the application of AM) (AP) (Respondent) v Director of Public Prosecutors (Appellant); R (on the application of AM) (AP) (Appellant) v Director of Public Prosecutors (Respondent) [2014] UKSC 38. 77 See, in particular, reference for the Nicklinson decisions, ibid. 72

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS held that it would be inappropriate for the Courts to declare the current law incompatible with human rights.78 The claim to extend the common law defence of necessity was also refused, as it would effectively create a new law. It was made clear by the strong majority of the English judiciary that any reform of the law on euthanasia is an issue for Parliament alone.79 4.2.2. France Similar to England, the blanket ban nature of euthanasia in France means it remains in the stronghold of governance through the law. Here the only actors involved in the application and enforcement of the law are the judiciary, public prosecutors and law enforcement officers.80 In the Duffau81 case, a doctor instantly ended the life of a 92 year-old patient who was ‘suffering unbearably’ with an injection of potassium chloride, upon the patient’s request.82 The physician faced the Regional Medical Board and was found guilty of intentionally causing his patient’s death (disciplinary offence – one year suspension), which was upheld by the Conseil d’État. Despite being aware of the disciplinary decision, the prosecution authorities refused to open a criminal investigation or initiate any criminal charges. In 2003, the highly publicized Humbert 83 case fueled numerous government discussions, public opinion surveys and media reports. A 22 year old had been left mute, blind and paralyzed from a car accident. He unequivocally expressed his desire for assistance in ending his life, 84 which he described as a ‘living death’. His mother injected him with barbiturates before his physician injected 78

Note that in the most recent Supreme Court decision, Lady Hale and Lord Kerr did argue (contrary to the other seven trial judges) that the current ban on assisted suicide is incompatible with Article 8 of the Human Rights Act 1998. Also in the same decision, Lord Neuberger, Lord Mance, and Lord Wilson, althoigh refusing to declare the law incompatable with the HRA in this intance, did not rule out the possibility of a declaration of incompatability being made in the future. See Nicklinson [2014] UKSC 38. 79 For example in Nicklinson [2014] UKSC 38, Para. 116; Nicklinson and Lamb [2013] EWCA Civ 961, per Lord Chief Justice at Para. 155: ‘Parliament represents the conscience of the nation. Judges, however eminent, do not; […] we cannot suspend or dispense with primary legislation.’ See also, Nicklinson v Ministry of Justice [2012] EWHC 2381 (Admin), per Lord Justice Toulson: ‘Some will say the Judges must step in to change the law. Some may be sorely tempted to do so. But to do so here would be to usurp the function of Parliament in this classically sensitive area.’ Also see, Lord Goff at 865 D/H and Lord Mustill in Bland at 896F, Lord Hobhouse in Pretty at Para. 120 and Lord Hope in Purdy at Para. 26. 80 Arguably, one unique exception to this arises when private actors are required to act as jurors in trials before the Cour d’Assize 81 See Conseil D’État, 29 December 2000. For online version of decision go to: . 82 Evidenced by doctor in question and attending medical staff. 83 See Le Monde (26 September 2003) 84 Recorded via functional lines of communication (hearing and right thumb) in a letter to then president Jacques Chirac, and also in a book he published.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS him with potassium chloride, resulting in death. Both faced criminal charges. However, the court followed the DPP’s request to dismiss the trial, ‘given the particular moral circumstances’. The judge held that both of the accused acted out ‘of love’ and ‘compassion’ and in light of the public reaction; an order of non-lieu must be issued.85 Both were exonerated of the charges. In the 2007 Tramois case, a doctor and nurse were prosecuted86 for providing a lethal injection to a cancer patient in the terminal phase, upon her request. According to the case report, she was suffering despite massive doses of morphine. She had tremors, urinary incontinence, constant fever, sores, nausea, depression, anxiety and a bowel obstruction, which caused vomiting excrement. The Cour d’Assize finally acquitted the nurse. The doctor, however, was found guilty of murder and sentenced to a symbolic one-year suspended jail sentence. It was not recorded on her criminal record and both medics eventually returned to work (having also served disciplinary suspensions from the Medical Council). In June 2014, the Cour d’Assize in Pau acquitted Dr Bonnemaison of administering poison to hasten the death of seven patients. Despite the fact that the accused doctor had used a ‘banned poison’, the jurors held that ‘it had not be proven’ that by administering the sedatives that he intended to kill his patients.87 It was accepted that he had taken ‘medically justified’ steps to end the agony of patients who only had a short period of life expectancy left. As in England, the French judiciary88 has also faced individual claims seeking for the prohibition on euthanasia to be overturned. In 2008 a Dijon court 89 rejected a claim to permit euthanasia with a lethal dose of barbiturates provided the patient’s suffering was untreatable and unbearable. This rejection was, according to the Court, based on the clear prohibition in the criminal code and the inability to usurp the legislators’ preference. It was made clear that French judicial decisions are limited to a narrow interpretation of the criminal code and may not set precedent for the future, effectively creating law.90 See R.C. Fox & J.P. Swazey, Observing Bioethics, Oxford University Press, New York, 2008, p. 49 – specifically in relation bioethics in France. 86 The son of the deceased, who like his father refused to bring civil charges, declared he was ‘sad and disgusted’ by the decision to bring the two women before a court ‘as criminals’. 87 J. Lichfield, ‘Nicolas Bonnemaison Trial: French Doctor Who Denied “Playing God” Is Cleared of Patient Euthanasia’, The Independent, 30 June 2014. See also ‘Euthanasie: le docteur Bonnemaison acquitté’, Le Monde, 25 June 2008. 88 Rather exceptionally, both President Chirac and President Sarkozy have also received direct individual pleas to allow for VAE – from Humbert and Sebiré. 89 Chantel Sebiré decision, see ‘La justice rejette la demande d'euthanasie active formulée par Chantal Sébire’, Le Monde 18 March 2008. 90 See C. Elliot, ‘France’, in K.J. Heller & M.D. Dubber (Eds.), The Handbook of Comparative Criminal Law, Stanford University Press, Stanford, 2011, pp. 209-251. 85

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS 4.2.3. The Netherlands In comparison to England and France, the approach to permit euthanasia under certain conditions in the Netherlands has meant that the application and enforcement of the law mandates public-private actor interdependence and a multi-level institutional structure. As in England and France, the Dutch prosecutors and courts may of course still be called upon to act in the final instance. Nonetheless, the role of doctors in self-reporting, ex ante control by expert consultants and ex post assessments by non-criminal review bodies precedes any involvement of prosecution authorities and court action. Attention on the application and enforcement of the law in the Netherlands prior to the 2002 law will be given in Section 6, below, which looks at how formal legal change was effected. Here, attention is paid to the application of the control system in practice in light of the 2002 Act. Written guidelines (referring to the statutory requirements of due care) are present in 83% of hospitals and 78% of nursing homes.91 In 1998, a body of independent specially trained euthanasia consultants for doctors (known as SCEN) was established. These consultants provide before-the-fact assessments. From a 2012 national study, 74% of euthanasia cases involved a SCEN consultant.92 The Regional Review Committees, the Medical Inspectorate, the Royal Dutch Medical Association (KNMG), the prosecutorial authorities, and the Government actively encourage the use of accurate due care policies and SCEN consultation.93 Out of the 29,650 cases of euthanasia reported to the Regional Review Committees from 1999 to 2011, a total of 57 of the physicians (slightly less than 2 per 1,000) were deemed not to have acted within the due care criteria.94 To date, there have been no prosecutions of reported cases and only 2 physicians have been sanctioned in medical proceedings. The majority of cases which did not completely satisfy the due care criteria related to the independence of the consulted doctor, none regarded the voluntary nature of the request, and a small number regarded the presence of alternative treatment.95

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See Griffiths, supra n. 26, p. 191. See Van der Heide, supra n. 58, p. 193. 93 See Griffiths, supra n. 26, p. 192 94 See for further statistics, the Regional Review Annual Reports, available at: . The majority of these cases concerned failure to comply with the procedural requirement of independent consultation, after further investigation into the case by the Regional Review Committee the breach was not deemed worthy of prosecution. See also, Van der Heide, supra n. 58 ; Griffiths, supra n. 26, p. 209. 95 See Regional Review Annual Reports, ibid. Also, see Table 5.19. Principle Grounds for a finding of ‘not careful’, in Griffiths, supra n. 26, p. 206. 92

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS There have been prosecutions and medical disciplinary proceedings for doctors96 who did not report, as well as several convictions of lay persons for assisting suicide. A number of these lay persons (sometimes known as ‘suicideconsultants’) work voluntarily for organisations that give advice and support for people contemplating suicide. In one case the suicide consultant was sentenced to twelve months of which eight were conditional. The Court of Appeals took the position that the consultant had over-stepped many boundaries and there was fear for repetition.97 More recently, Gerard Schellekens, the ex-chairman of SVL (Voluntary Life Foundation) was found guilty of knowingly violating the 2002 Act. Although not a doctor, Schellekens aided an 80-year-old woman end her own life who had been suffering from Parkinson’s disease for 15 years. The Court emphasised that the Dutch legislation evidenced the legislature’s intention that AS should only be lawful under medical supervision and where a doctor’s decision would be scrutinised afterwards. He was sentenced to a one year suspended prison sentence.98

5. Critical Analysis of ‘The Law in the Books’ v ‘The Law in Action’ Having looked descriptively at ‘the law in the books’ and ‘the law in action’, it is now important to comparatively critique any discrepancies between the two. In the few VAE cases that came before the courts in England and France, one can identify discrepancies – particularly in the punishment of offenders. The courts rely on techniques such as the doctrine of double effect or jury nullification99 to find the accused not guilty. Although the result sought i.e. not to criminally sentence a compassionate physician is arguably commendable, such legal techniques as a means of doing so are questionable. In both England and France, VAE is deemed an act of murder, which requires the proof of intention to kill. In England, it is a well-established principle of criminal law that intent is inferred from the reasonable/certain foreseeable consequences of your actions. A desire (or primary purpose) to kill is irrelevant once it is established that the result was foreseeable. Under French law, proof of 96

Most notably the conviction of Dr Sutorius (in the Brongersma case); whereby it was upheld by the Supreme Court in 2002 that there must be a ‘medically classified disease or disorder’ for a doctor to be able to rely on the defence of necessity. See also the convictions in the Van Oijen case, Hoge Raad, 9 November 2004; Nederlandse Jurisprudentie 2005, no 217 and the Vencken case, Court of Appeal, ’s-Hertogenbosch, 19 July 2005, ECLI:NL:GHSHE:2005:AU0211. 97 See Tijdschrift voor Gezondheidsrecht 2004: pp. 173-178. 98 Court of Appeal, Arnhem, 17 Februari 2012, ECLI:NL:GHARN:2012:BV6139, Nederlandse Jurisprudentie 2012, No. 509, annotation by T.M. Schalken. 99 This is when the jury is given the option to acquit on compassionate grounds, even if the accused has no defence in law.

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS ‘special intention’ is required for a charge of murder. Here, ‘intent’ is based on the desire to commit the wrongful act, not a desire to achieve the exact result of that act.100 It is irrelevant if the accused had either the cruel desire to end life or a compassionate desire to end suffering, once it is established that he/she had a desire to commit the act that caused death. However as evident in Section 4.2.1 and 4.2.2 respectively, the courts in both countries have frequently discarded this fundamental point of law. Instead, a unique subjective understanding of ‘intent’ in criminal law has been frequently made to find the doctors not guilty.101 A doctor who intends to bring about the death of a patient (his primary purpose/desire) by injecting a large dose of morphine is guilty of murder. However, a doctor who intends to relieve the patient’s pain (this being his primary purpose/desire) with that same dosage of morphine, and who foresaw death as a reasonable/certain consequence, is not guilty. The making of such a distinction creates a doctrinal tension in both jurisdictions between the established objective meaning of intent in criminal law and the subjective concept of intent to resolve cases of VAE. If this distinction is workable, one may ask what is the intent (primary purpose/desire) of the doctor in the Netherlands who performs euthanasia? Given that the patient’s suffering must be unbearable and irrepressible (required by law to be verified by an independent consultant), any subsequent termination of life is performed on the prerequisite of relieving unbearable pain. Thus, the doctor’s primary intention/desire (although certainly ending life in the process) must be the alleviation of the patient’s pain. One may ask: what is the legal benefit in classifying the certain foreseeability of death as a ‘secondary desire’ or an ‘incidental effect’? Bluntly put, the doctrine of double effect is of little legal benefit. Instead, the defence of medical necessity (as utilized by the Dutch courts before the 2002 Act came into play) provides a more coherent explanation for exempting physicians from criminal liability, applying – objectively – to situations where the doctor is faced with the choice of leaving the patient without adequate relief, or administering what is likely to be a fatal dose as the only means to relieve severe and incurable pain. 100 101

See Elliot, supra n. 90. In England, see the Dr. Adams, Dr. Lodwig and Dr. Martin decisions (Section 4.2.1, above); whereby the respective doctors were found not guilty despite the fact that they administered morphine and potassium, respectively, with fatal (certainly foreseen) consequences. In France, see the Humbert and Bonnemaison decisions (Section 4.2.2, above); whereby the accused were acquitted of murder charges against them due the overwhelming compassion to alleviate suffering and ‘moral aspects of the situation’ despite the foreseeability that their actions would result in death.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Whilst in the majority of cases in England and France doctors have escaped serious criminal liability, there have also been a few, very similar, cases in which convictions (and disciplinary sanctions) have ensued. The techniques described above to circumvent the harshness of the law are not always applied consistently. In France, public authorities have, on occasion, been made aware that a doctor or lay person had performed VAE but refused to initiate any criminal prosecution. 102 However, when Dr. Tramois performed VAE in circumstances akin to those that went unnoticed, she was criminally prosecuted and handed a one year suspended jail sentence. Similarly in England, the Dr. Cox case was a rare instance where the Court did not avoid imposing a criminal sentence (albeit, a 12-month suspended sentence). Furthermore, a third concern becomes apparent. Qualifying VAE as an act of murder, by definition makes it a ‘serious offence’. Yet on the rare occasions when a guilty verdict of murder is reached, the sentence is incredibly minimal given the ‘public interest’ not to seriously sanction such behavior (at most a suspended jail sentence). This suggests a disconnect between the law on the one hand and common views of reprehensibility on the other. Doctors in England and France face such uncertainty and rely on subterfuge legal techniques to avoid liability. In doing so, the rights of the patient are undermined. Maintaining VAE as an illegal practice but occasionally permitting it on dubious legal grounds, means that its administration will inevitably be unregulated and inconsistent. Upon such reflections, one may question if the blanket ban on VAE (given its current application and enforcement) in England and France may be deemed suitable, necessary or effective in ‘the public interest’. The English and French approach to AS also creates a number of difficulties. The most striking concern is the clear preference for amateur assistance over medical professional assistance. In England, the DPP policy states that prosecution is more likely if the suspect was acting as a healthcare professional. Regardless of criminal prosecution, the physician in England may still face medical disciplinary charges. In France, assisted suicide is not per se illegal, but a physician may nonetheless face penal or disciplinary charges. If a doctor prescribes drugs to a patient for the purpose of that patient’s suicide but then is not present when the suicide occurs, the only sanction is disciplinary. If s/he

102

As particularly evident in the Daffau case (Section 4.2.2) – whereby, the doctor was found guilty of intentionally ending the life of his patient in disciplinary proceedings before the French Medical Council, yet not criminally investigated.

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS stays to supervise, s/he may face disciplinary proceedings and also be charged under the penal code ‘duty to rescue’. In both countries, criminal legislation, prosecution authorities, and medical codes of conduct effectively place the onus on compassionate friends and family. This creates a threat of abuse resulting from the law condoning what is an unregulated practice. It increases the risk of error and further trauma or suffering for the patient. Additionally, it means that assisting in a suicide (by an amateur) may be permitted regardless of the patient’s condition (treatable or not). No regard is given to the patient’s degree of suffering, provided the amateur suspect acted ‘compassionately’ (in England) or didn’t incite the suicide (France). This is a more permissive approach to AS than in the Netherlands. Dutch law requires that the physician (and only a physician) must satisfy due care requirements ex ante and ex post any performance of assisted suicide. There is a clear requirement for a prospective assessment of capacity, of voluntary request, of suffering, alternative treatment and consultation before any such assistance may be performed. It appears that by prohibiting professional assistance, the English and French legal systems rely on the ‘Swiss option’ or ‘suicide tourism’ to fill in the gap. As recognized above, 182 English patients and 137 French patients (at the time of writing) have travelled to Dignitas in Switzerland for assisted suicide over the past ten years. This is hardly a satisfactory alternative. Firstly, such an option is limited to patients who can afford the costs, and secondly, to those who are physically capable of travelling (able bodied patients). Such a law quite clearly accommodates a discriminatory undertone. Also, evidence has been given that some patients, who fear, due to their progressive illness that they may not be able to physically travel in a few months, feel compelled to travel and thus end their life far earlier than otherwise desired.103 Recognizing the risks of ‘transplanting’ the Dutch experience of euthanasia into jurisdictions of different socio-political traditions, we can still learn a number of valuable lessons by examining the chosen law, and its effects. It must be stated that legal control is not perfect in the Netherlands either. However, as Griffiths and Weyers state ‘it is better than in other countries for which information is available, and it has been getting more encompassing, more refined and in practice more effective in the two decades since euthanasia became legal.’104

103

Report by Commission on Assisted Dying, p. 101. Available at: . 104 Griffiths, supra n. 26, p. 520.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS By refusing to allow euthanasia to remain an amateur activity, the Netherlands has acquired a system of relatively clear control over the requirements of due care. Essentially, the end of life practice of Dutch doctors is ‘more transparent and is exposed to far greater regulatory pressure and concrete social control’.105 Efficient systems for the transmission of legal information are in place, such as medical journals, local protocols and the SCEN programme of trained advisors and consultants. The latter programme in particular has proven to be a highly efficient ex ante system of control. By removing the immediate threat of criminal prosecution and placing a ‘buffer’ (i.e. the Regional Review Committee) between the physician and the prosecution services, the Dutch law has induced an increase in the reporting procedure. No evidence exists of a slippery slope towards victimization of the vulnerable or towards a more ‘permissive’ legal approach. Indeed, empirical evidence shows the current safeguards are utilized to protect vulnerable patients in extreme circumstances (the majority of instances involving terminal cancer patients suffering in the final phase). Essentially, it appears the Dutch approach – justified by the principles of autonomy and beneficence - has provided patients with legal certainty and proportionate safeguards.

6. Comparative Critique of Legal Reform The above comparative analysis has so far focused on the ‘law in the books’ v the ‘law in action’ regarding euthanasia; however, in order to complete a law and governance perspective, attention must now be given to the actors and institutional architecture in the creation of the respective laws. This allows one to make more than just descriptive remarks (Section 3 and 4) and critical remarks (Section 5), but also prescriptive ones. Governance through the Law – England and France As evident, the actors and institutions involved in the application and enforcement of the law on euthanasia in England and France are public and hierarchical in nature. The same holds largely true in the creation of said law. Private actors (namely, interest groups and medical associations) have played a limited role in developing the law or effecting legal change.

105

Ibid., p. 516.

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS Over the last 15 years in England, four individual bills106 proposing rules107 very similar to those in the Dutch 2002 Act were put before the House of Lords (indirectly elected108 upper house of parliament). All of these proposals failed. No bill to legalize VAE and AS has ever been proposed/debated in the House of Commons (directly elected lower house of parliament). In 2012, the lower house did debate the suitability of the DPP policy on AS, and the motion in favour of maintaining the current DPP policy was passed without a vote. In France, since 2008 a number of bills to legalize VAE and AS109 have been proposed by individual Members of Parliament without success. In January 2009, a select committee on Social Affairs in the Senate (indirectly elected upper house) approved such a bill, however the full Senate rejected the proposal later that year by a vote of 170 to 142. A very similar bill was presented before the National Assembly (directly elected lower house) in 2009, but was rejected by a vote of 326 to 202. A number of comparable observations may be made from studying these political debates and processes in England and France.110 First, there was a failure to contextualize the debate – by both the legislator and the judiciary. Neither technically defined VAE and AS as part of a wider, complex phenomenon of medical behavior that shortens life (MBSL). From the outset, this failure created a vacuum for highly partisan and polarized ideologies to fill. 111 Both sets of politicians (similar to their respective judiciaries) considered other forms of highly similar MBSL as legitimate based on the principles of autonomy (e.g. advanced directive to withdraw treatment) or 106

Lord Joffe proposed the Patient (Assisted Dying Bill) in 2003, 2004, and the Assisted Dying for the Terminally Ill Bill in 2005 and 2006. Note: at the time of writing, Lord Falconer introduced a very similar Private Members’ Bill to the House of Lords, which is due for general debate (Second Reading) on the 18th July 2014. 107 The patient must be suffering unbearably and with no prospect of improvement; subject to voluntary request; performed only by a physician; requires independent consultation; report filed before Regional Review Committee. 108 Note that of the 763 seats, 26 are reserved for Lords Spiritual (Bishops) and 92 members sit in the house by hereditary peerage (only one of these is a female due to rules on inheritance). 109 Also containing safeguards and conditions very similar to those in place in the Netherlands. 110 The full lower house debate in England is available at: . The full lower house debate in France is available at: . To see earlier analysis of legal reform in England and France see respective national reports in Griffiths, supra n. 26. 111 See supra n. 39, whereby Hennette-Vauchez claims that the general tone of the socio-legal debate on biomedical issues [...] in France has been marked by a strong reaffirmation of principles and values, such as the sacredness of human life. For an evocative example of this in England, see MP Ian Paisley in the Commons debate; ‘This debate sets on its course the notion that we, this Parliament, can put in place a law that will determine when people in this nation should lose their lives. Think of it! Think of how foolish the House is, in the great scheme of things, when it puts itself in that God-like position! It is not God. The law works well in practice.’

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS medical beneficence (e.g. the proportionate duty to relieve suffering in the patient’s best interest, such as the administration of pain relief with life shortening effects), but ignored combining the two principles as a basis to justify VAE or AS. Second, there was confusion between practical concerns of a slippery slope in legal change (empirical argument) and more ethical concerns about a slippery slope in moral standards. Such ideological argumentation resulted in a disregard for (i) the similar dangers inherent in permitting (although not regulating) ‘morally legitimate’ forms of MBSL, and (ii) the problematic discrepancies in the status quo (i.e. the current ban on euthanasia) and its application in reality (see Section 5, above). Instead the majority opposed legal reform similar to that in the Netherlands based upon unfounded evidence of the inherent potential for abuse112 and lack of available safeguards. Third, the fact that the actual legality of euthanasia has been debated only once in the directly elected house in France and never in the English equivalent reflects something in itself. Despite the seemingly strong public support for legal reform in both nations,113 there is political reluctance to put euthanasia on the legislative agenda. As Giandomenico Majone points out, ‘most political scientists can safely assume that the main goal of elected politicians is to maximize their probability of being re-elected’.114 Accordingly, they prefer to support distributive policies serving special/influential interest groups. In the case of euthanasia, it may be argued that English and French politicians have a ‘get out of jail card’ with their electorate. They can justify their legislative inaction by not only relying on the polarized nature of the debate, but by also relying on the lack of mobilized and influential interests groups 115 and, in particular, the formal unwillingness of the medical profession to support legal

A number of French MP’s justified their rejection of the bill, as they didn’t think the law should provide a positive right to assistance in death. The simple fact is that this was explicitly never the case. The bill allowed patients the freedom to receive assistance, while no obligation was put on the physician to perform such assistance (it was a liberty-based right under certain circumstances). 113 For statistics on public opinion in England dating from the 1980’s to the present day see, Commission Report on Assisted Dying, supra n. 98, pp. 60-62. For related data in France, see the French report in Griffiths, supra n. 26, p. 375. 114 G. Majone, ‘The Common Sense of European Integration’, Journal of European Public Policy, Vol. 13, No. 5, 2007, p. 623. 115 Indeed interest groups do exist, but they have failed to meaningfully cultivate good relations with existing political parties and government bodies. Note in contrast, that prior to World War II and the negative connotations subsequently attached to the term ‘euthanasia’, the English right to die society known as the Voluntary Euthanasia Society (now known as Dignity in Dying) ‘enjoyed the support of many of Britain’s most distinguished doctors, public figures and clergy men’ and had proposed a bill for legislation before the House of Lords in 1936. The leading right-to-die associations in France (l’association pour le Droit de Mourir dans la Dignité) and England (Dignity in Dying) have approximately 50,000 and 25,000 members respectively. This may be compared with the leading right-to-die association in the Netherlands (NVVE), which has 105,000 members. 112

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS reform.116 Weyers convincingly illustrates that legal change does not require a formal positive stance from the medical association (see in the case of Belgium) but it may be assumed that where they ‘are vigorously opposed, legalization is less likely, even if values of the general public seem to point to legal change’.117 Furthermore, one may question if the formal opposition by medical associations to legal reform truly reflects the views of the respective members. 118 It is no secret that medical associations are generally opposed to stringent legal obligations and constraints on their members’ actions. For example, see the reaction of the French Medical Association to the 2002 Patients’ Right Bill, where the basic right for patients to obtain medical information prior to any form of treatment was contested as overly complicated and counterproductive.119 Fourth, the importance of one particular institutional structural parameters becomes apparent – the separation of powers. Both the English and French courts have made it clear that lawfully permitting euthanasia is a matter for parliament only. They are resigned to pass any power to effect legal change into the hands of the respective parliamentarians. In return, parliamentary inaction on the issue has left the prosecution authorities and members of the judiciary to deal with criminal accusations of euthanasia and individual challenges to the blanket ban. 120 Subsequently, to avoid punishing benevolent physicians and usurping the parliament’s role, the prosecutors and judiciary rely upon problematic techniques not to impose the full, if any, force of the law (see Section 5). This creates a regulatory paradox: the law on euthanasia is unlikely to be consistently enforced and unlikely to be adequately reviewed. Thus, it may be said that the law on euthanasia in England and France is hampered by the effects of over-politicization (mentioned in Section 2): individual rights are weakened by partisan ideology and the law is largely inflexible because of noclear-winner political situations. An alternative law and governance approach may be of fundamental value.

In England, the General Medical Council refuses to take a position on VAE or PAS, ‘neutral or otherwise’ – it merely insists that its members follow the law. However, the British Medical Association (trade union for doctors) is officially opposed to the legalization of VAE and PAS. In France, the Académie Nationale de Médicine formally opposed the Bill before the National Assembly to allow for euthanasia under similar conditions to the Dutch 2002 Act, also the National Medical Ethics Council rejected both VAE and PAS, but approve of other MBSL. 117 See Griffiths, supra n. 25, p. 525. 118 In England, see the organisation of Healthcare Professionals for Assisted Dying. Note that during the Tramois trial in France, 2,000 doctors signed a petition to allow for euthanasia. 119 Hennette-Vauchez, supra n. 38, pp. 371-394. 120 See Section 4.2.1 and 4.2.2, above. 116

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Governance in the Law – the Netherlands In the Netherlands, the legal norms finally codified in 2002 were not formulated in a simple hierarchical manner or solely dependent on public actors. Instead, the law is a result of significant interaction between the medical profession (individual doctors and the Royal Medical Association121), interest groups (in particular the Association for Voluntary Euthanasia – NVVE), the Executive, the Parliament, the Health Council, the State Commission on Euthanasia, the Remmelink Commission (appointed by to carry out empirical research concerning euthanasia and related practices), academics, the judiciary, the prosecutorial authorities, the medical disciplinary tribunals, the Medical Inspectorate, and the ‘public’.122 A detailed account of Dutch legal reform on euthanasia is beyond the scope of this chapter,123 instead some key moments will be highlighted. In the 1970’s and early 1980’s, Dutch cultural change 124 and advances in medical technology brought the topic of ‘euthanasia’ into the public spotlight.125 Media attention increased and special interest groups 126 mobilized rapidly. Importantly, a small number of criminal prosecutions127 for euthanasia resulted in the highest prosecutorial authority – under guidance of the Ministry of Justice – to develop a policy on such cases.128 In deciding to prosecute or not, certain ill-defined criteria were agreed upon; namely, the presence of a well considered request, independent medical consultations, and unbearable and hopeless suffering. In the following decade a unique course of legal development and period of conceptual clarification occurred. A number of reporting and investigating procedures were established by local prosecutors designed to encourage doctors to report if they had performed euthanasia.129 In response to such reports, the prosecution authorities initiated criminal proceedings to clarify the procedural and substantive grounds on which such behavior may be justified. During that same time, the Executive Board of 121

Interchangeably referred to as the KNMG. See Griffiths, supra n. 26. 123 See J. Griffiths, A. Bood & H. Weyers, Euthanasia and Law in the Netherlands, Amsterdam University Press, Amsterdam, 1998, pp. 43-86. 124 A general shift towards more secularization, individualization and democratization. 125 Just as in England and France today, the early debate in the Netherlands did not always conceptually distinguish ‘euthanasia’ from other similar types of MBSL. 126 Both pro- and anti-euthanasia groups were created. The main advocates for legalization of euthanasia were the Dutch Association for Voluntary Euthanasia (NVVE – which was, and still is, the largest) The main opponents were the Dutch Association of Physicians, the Dutch Association of Patients and sectors of religious groups, in particular the Calvinist churches and the Roman Catholic Church. 127 The most notable prosecutions arising from the Postma case (Nederlandse Jurisprudentie 1973, No. 183:558), and the Wertheim case (Nederlandse Jurisprudentie 1982, No. 63:223). 128 See Griffiths, supra n. 26, p. 30. 129 Ibid. 122

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS the Medical Association recognised130 that both VAE and PAS were occurring in reality and clarified somewhat the conditions that must be satisfied when either occur.131 When the first Supreme Court case concerning VAE (the Schoonheim case) arose in 1984, the stance of the medical profession laid the groundwork for the Court to conclude that a doctor who complies with the requirements of due care can successfully invoke the justification of necessity (conflict of medical duties).132 Upon appeal, it resulted in the first acquittal of a Dutch doctor for performing euthanasia. At the same time, a State Commission on Euthanasia clarified (note, in co-operation with the Medical Association) exactly what was meant by the term ‘euthanasia’ in the context of other similar yet distinct MBSL and produced a report advising the government to change the Criminal Code to permit euthanasia. However, the legislator avoided any amendments at that time 133 and effectively left a legal vacuum for the courts to fill. Unlike in England and France, the Dutch judiciary did not fear a backlash here for usurping the role of the legislator. Rather, according to Dutch commentators such judicial activism was ‘respected’ by the Dutch Parliament.134 In the early 1990’s, a number of cases came before the Dutch courts whereby it was repeatedly held that a doctor who complies with the requirements of due care can assume that he will not be prosecuted. The Ministry of Justice and the prosecution authorities further confirmed this legal stance to the Medical Association, as the next issue became more about effective control and less about the permissibility of euthanasia. Following on from the empirical research produced by the Remmelink Commission,135 it was decided that doctors would be more willing to report if the ‘criminal character’ of the reporting procedure was reduced. As a result semi-public Regional Committees were created, composed of a team of lawyers, doctors and ethicists appointed to assess the compliance of each reported case of euthanasia with the due care criteria. These expert actors were delegated sole responsibility for creating the procedural 130

This was in response to questions from a State Commission on Euthanasia set up 1982 at the request of Parliament. It is important to note that the KNMG is a professional group which generally has a lot of public confidence in it. 131 There must be a voluntary and well considered request; ‘unacceptable’ suffering, a second doctor should be consulted and a certificate of ‘natural’ death should not be filed. 132 See Griffiths, supra n. 26, p. 31, and supra. n.119, p. 63. 133 Largely due to the essential role of the Christian-democratic party (CDA) in the coalition government and its position to block such legislation at the time. 134 See H. Weyers, ‘Legal change 1945-1997’, in Griffiths et al., supra n. 123, p. 87. 135 Officially known as ‘The Commission Appointed to Carry out Research Concerning Medical Practice in Connection with Euthanasia’, but more commonly known after its chairman and Advocate General at the Supreme Court at the time. It was established in 1990 by the Government to conduct empirical research into the extent of euthanasia practice.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS guidelines for investigating compliance.136 Furthermore, SCEN, a body of expert doctors on euthanasia was set up by the Medical Association and financed by the Ministry of Health to provide (by and large, successfully) an extra system of ex-ante control. Over a forty-year period, the law on euthanasia was greatly ‘depoliticized’137, allowing political and legal decisions to be made in stages. The prosecution authorities, the State Commission on Euthanasia, the ‘Remmelink’ Committee and the KNMG provided politically neutral and objective solutions that the Court – presented with somewhat of a legal vacuum 138 – accepted. In 2002, Parliament 139 finally amended the criminal code, which did little more than ratify what had already been accomplished elsewhere.140 Thus, the governance mechanism at play in the Netherlands not only evidences meaningful publicprivate actor interaction in the application and enforcement of the law, but also in the creation of said law.

7. Conclusions The need to loosen the law on euthanasia from the schakles of state politics is apparent. Purely formal, command and control – public actor governance through the law – as seen in England and France, does not appear to result in a high degree of compliance with the principles of good governance (see Section 5 and 6). Namely, it raises concerns regarding accountability, effectiveness, proportionality, legal certainty, consistency and compliance with human rights. The practical fears raised about the effects of legalization do not seem to warrant a blanket prohibition, and can arguably be better addressed by the implementation of regulatory safeguards. Lessons may be learnt from the creation, application and enforcement of the law on euthanasia in the Netherlands. Governance here relies heavily upon publicprivate actor interdependence: namely, between the Dutch Medical Association, SCEN, individual physicians, the Regional Review Committee, specialized State Committees, the public prosecution authorities, the judiciary and then finally the 136

Note that since 2002, a judgment from this Committee that a reported case of euthanasia satisfies the conditions, now formally ceases the review and the prosecution authorities will not investigate the case. 137 In other words: the issue of euthanasia was made appear a ‘medical’ one and therefore politically neutral. See R. Andeweg & G. Iriwn, Dutch Government and Politics, MacMillan, London, 1993. 138 Arguably, due to the deliberately slow pace of political decision-making. See Weyers, supra n. 134. 139 Note, that the government coalition at that time, and for the first time since 1917, did not consist of a confessional party. 140 See Griffiths, supra n. 26, p. 33.

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EUTHANASIA IN ENGLAND, FRANCE AND THE NETHERLANDS Parliament. Thus, it is cuatiously submitted – particularly in light of the challenges faced in England and France via governance through the law - that the most appropriate course to maximise individual freedom and selfdetermination at the end of life while proportionally protecting vulnerable persons, necessitates a meaningful interaction of public-private governance in the law. Such an approach has attested the need to contexualize and depoliticize the debate, mobilise influential interest groups, acquire national empirical data, and seek accountability from health care professionals. From this perspective, private actors may positively decouple the necessary legal and political decisions on euthanasia to benefit the ‘public interest’.

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III. ENERGY SERVICES AND ENVIRONMENTAL SUSTAINABILITY

Realizing ‘Universal Access to Modern Energy Services’ EXPLORING AVENUES FOR PRIVATE STAKEHOLDER ACCOUNTABILITY IN INTERNATIONAL HUMAN RIGHTS LAW AND GOVERNANCE Marlies Hesselman*

Introduction At present, about 2.8 billion persons worldwide still live in ‘energy poverty’. This means that these persons currently lack any basic access to modern energy services for their daily necessities, such as lighting, heating or clean cooking facilities. 1 ‘Energy poverty’ is therefore said to negatively impact on many aspects of an individual person’s life, such as their health situation, educational opportunities, hygiene, working conditions, income generation or general circumstances of poverty. 2 To illustrate the urgency of energy poverty: it is projected that, by the year 2030, more persons will die prematurely from unhealthy traditional cooking practices involving (indoor) air pollution from wood, dung or charcoal, than from the consequences of HIV/AIDS and malaria combined.3 To tackle ‘energy poverty’ globally, the United Nations Secretary General, Ban Ki Moon, launched a special global initiative in 2011, called the ‘Sustainable for Energy All-initiative’ (‘SE4ALL-initiative’).4 This initiative supports the realization of three interlinked global energy goals by the year 2030, which are the *

M.M.E. (Marlies) Hesselman, LLB (Leiden), LLM cum laude (Groningen) is currently a Ph.D. researcher on ‘universal access to modern energy services’ at the Department of International Law at the University of Groningen. She is also a Lecturer in International Law in the same department. The author thanks her colleagues dr. Antenor Hallo de Wolf and dr. Brigit Toebes for valuable input into various drafts. The article also benefitted from presentation and discussions with staff at the Centre for the Study of Human Rights at the London School of Economics, facilitated by a research grant from the European Science Foundation (ESF) in the context of the GLOTHRO Research Networking Programme, as well as from discussions in the University of Groningen’s Seminar Series ‘Human Rights in Essential Public Services Provision’ in 2014. 1 See for a more detailed discussion of ‘energy poverty’ and the definition of ‘universal access to modern energy services, Section B.1. 2 Report of the United Nations Secretary General, ‘United Nations Decade of Sustainable Energy for All’, 6 August 2013, UN Doc. A/68/309, Para. 4; World Health Organization, ‘Social Determinants of Health Sectoral Briefing Series 5. Energy: Shared Interests in Sustainable Development and Energy Services’, 2013, available at: . 3 UNDP, IEA & UNIDO, ‘Energy Poverty: How to Make Modern Energy Access Universal? Special Early Excerpt of the World Energy Outlook 2010 for the UN General Assembly on the Millennium Development Goals’, September 2010, p. 13, available at: . 4 See United Nations Secretary General, ‘Sustainable Energy for All: A Vision Statement by Ban Kimoon Secretary-General of the United Nations’, United Nations, 2011, available at: .

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS realization of ‘universal access to modern energy services’ for all global energy poor; the doubling of the rate of global energy efficiency; and the doubling of the share of renewables in the global energy mix.5 Despite current wide-spread support for the initiative,6 it has been acknowledged with respect to the first goal that: ‘[a]chieving universal access to modern energy services is an immense challenge. It will require a large, sustained and coordinated effort from a combination of international, national and local actors, including governments, businesses and civil society organizations. All participants should be able to contribute in an open, transparent and identifiable manner while at the same time being accountable for the commitments they make to the overall effort’.7

Hence, it is clear that for realizing universal access to modern energy services various actors need to be involved, including private actors such as business and civil society. In fact, the SE4ALL-intiative currently concedes that it is operating under a ‘new business model’ for development, more widely emerging at the United Nations, namely ‘one where governments, businesses, investors, and civil society gather to solve global problems’.8 This ‘new business model’ is very remarkable, since it endorses the view that global development is not only a concern of States in their multi-lateral settings, or of the poor people within those States. Global equitable development is a concern of larger international society, which actively embraces private actors’ contributions. For access to energy services the involvement of business and investors is paramount, as illustrated by the estimate that a total of USD 48 billion per annum needs to be leveraged globally by various actors, with the additional observation that ‘the private sector needs to grow the most’ in this respect.9 Moreover, if we consider that the majority of investments will be required in rural areas in sub-Saharan Africa and developing Asia, where energy poverty is by far the highest,10 and 5

More information on all goals via the website of the SE4ALL-initiative: . For example, the United Nations General Assembly proclaimed an ‘International Year of Sustainable Energy for All’ in 2012, and designated the period 2014-2024 to be the UN Decade of Sustainable Energy for All. The first focal point for the UN Decade is women’s access to energy for the benefit of their health. See United Nations General Assembly, International Year of Sustainable Energy for All, adopted on 16 February 2011, UN Doc A/RES/65/151; United Nations General Assembly, Promotion of New and Renewable Sources of Energy, adopted on 30 March 2013, UN Doc. A/RES67/215, Paras. 2, 9-11, 13. 7 F. Birol et al., ‘Sustainable Energy for All: Technical Report of Task Force 1 in Support of the Objective to Achieve Universal Access to Modern Energy Services by 2030’. April 2012, p. 13 8 SE4ALL, ‘Accountability Framework’, 2013, available at: , and for the document directly available at: . 9 OECD & IEA, ‘Energy for All: Financing Access for the Poor’, Special Early Excerpt of the World Energy Outlook, October 2011, p. 3. 10 OECD & IEA, 2011, p. 3 6

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ which belong to nations which are the least developed, it is not only clear that energy access is highly disparate, but also needs sustained and concerted action from a dedicated group of international development actors. The purpose of this chapter is to assess how private actors, most notably business actors, can be engaged appropriately in the mobilization of sufficient investments for ‘universal access to modern energy services’. More specifically, it aims to assess how such actors can be held effectively accountable for their contributions (or lack thereof). The SE4ALL-initiative itself already started to propose a so-called ‘Accountability Framework’, which is based on a soft reporting procedure for those who voluntarily commit to the initiative.11 Within this Accountability Framework, private actors who formally sign-up to the initiative with a concrete commitment regularly report to the SE4ALL staff on their progress. In case progress is insufficient, or there are no reports, a specific commitment may be delisted from the SE4ALL-intiative. Ultimately, this amounts to a (weak) naming and shaming procedure, and contributions remain largely at the private actor’s discretion. This chapter will thus assess how ‘accountability’ for the implementation of global development goals (to be perceived here as shared, globally-set public aims or interests) can be appropriately shaped, including towards private actors. Specifically, it analyses if, and how, accountability frameworks can benefit from an international human rights based approach. This question is especially pertinent, considering that recent discussions within the United Nations Post2015 Development Framework – the follow-up Framework for the Millennium Development Goals, which is likely to include goals on energy access as well – reopened the debate on the following important questions related to human rights, global development goals and accountability:

‘What is accountability?: What do we mean by accountability in the context of a global development framework (e.g. by whom, to whom, on which basis)? […] How might “accountability” principles and mechanisms strengthen incentives for delivering on a new global development agenda? […] What should be key criteria when designing a monitoring framework (including new global goals, targets and indicators) to measure progress on a post-2015 agenda? Are there innovative and effective examples of accountability mechanisms (at the local, national, regional or global levels) that could be drawn upon in designing the post-2015 framework, and ensuring that post-2015 commitments are implemented in practice? How to ensure an accountability framework that takes

11

SE4ALL, supra n. 8, pp. 4, 8.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS into account human rights principles and obligations to assure delivery on the Post-2015 Development Agenda?’ 12

In this chapter, the purpose is to further scope out the meaning of ‘accountability’, i.e. what do we mean by it, what does it entail, including from a human rights perspective? In addition, what could a human rights law perspective add to the design of appropriate accountability frameworks, e.g. in terms of assigning roles and responsibilities and in shaping accountability mechanisms and relationships? Is the SE4ALL Accountability Framework, appropriately designed to secure the perquisite contributions of private actors alongside those of other actors, such as States? Before embarking upon these questions, the following sections will first provide some further background on ‘universal access to energy services’ as a new development goal, and situate it within the current positive human rights framework.

1. Universal Access to Modern Energy Services as an International Development Goal and a Human Rights Concern 1.1. Access Modern Energy Services a New International Development Goal As indicated in the Introduction, ‘universal access to modern energy services’ only recently started to gain traction as a new global public development interest. The articulation of the goal’s parameters is still taking place, although this process is arguably well underway now in various development fora that are mentioned above.13 Unfortunately, a clear consensus on the definition of and the requirements for ‘universal access to modern energy services’ does not yet

OHCHR & UNDP, ‘E-Discussion on Governance and the Post-2015 Framework’, Concept Note, 14 November 2012, available at: , or . Also: United Nations, ‘Who Will Be Accountable? Human Rights and the Post 2015 Development Agenda’, New York and Geneva, 2013, UN Doc. HR/PUB/13/1; E.g. see earlier discussions on the Millennium Development Goals (2000-2015), P. Alston, ‘Ships Passing in the Night: The Current State of the Human Rights and Development Debate Seen through the Lens of the Millennium Development Goals’, Human Rights Quarterly, Vol. 27, 2005, pp. 755-829. 13 E.g. in the context of the SE4ALL-initiative, see: ; within related United Nations agencies, e.g. see the website of the United Nations Development Programme, , or the collective of UN agencies under auspices of UN-Energy, . Also, the goals seems to get attention in the Post-2015 Development Framework for inclusion in a list of Sustainable Development Goals, WorldWeWant, ‘Global Thematic Consultation on Energy and the Post-2015 Development Agenda’, November 2013, p. 4, available at: . 12

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ exist,14 although Modi et al. have put forward a useful first definition of ‘energy services’ to start from. They consider that: ‘[e]nergy services are the benefits that energy carriers produce for human wellbeing. Examples of energy services include heat for cooking, illumination for home or business use, mechanical power for pumping or grinding, communication, and cooling for refrigeration. Energy services can be derived from a variety of energy carriers. For instance, illumination can be produced by fuels or by electricity. Mechanical power can be produced from kinetic or potential energy of water, from kinetic energy of wind, from a liquid fuel, or from electricity. Energy carriers, in turn, can be derived from a variety of primary energy sources; electricity for example can be generated from hydropower, petroleum, solar, or wind energy. From the point of view of the user, what matters is the energy service not the source. Whether in business, home, or community life, what matters are the reliability, affordability, and accessibility of the energy service.’ 15

It is clear that this definition raises a host of potential issues, for example in respect of the range of energy services to be included in the proposed development goal. In addition, the definition raises questions about the reliability, affordability and accessibility of these services; the persons or groups who should have access to them, i.e. each individual user, a household, a community, businesses or public services; which resources are used to generate the energy, and whether they are environmentally responsible? Finally, it is important to assess the reliability, availability and accessibility of the production sites or distribution networks within the larger supply chain.16 The SE4ALL-initiative is much aware of these different aspects and challenges, yet has not decided on a definition. Presently, the initiative measures, among other things, the actual levels of energy supply and the services used at the individual or household level, while at the same time seeking to measure community and small businesses access. Equally, the regularity of energy supply, the frequency of breakdowns, problems of quality, including low or fluctuating voltage, the wattage available, connection costs or electricity charges posed on households, and the legality of the connection used – summed up in ‘the attributes of availability, quality, affordability, and legality of supply’ – are

14

See SE4ALL, Tracking Framework, Chapter 2: Universal Access, 2013, p. 75, available at: . 15 V. Modi et al., ‘Energy Services for the Millennium Development Goals: Achieving the Millennium Development Goals’, ESMAP, IBRD, World Bank & UNDP, New York, 2006, pp. 9-10. 16 See for a much more elaborate discussion of these questions, SE4ALL, supra n. 14, or M. Hesselman & A. Hallo de Wolf, ‘Defining Universal Access to Modern Energy Services: An (Inter)national Human Rights Perspective’, 2014, forthcoming.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS also object of attention. Finally, the initiative is currently ‘fuel-neutral’ and ‘technology neutral’.17 It is important to observe that each element of the final definition has a bearing on the exact contributions required by different actors, including by private companies or investors. Hence, it is important that some measure of clarity on definitions is given. One manner to go about this would be to take inspiration from standards found in the human rights framework. For example, the human rights framework posits reference standards for universal access to a variety of essential services, such as health, water, food, housing, summed in the so-called AAAQ-Framework on the ‘availability’, ‘accessibility’, ‘acceptability’ and ‘quality’ of services. These standards could be equally employed to further shape standards on ‘universal access to modern energy services’.18 1.2. Universal Access to Modern Energy Services as a Human Rights Concern Is ‘universal access to modern energy services’ a human right already? The answer is no. There is currently no internationally recognized ‘human right to access modern energy services’ as of yet, either in hard law or in soft international human rights law. Nonetheless, Article 14(h)2 of the United Nations Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) comes close to an explicit recognition, since it states that women in rural areas have a right ‘to enjoy adequate living conditions, particularly in relation to housing, sanitation, electricity and water supply, transport and communications’. 19 This Convention dates from 1979, so it is remarkable that access to electricity was already considered an important human rights concern at that time. Unfortunately, the Article has not received much attention to date, although a specific interpretative ‘General Recommendation’ on this provision is currently being drafted. This should clarify some aspects related to access to electricity as a human rights concern as well.20 187 States are

17

SE4ALL, supra n. 14, pp. 79, 83-84. See e.g. H. Potts, Accountability and the Right to the Highest Attainable Standards of Health, Human Rights Centre, University of Essex, 2007, pp. 9-10; Committee on Economic, Social and Cultural Rights (CteeESCR), General Comment 14, 2000, ‘The Right to Highest Attainable Standard of Health’, UN Doc. E/C.12/2000/4. Para. 12; United Nations, supra n. 12, pp. 13, 34; WorldWeWant, supra n. 13, pp. 4, 16; and Hesselman & Hallo de Wolf, supra n. 16. 19 Convention on the Elimination of All Forms of Discrimination against Women, New York, 18 December 1979, United Nations, Treaty Series, Vol. 1249, p. 13. 20 Committee on All Forms of Elimination of Discrimination against Women, Concept Note for the General Recommendation on Article 14 of CEDAW (prepared with support of FAO, IFAD, WFP and UN Women), 2013, pp. 13-15, available at: . 18

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ currently party to CEDAW, so ratification is near universal for these obligations.21 Besides CEDAW, various human rights bodies have also recognized the importance of ‘access to energy’ in the context of their respective treaties. Most notably, the United Nations’ Committee on Economic, Social and Cultural Rights, which supervises the implementation of the International Covenant on Economic Social and Cultural Rights, has considered that ‘electricity access’ is a component of the ‘human right to health’,22 the ‘human right to an adequate standard of living’, including in particular in the context of housing, 23 the ‘human right to education’,24 or the protection of economic, social and cultural human rights more generally. 25 Similar links between access to energy and human rights protection have been recognized earlier by various international writers and UN Agencies as well, which affirms that ‘access to energy’ is finding increasing acceptance as a human rights concern.26 21

Status on implementation of CEDAW, available at the United Nations Treaty Collection website, . 22 Committee on Economic, Social and Cultural Rights (CteeESCR), ‘Concluding Observations on Australia’, 12 June 2009, E/C.12/AUS/CO/4, Para. 28: ‘The Committee calls on the State party to take immediate steps to improve the health situation of indigenous people, in particular women and children, including by implementing a human rights framework that ensures access to the social determinants of health such as housing, safe drinking water, electricity and effective sanitation systems.’ 23 CteeESCR recommended in several instances that settlements for evicted persons, displaced persons, indigenous peoples or certain minorities would have improved access to ‘basic services’, including safe drinking water, adequate sanitation, electricity and other essential services. The same goes for expression of concerns about certain rural or urban areas not having access to electricity. CteeESCR, ‘Concluding Observations on Cambodia’, 12 June 2009, UN. Doc. E/C.12/KHM/CO/1, Para. 30; CteeESCR, ‘Concluding Observations on Republic of Korea’, 17 December 2009, UN Doc. E/C.12/KOR/CO/3, Para. 22; CteeESCR, ‘Concluding Observations on Chad’, 16 December 2009, UN Doc. E/C.12/TCD/CO/3, Para. 26; CteeESCR, ‘Concluding Observations on Morocco’, 4 September 2006, UN Doc. E/C.12/MAR/CO/3, Para. 13: ‘The Committee takes note with concern of the privatization of public services such as water and electricity in urban centres in Morocco, the effect of which is to impose an additional economic burden on families living in shantytowns and thus aggravate their poverty.’ 24 CteeESCR, ‘Concluding Observations Sri Lanka’, 9 December 2010, UN Doc, E/C.12/LKA/CO/2-4, Para. 6. The Committee expressed concern over public investment in education being ‘at a relatively low level in spite of the needs of rebuilding school infrastructure in conflict-affected areas, reducing persistent disparities in accessing education between the State party’s provinces and providing schools with water, sanitation and electricity’. 25 E.g. CteeESCR, ‘Concluding Observations on Republic of Korea’, 17 December 2009, UN Doc. E/C.12/KOR/CO/3, Para. 22; CteeESCR, ‘Concluding Observations on Israel’, 26 June 2003, UN Doc. E/C.12/1/Add.90, Para. 16 26 See for more detail e.g.: Hesselman & Hallo de Wolf, supra n. 16; WHO, ‘Social Determinants of Health Sectoral Briefing Series 5’, 2013; A. Bradbrook, & G. Gardam, ‘Energy and Poverty: A Proposal to Harness International Law to Advance Universal Access to Modern Energy Services’, Netherlands International Law Review, Vol. 57, 2010, pp. 1-28; S. Tully, ‘Access to Electricity as a Human Right’, Netherlands Quarterly of Human Rights, Vol. 24, 2006, pp. 557-588; In addition, in 2010, the United Nations Development Programme (UNDP) also contracted a specific independent consultant to analyze the links between human rights and universal access to energy, indicating that

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS This article will go forward on the premise that ‘universal access to modern energy services’ can be appropriately viewed as a human rights concern – or at least can be usefully framed by borrowing concepts and ideas from international human rights law in shaping appropriate ‘governance and accountability’ frameworks for the realization of access to energy. The following sections will discuss this position in more detail.

2. Private Actor Engagement and Accountability as a Parameter for ‘Universal Access to Modern Energy Services’ As already mentioned in the introduction, the idea of ‘business involvement’ in development or ‘a new business model’ for development is gaining traction within the UN, including in the context of access to energy. The Chief of the SE4ALL initiative recently stated that: ‘[t]he speed and scale of interventions we need to transform our current energy system and ensure shared prosperity lie in the private sector’, meaning that the ‘private sector is seen as crucial to meet objectives’ of SE4ALL.27 Equally, in the context of the Post-2015 Development discussions it was stated that: ‘The challenges of our globalized world are becoming more complex and cross‐ cutting in nature, while stakeholders become more diverse and play more roles. Our approach to addressing such challenges should be universally applicable while at the same time implementable at the national, sub‐national, community and individual levels. We therefore need to strengthen global governance to ensure it is fit for its purpose […]. Enhanced and scaled up models of cooperation among all levels of governments, the private sector, and civil society at the global, regional, national, and sub‐national levels will be needed.’ 28

Finally, the United Nations Secretary-General himself affirmed that:29 ‘[T]ransformative actions of the post-2015 development agenda should be supported by multi-stakeholder partnerships […]. These should include not only governments but also businesses, private philanthropic foundations, international organizations, civil society, volunteer groups, local authorities, parliaments, trade there is an interest is such explorations. The results of this study are not published (yet) however. The vacancy is on file with the author. SE4ALL, ‘UN Decade of Sustainable Energy for All Launched to Business Community; Private Sector Engagement Seen as Crucial to Meet Objectives’, 9 April 2014, available at: . 28 ‘Communiqué of the Meeting of the High‐Level Panel of Eminent Persons on the Post‐2015 Development Agenda in Bali, Indonesia’, 27 March 2013, p. 2. 29 See United Nations Secretary-General, ‘A Life of Dignity for All: Accelerating Progress Towards the Millennium Development Goals and Advancing the United Nations Development Agenda Beyond 2015’, 26 July 2013, UN Doc. A/68/202, Para. 98. 27

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ unions, research institutes and academia. Such partnerships can channel commitments and actions from a wider set of actors, and their success depends on assigning roles, responsibilities and clear accountability [emphasis added MH].’

Hence, the need for multi-stakeholder engagement in development is now accepted generally, as is the need for clear responsibility and accountability amongst such actors. Yet, how can private actors be effectively engaged in global development efforts and how to appropriately ensure their accountability? What is their role vis-à-vis States? Lately, it is often observed in writings on the complexity of global affairs and the governance of various actors’ behavior therein, that problems may arise: ‘[W]hen elected and formally accountable actors and institutions [e.g. States] become dependent on non-accountable actors for the execution of public policy. In this muddle of complex, global relations among interdependent actors of various types, we may ask: “Which groups are held accountable to whom, to what principles and in what ways?”’30

This observation, by Boström and Garsten, is very much central to the problems discussed in this Chapter. SE4ALL and other UN actors clearly suggest that State actors cannot ensure ‘universal access to modern energy services’ by themselves. Private actor participation is discernable and required in the leverage of investment, but likely also to some extent in respect of operating actual services delivery over a longer period of time when public services have been privatized for reasons of efficiency. The following sections assess how to potentially effectively conceive of ‘accountability’ and ‘accountability mechanisms’ in a ‘muddle of complex, global relations’, including towards the inclusion of private actors in global affairs. It will also include a human rights perspective on this matter. 3. Conceptualizing ‘Accountability’: What Does ‘Accountability’ Entail? One of the problems in discussing ‘accountability’ is that ‘accountability’ is often considered an ‘essentially contested’ or ‘elusive’ term, full of good intentions but hard to grasp. Bovens warns us that the notion of ‘accountability’ should not be(come) a ‘dustbin filled with good intentions, loosely defined

30

M. Boström & C. Garsten, ‘Organizing for Accountability’, in M. Boström & C. Garsten (Eds.), Organizing Transnational Accountability, Edward Elgar Publishing, Cheltenham 2008, p. 5.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS concepts and vague images of good governance’.31 The following paragraphs however suggest that a number of shared general conceptual observations can be usefully derived from the current literature, 32 which can help assess existing accountability frameworks, such as the SE4ALL-framework. 3.1. ‘Internal’ and ‘External’ Accountability Relationships First of all, it appears to be understood that ‘accountability’ can be both ‘internal’ and ‘external’ in nature.33 ‘Internal accountability’ presupposes mostly a hierarchical relationship between a ‘constituency’ and those in formal/factual power to govern the interests of that constituency or the ‘represented’. It is essentially a vertical ‘principal-agent’ relationship.34 Examples of ‘internal’ accountability would be the State and its people, a company and its workers or shareholders, a civil society organization and those whose interests it represents or its donors, or international organizations and the States which establish them. ‘External accountability’ then exists in the more horizontal relationships amongst various actors/stakeholders externally.35 They are not based on a traditional principal-agent relationship, but on the fact that an actor is somehow (substantially) affected by the behavior of another actor; they have an interest in the behavior of the other actor because they are affected by it. This transforms them into a ‘stakeholder’ who deserves his/her interests accounted for in the course of conduct, decision-making, or implementation of conduct by that other actor.36 Some consider that especially in the international realm, in the absence of a single overarching governing power, most accountability-relationships are of a horizontal nature, meaning that greater ‘external accountability’ is generally a prime concern.37 Examples of ‘horizontal’ accountability-relationships could include those between/among sovereign states; between (international) NGOs/ individuals/local communities and transnational companies (TNCs)/foreign States/international organizations who affect their interests; or between States and TNCs incorporated elsewhere.

M. Bovens, ‘Analysing and Assessing Accountability: A Conceptual Framework’, European Law Journal, 2007, Vol. 13, p. 449. 32 Ibid., pp. 448, 450. 33 M. Koenig-Archibugi, ‘Transnational Corporations and Public Accountability’, Government and Opposition 2004, pp. 236-237. 34 Boström & Garsten, supra n. 30, p. 7. 35 Koenig-Archibugi, supra n. 33, pp. 236-237; Anderson, ‘Accountability as Legitimacy: Global Governance, Global Civil Society and the United Nations’, Brooklyn Journal of International Law, Vol. 36, 2011, pp. 841-843; Also, see R. Keohane, ‘Global Governance and Democratic Accountability’ (2003), reprinted in Wilkinson, The Global Governance Reader, Routledge, New York, 2005. 36 Koenig-Archibugi, supra n. 33, p. 236; Bovens, supra n. 31, p. 460. 37 Keohane, supra n. 35, pp. 128-130. 31

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ In the SE4ALL Accountability Framework it appears that the main ‘accountability-relationship’ covered is rather one-dimensional. It involves a (private) actor who voluntarily committed to the initiative and SE4ALL staff who assess this actor’s reports and engage in a possible sanction. Is this truly an accountability relationship between affected stakeholders? What is this accountability-relationship exactly based on? It is suggested here that the current Framework possibly neglects other (more) important (pre-existing) accountability-relationships, such as including affected States, or the individuals or local communities who stand to benefit from the services.38 3.2. ‘Accountability’ as a Mechanism A further analysis of the concept of ‘accountability’ leads to a second useful distinction in the literature. According to this distinction ‘accountability’ can be viewed either as a general aspirational value or ‘virtue’ of good behavior in its own right (it is good to be ‘accountable’, whatever this means), or as a distinct ‘mechanism’ designated to improve governance of various actors and interests, including towards the realization of certain (shared) commitments or goals.39 Of course, this is of interest here. Bovens submits that ‘accountability’ as a mechanism includes at least the following elements:40 -

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‘an actor’ [the ‘account-giver’] ‘who provides information about his conduct to some forum’ [e.g. an external global governance forum – however defined – or particular external stakeholders] ‘there should be explanation and justification of conduct—and not propaganda, or the provision of information or instructions to the general public’, while ‘explanation should be directed at a specific forum—and not be given at random’ ‘the actor must feel obliged to come forward—instead of being at liberty to provide any account whatsoever’ ‘there must be a possibility for debate and judgment by the forum, and an optional imposition of (informal) sanctions or rewards—and not a monologue without engagement.’

See also United Nations, supra n. 12, p. 65, considering that: ‘a human rights-based approach to monitoring entails that adults, children, local representatives and others be viewed and empowered as actors or agents who are enabled to undertake their own monitoring.’ 39 M. Bovens, ‘Two Concepts of Accountability: Accountability as a Virtue and as a Mechanism’, West European Politics, Vol. 33, 2010, pp. 946-967; Bovens, supra n. 31, pp. 450-454, 459-460 on the different purposes of accountability, e.g. financial accountability, efficiency of policy, legality of conduct, ‘procedure or process’, or ‘product or content’. 40 Bovens, supra n. 31, pp. 450-452. 38

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Koenig-Archibugi notes that Bovens’s definition resonates with definitions of ‘accountability’ elsewhere, including in the field of international relations. Koenig-Archibugi considers similarly that ‘accountability’ includes:41 -

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standards that those who are held accountable are expected to meet; information available to accountability-holders, who can then apply the standards in question to the performance of those who are held to account; the ability of these accountability-holders to impose sanctions – to attach costs to the failure to meet the standards.

A few aspects stand out from these definitions, for example the need for standards or expectations of behavior, a forum for exchange and discussion of information about the conduct of the account-giver by the account-holder, subject to the option of sanctions. The notion of sanctions, or incentives for that matter – Bovens refers to ‘facing consequences’ –, seems, in particular, a constitutive element of ‘accountability’ as a mechanism.42 While this generally would be supportive of legalistic approaches to accountability and governance,43 i.e. focusing clearly on standards, supervision and sanctions, it is immediately noted that accountability mechanisms can be non-legal in nature as well. Various authors submit that ‘accountability’ mechanisms can range from ‘political, legal, administrative, professional (peers) to social’ mechanisms (Bovens);44 from ‘hierarchical, supervisory, fiscal, legal, market, peer to public reputational’ (Grant and Keohane on transnational forms of accountability in international relations); 45 and from ‘judicial, quasi-judicial, administrative, political to social’ (per Potts in the context of human rights specifically).46 In all these lists, ‘legal’ accountability is included, as well as softer forms of ‘reputational’ accountability. According to Koenig-Archibugi, the latter type of accountability might be more common at the international plane, where hard international law as well as hard legal sanctions, including fines or penal sanctions may be less common.47 This seems certainly true for the international human rights framework, where truly judicial forms of accountability are generally scant, although this may be somewhat better at the national level. Yet, Keohane & Buchanan as quoted by M. Koenig-Archibugi, ‘Accountability in Transnational Relations: How Distinctive Is It?’, West European Politics, Vol. 33, 2010, p. 1144. Bovens, supra n. 31, pp. 451-452; Boström & Garsten, supra n. 30, p. 8; various writers, including Potts, supra n. 18, pp. 13-14 also usefully stress what accountability is not, or at least is not synonymous to or solely, such as ‘participation’, ‘transparency’, ‘inclusion’ or ‘responsiveness’; also Bovens, supra n. 31, pp. 452-453 43 Bovens, supra n. 31, p. 452. 44 Bovens, supra n. 31, pp. 454-457. 45 See for a comparison of Bovens & Grant and Keohane, Koenig-Archibugi, supra n. 41, p. 1144. 46 Potts, supra n. 18, pp. 13, 17. 47 Koenig-Archibugi, supra n. 41, p. 1150. 41

42

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ this also seems true for the SE4ALL Accountability Framework, which is solely based on soft ‘reputational’ sanctioning. What then may a human rights approach have to add in shaping appropriate governance and accountability frameworks for the realization of ‘universal access to modern energy services’, including in respect of various actors, and private actors as new important players in particular? This question will be further discussed in Section 4.

4. Multi-Stakeholder Accountability in International Human Rights Law One of the main questions that that this chapter seeks to raise and answer is whether international human rights law can assist in identifying and assigning ‘clear roles, responsibilities and accountability’ for various development actors in respect of governing ‘universal access to modern energy services’ as a complex development goal. Earlier sections in this chapter already highlighted the problem that private actors, most notably business actors and investors, need to be included in governance strategies for the goal to become a success. Equally, private actors need to be accountable for their contributions to the overall effort, including preferably the lack thereof, if the goal is really to be reached. Yet, it was also observed that problems may arise when (non-state, private) actors – who are not in any formal hierarchical position to actors who have originally been seen as tasked with the implementation of public policy objectives – are suddenly viewed as having to make a major contribution towards the realization of a shared public goal. The question then becomes: how should different groups be governed, (international) business and investors especially, and ‘[w]hich groups are held accountable to whom, to what principles and in what ways?’ The following section will aim to answer this question from the perspective of human rights law. Human rights law offers interesting (and legally binding) views on who are affected stakeholders/ account-holders/account-givers in efforts related to the provision of essential public services and important public interests qualified as human rights (i.e. at least States and individuals). At the same time, it still struggles with the (legal) position and obligations of private actors therein, and the mechanisms to hold private actors accountable. In this respect it can be worthwhile to note that the previous section suggested that ‘legal’ accountability is not the only manner to secure accountability; there may be various ways to conceive of an effective accountability-relationship and mechanisms to ensure accountability, i.e. ranging from social, reputational, political, administrative to other forms of

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS accountability. The potential effectiveness of such forms of accountability in respect of private actors is discussed later in this chapter. 4.1. The Centrality of ‘Universal’ Protection for the ‘Individual’ as the Prime Beneficiary/Account-Holders In respect of the insights to be drawn from human rights law for accountability frameworks, it can, first of all, be observed that one of the main insights that human rights law brings to the table for the concept of ‘accountability’, including that of private actors, is that it places clear emphasis on the need for ‘universal protection’ for ‘all affected individuals’. It also imposes certain substantive minimum standards on the basis of which expectations for services delivery can be based: see for example, the ‘AAAQ-Framework’, which was already discussed in Section 1.1 Indeed, the human rights framework qualifies first and foremost each and every individual (e.g. every energy poor person) equally or with priority – depending on his or her vulnerability – as a prime beneficiary of intended action (or inaction). This qualifies them as prime stakeholders, which deserve recognition as affected ‘account-holders’ vis-à-vis those who affect their position, requiring a suitable ‘accountability-mechanism’ for the protection of their interests. This contrasts with the current SE4ALL Accountability Framework, which, although clearly concerned with the energy needs of 2.8 billion ‘energy poor’, does not seem to accord these persons a direct stake in the realization of the goal through suitable avenues to hold any actor to account, let alone business actors. It could be asked in this respect on which basis the SE4ALL staff is exercising its task as accountholder? On the basis of which criteria, and on behalf of whom? A human rights based approach potentially has added benefit here, as it would clearly focus the efforts of all actors involved on the realization of certain minimum access, for all individuals, and taking into account their needs or rights. Another important observation on the SE4ALL initiative, is the fact that in human rights law the typical, prime accountability-relationship recognized is between an individual and its own national State. It does not cover accountability with respect to an international organization or a business which provides for the individual’s needs – the two actors currently discussed as involved in the SE4ALL Accountability Framework. Human rights law appoints the national State as the prime ‘account-giver’ (or ‘duty-bearer’) vis-à-vis individual citizens as the ‘account-holder’ – leaving aside any question of extraterritorial obligations.48 Of course, generally, from a viewpoint of establishing 48

For a discussion on the issue of extra-territorial obligations of human rights see F. Coomans & M. Kamminga (Eds.), Extraterritorial Application of Human Rights Treaties, Intersentia, Antwerp, 2004, and more specifically with respect to economic social and cultural rights the ‘Maastricht Principles on

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ successful accountability-mechanisms/relationships between any actors, the question is, what is the accountability-relationship based on and where do expectations or standards of behavior originate from? Moreover, how do actors recognize each other as (affected) stakeholders in the same project and find themselves in an accountability-relationship? Here, we encounter a potential disadvantage of the human rights framework, since it traditionally has narrowly recognized only States and its citizens as engaged in a (formal, vertical) accountability-relationship. Yet, with globalization, this narrow perception of human rights is waning as well, opening up to different actors, and beyond strict borders, much in line with the general observations on the changing international affairs dynamics discussed in Section 2.49 Two concrete examples of this trend in human rights law are the elaboration of (non-binding) human rights responsibilities for businesses (discussed below), and the drafting of guidelines on extra-territorial application of human rights for States.50 4.2. The National State as the Prime Duty-Bearer vis-à-vis Individual Account-Holders and as the Protector of Individuals vis-à-vis Third (Private) Actors As indicated in the previous paragraphs, one potential obstacle for devising a proper private-stakeholder accountability approach on the basis of human rights, is that the State still plays a very central role in the current human rights framework. Over the past decades the State has been put forward as the primary duty-bearer/account-giver towards individuals, and has, in that course, also been conceptualized as the ‘protector’ of individuals’ rights vis-à-vis other actors, such as corporations.51 This can be seen as a reaction to some of the concerns raised by Boström and Garsten as discussed in Section 2: more and more actors become involved in the global arena and have various impacts, but there are struggles to accommodate such actors appropriately in a framework where States remain central.52 the Extra-Territorial Obligations of States in the Area of Economic Social and Cultural Rights’, adopted by the ETO-Consortium on 28 September 2012, Maastricht, available at: (Maastricht ETO Principles). 49 E.g. A. Clapham, Human Rights Obligations of Non-State Actors, Oxford University Press, Oxford, 2006; P. Alston (Ed.), Non-State Actors and Human Rights, Oxford University Press, Oxford, 2005; M. Langford et al. (Eds.), Global Justice, State Duties: The Extraterritorial Scope of Economic, Social, and Cultural Rights in International Law, Cambridge University Press, Cambridge, 2012. 50 See e.g. Maastricht ETO Principles, supra n. 48; Or, Office of the High Commissioner for Human Rights, ‘Guiding Principles on Business and Human Rights: Implementing the United Nations “Respect, Protect and Remedy” Framework’, New York and Geneva, 2011, UN Doc. HR/PUB/11/04 (Ruggie Framework). 51 See e.g. the Ruggie Framework, ibid., Principle 1 on the State’s primary duty to protect. 52 See e.g. A. Bianchi, ‘The Fight for Inclusion: Non-State Actors in International Law’, in U. Fastenrath et al. (Eds.), From Bilateralism to Community Interest: Essays in Honour of Judge Bruno Simma, Oxford University Press, Oxford, 2011, pp. 39-75; J. D’Aspremont (Ed.), Participants in the International Legal System: Multiple Perspectives on Non-State Actors in International Law,

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS In human rights law, the answer to the increasing complexity of international affairs and the increasing involvement of private actors in the realization of public interests was partly found in the articulation of new international human rights obligations for States, entailing that States became not only responsible for their own (in)action towards individuals, but also for the (in)action of companies that impact on human rights. States remain the focal point and are basically subjected to a duty to effectively regulate the conduct of companies.53 Hence, the individual formally continues to only have one ‘account-giver’ to turn to according to human rights law, the State, which has simply richer obligations to protect individuals. Overall, it is accepted that States currently have three types of human rights obligations vis-à-vis individuals, in that States should ‘respect’, ‘protect’ and ‘fulfil’ all human rights that bind them. This entails specifically that States should: (a) refrain from interfering with any existing human rights enjoyment (‘respect’ human rights); (b) prevent others, including private actors, from interfering with any existing human rights enjoyment (to ‘protect’ human rights); and (c) actively take measures to ‘fulfil’ certain minimum enjoyment of human rights for all individuals, especially when persons do not have access to such minimum essential levels beyond their own fault, e.g. such as in the case of ‘energy poverty’. 54 Moreover, it is equally accepted that States could have an obligation to mobilize resources externally, individually and through cooperation, when they cannot fulfill human rights with internally available resources.55 This raises two questions. In the first place, whether the current ‘business model’ for development encourages contemplation of human rights responsibility for States to leverage sufficient Routledge Research in International Law, Routledge, London, 2011; Clapham, supra n. 49; Alston, supra n. 49. 53 See for similar observations on paradoxical effects of the current human rights discourse and attempts to deal with human rights violations by businesses leading a greater role and more centrality of the role of the State as a regulator: E. de Brabandere, ‘Non-State Actors and the Attempts to Formalize the Role of Corporations as Participants in the International Legal System’, in J. D’Aspremont (Ed.), Participants in the International Legal System: Multiple Perspectives on Non-State Actors in International Law, Routledge Research in International Law, Routledge, London, 2011, pp. 269, 280; A. Hallo de Wolf, Reconciling Privatization and Human Rights, Intersentia, Antwerp, 2011, p. 39, speaking of the ‘privatization paradox’. 54 E.g. ‘Maastricht Guidelines on Violations of Economic, Social and Cultural Rights’, adopted by a group of international human rights experts on 22-26 January 1997, Maastricht, available at: (Maastricht Guidelines). Guideline 6; and various interpretative documents by human rights supervisory bodies, e.g. CESCR, General Comment 14, 2000, Paras. 33-37 or CESCR, ‘General Comment No. 15 (2002): The Right to Water’, 20 January 2003, UN Doc. E/C.12/2002/11, Paras. 20-29. 55 Article 2(1) International Covenant of Economic Social and Cultural Rights, New York, 16 December 1966, United Nations Treaty Series, Vol. 933, p. 3: ‘Each State Party to the present Covenant undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means […]’; CteeESCR, General Comment 3, The nature of States parties’ obligations (Fifth session, 1990), U.N. Doc. E/1991/23, annex III at 86, Paras 9-13.

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ international business investment for human rights, through cooperation or certain other measures. In the second place, whether it indirectly supports responsibilities for business to contribute to development goals directly. One responsibility exists under the rubric of a State’s collective or individual obligation to protect/fulfill human rights and mobilize resources, the other under a separate expectation/responsibility for businesses to directly contribute.56 The role of business in development and in the realization of human rights specifically, will be now further discussed. 4.3. The Direct Human Rights Responsibilities and Accountability of Private Actors (Businesses/Investors) for Contributions to Public Interests/Human Rights Over the past decades there have been a number of attempts to elaborate various documents on the direct human rights responsibilities or obligations of businesses, both in binding and non-binding manner. Examples include, the UN Global Compact and voluntary codes of conduct adopted by various companies in the garment industry, but this chapter will not dwell on a description of these efforts, since extensive descriptions are available elsewhere. 57 Instead, this chapter will mostly deal with a brief appraisal of the (non-binding) human rights framework which currently seems to find most traction, being the relatively recently adopted United Nations Guiding Principles on Business and Human Rights in the context of the United Nations ‘Respect, Protect, Remedy Framework’ (2011) (hereinafter: Ruggie Framework). This Framework was articulated by UN Special Rapporteur on Business and Human Rights, John Ruggie, in the period 2005-2011.58 Central to the Ruggie Framework, is, again, the concept of a tripartite typology of human rights obligations for States, with ‘differentiated but complementary

E.g. A. Hallo de Wolf, ‘Human Rights and the Regulation of Privatized Essential Services’ Netherlands International Law Review, Vol. 60, 2013, pp. 180-181, supports that States’ regulation of (privatized) essential services provision, can actually be seen as an articulation of the State’s obligation to fulfil. 57 E.g. A. De Jonge, Transnational Corporations and International Law: Accountability in the Global Business Environment, Edward Elgar Publishing, Cheltenham, 2011; De Brabandere, supra n. 53; Bianchi, supra n. 53. 58 Ruggie Framework, 2011; Also, the OECD Guidelines on Multinational Enterprises were amended in 2011 in line with the Ruggie Framework. See OECD, OECD Guidelines for Multinational Enterprises, 2011 Edition, OECD Publishing, available at: , p 3; Noteworthy is the new recent call in the UN Human Rights Council by a large group of States that the United Nations move towards a binding instrument on TNCs’ human rights obligations. See ‘Social movements and CSOs welcome initiative by group of States for a legally binding instrument to regulate TNCs’, 23 September 2013, ETO Consortium Website, . It will be worthwhile to follow this initiative. 56

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS responsibilities’ for business.59 The Framework accepts firstly that States indeed have a prime protective function under human rights law, and are under the obligation to ‘protect’ (regulate) against interferences by corporations. 60 However, Ruggie went a step further, and the Guiding Principles underscore that business enterprises themselves ‘should ‘respect’ human rights, in that they should avoid infringing on the human rights of individuals, as well as address adverse human rights impacts with which they are involved’ (‘obligation to remedy’). 61 Thus, a responsibility (albeit not a proper international legal obligation) to ‘respect’, i.e. to ‘do no harm’, is extended to business enterprises in a similar manner that States have such an obligation. In respect of these obligations and responsibilities both business and States have an ‘obligation to remedy’ in case of violation of such obligations or responsibilities, with the requirement that ‘industry, multi-stakeholder and other collaborative initiatives that are based on respect for human rights-related standards’ should set up effective grievance mechanisms, including for standards put in codes of conduct, performance standards, global framework agreements or other undertakings. 62 Moreover, there is clear recognition of the role of non-legal standards and grievance mechanisms for accountability as well. The Ruggie Framework accepts non-judicial grievance mechanisms, proposing that these mechanisms: 63 -

are human rights compatible; enable trust from and be known to the stakeholder groups for which they are intended; are accessible in the sense that adequate assistance to ensure actual access must be provided; are predicable in process, outcomes available and implementation; are open to participation on fair, informed and respectful terms; are transparent in the sense that information on the operation of the grievance mechanism is provided; and are ‘a source of continuous learning’ for improvement and prevention of future harm.

The description seems roughly in line with the definition of ‘accountabilitymechanisms’ discussed in Section 3.2, especially if accountability is also ‘Protect, Respect and Remedy: a Framework for Business and Human Rights’, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, John Ruggie, 7 April 2008, UN Doc. A/HRC/8.5, Para. 9. 60 Ruggie Framework, Guiding Principles 1-10, p. 7 of the document in particular. 61 Ruggie Framework, Guiding Principle 11 and onwards. 62 Ruggie Framework, Guiding Principles 25, 30-31, see pp. 32-33. 63 Ruggie Framework, pp. 33-35. 59

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ understood as a process to help ‘to identify what works, so it can be repeated, and what does not, so it can be revised’.64 A clear focus on ‘sanctions’ seems not available, although the notion of ‘remedy’ may imply this. If we appraise the considerations in the Ruggie Framework with regard to the type of human rights responsibilities that businesses seem to incur currently (i.e. to ‘respect human rights’), we must immediately note a few points of concern when it comes to aligning these responsibilities with the earlier articulated needs regarding substantial investments and cooperation for the realization of SE4ALL or the ‘business model for development’. It appears that there are limited prospects for ‘accountability’ on the basis of human rights for pro-active contributions. Indeed, first of all, the Ruggie Framework is mostly based on the corporate ‘obligation to respect’ human rights and the State obligation to ‘protect’ against interferences; there are no guidelines referring to an obligation to fulfill human rights – either on the part of business or States – meaning that the business community’s incredible potential to contribute to ‘fulfilling’ human rights in local communities, as SE4ALL suggests, is not recognized as such.65 Yet, it has been put forward that TNCs can be ‘violators’ of human rights, ‘complicit’ in human rights abuse or ‘promotors’ of human rights,66 considering their ‘great and sometimes unexploited potential to promote human rights through investment’;67 however, true positive duties and inclusion of private actors into the human rights framework on this basis have not generally been accepted internationally, in soft law nor in other documents. 68 At the same time, the question needs to be raised whether contributions of corporations to human rights fulfillment are presently fully perceived as ‘gifts’ or ‘charity’, or if there is increasingly an expectation of TNCs to somehow contribute positively to human rights realization as well, if only under a rubric of corporate social responsibility, potentially, but not nearly always matched by corporate social

64

Potts, supra n. 18, p. 13. E.g. A. Gatto, Multinational Enterprises and Human Rights: Obligations under EU Law and International Law, Edward Elgar Publishing, Cheltenham, 2011, pp. 85, 90 notes that earlier references to obligations to fulfill human rights in a United Nations attempt to formulate a framework on human rights and businesses in 2003, seem to have been diluted in the current Ruggie Framework; Also others have critiqued the lack of positive duties for TNCs, including in the Ruggie Framework, on more moral business ethics grounds, such as F. Wettstein, ‘CSR and the Debate on Human Rights and Business: Briding the Great Divide’, Business Ethics Quarterly, Vol. 22, 2012, pp. 740, 745. 66 See Gatto, ibid., pp. 8-13. 67 Gatto, ibid., pp. 12-13; Similarly, De Jonge, supra n. 57, pp. 1-2. 68 Also see N. Jägers, Corporate Human Rights Obligations: In Search of Accountability, Intersentia, Antwerp, 2002, pp. 75-92, who primarily recognized/supports ‘obligations to fulfil’ in principal-agent relationships of the corporation, i.e. towards employees. 65

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS accountability. 69 In any event, the current development discourses – and especially the ‘new business model’ for development – seems to suggest a large emphasis on the contributions of private actors, even to the extent that development (or human rights fulfillment) cannot be obtained without their involvement. If this is the case, should the inclusion and accountability of business actors into the human rights framework, including for positive contributions (to fulfil), or the lack thereof, be taken more seriously? Of course, any answer to this question will need to consider the responsibilities, prerogatives and the accountability of affected States as well, and provide an answer as to any ‘differentiated but complementary responsibilities’ involved. To whom can an individual turn, and what may affected States expect from businesses or investors? This question brings us to a discussion of the most appropriate accountability-mechanisms and the actors who should be involved for the realization of human rights or development goals. A few notes are finally in order on the effectiveness of accountability mechanisms that are currently in place for existing corporate human rights or social responsibility initiatives, including as they relate to the present SE4ALL Accountability Framework. Examples of accountability mechanisms for businesses are the mechanisms in place for commitments to the United Nations Global Compact or the OECD Guidelines on Multinational Enterprises. It is argued that – while initiatives are increasingly based on (respect for) human rights70 – accountability for business enterprises as a whole is not, by and large, effective as yet. 71 De Jonge considers that ‘compliance remains essentially voluntary’ 72 for any current initiative, whether it is company-based, industrybased through international codes of conducts, or through self-regulation. Any failure to report on violations or even a public announcement that such a failure occurred, might not have any effect, partly due to the fact that businesses often contain such costs within their operations (i.e. they calculate set-backs in advance as a business risk) and are thereby not really incentivized to prevent harm; moreover, relevant watchdog organizations often lack funding or

69

This has been submitted earlier on the question whether wealthy developed States have an obligation/responsibility to contribute to human rights realization universally, if they are in a position to do so, as a matter of shared responsibilities for protection in a globalized world. S. Fukuda-Parr, ‘International Obligations for Economic Social and Cultural Rights: The Case of Millennium Development Goal Eight’, in S. Hertel & L. Minkler (Eds.), Economic Rights: Conceptual, Measurement and Policy Issues, Cambridge University Press, Cambridge, 2007, pp. 285-286. 70 The OECD Guidelines were amended in 2011 for the first time in ten years, now including specifically a large chapter on human rights protection based on the Ruggie Framework. 71 E.g. Koenig-Archibugi, supra n. 33, who discusses a number of potential ‘accountability gaps’ towards corporations; Also, for a discussion of various corporate social responsible initiatives, including accountability shortcomings, De Jonge, supra n. 57, pp. 21-90. 72 De Jonge, supra n. 57, p. 54.

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ investigatory powers to act as account-holders.73 In terms of ‘accountability’ as a ‘mechanism’ as defined in Section 3.2, this seems to signify problems with the effectiveness of the position of the ‘account-holders’ vis-à-vis business generally, or with the availability of effective ‘sanctions’. Others have voiced similar concerns about the effectiveness of voluntary mechanisms in the absence of adequate enforcement and accountability mechanisms. 74 For example, the ‘OECD Watch’, a group of non-governmental organizations, recently lamented that the first review of the OECD Guidelines since ten years, in 2011, did not credibly strengthen enforcement/accountability mechanisms – even though the scope of the Guidelines was improved by adding a human rights chapter inspired by the Ruggie Framework.75 De Jonge submits that ‘[w]hat is needed to give global standards genuine force and meaning are standardized, independent monitoring and verification mechanisms’.76 This is essentially a call for strengthened accountability avenues, by account-holders in an effective accountability-relationship. At the moment, the grievance mechanisms of the Ruggie Framework remain an underdeveloped pillar of that Framework. Reflecting on the design of the SE4ALL Accountability Framework, De Jonge has considered that a similar other UN reporting and public delisting system in place for businesses’ commitments to the United Nations Global Compact – which is arguably less concrete goal oriented, but is also subject to a special complaint procedure for ‘egregious abuse of the Compact’s overall aims and principles’ – has not been able to secure commitments and delivery upon commitments and accountability.77 She has suggested alternatively, and provokingly, that corporations could voluntary sign up to legally binding human rights treaties and related accountability mechanisms so that stronger avenues to effectuate accountability are available over the softer initiatives (potentially after ‘an international law system of responsibilities for [corporations]’ has more fully emerged though).78 This raises the question whether international human rights law and its accountability mechanisms should increasingly be integrated or used within development efforts. In other words, should the development agenda and human rights framework be better aligned and integrated for overall strengthened and focused accountability in each setting? Arguably, aligning the human rights discourse and the current development discourse, especially as it relates to the role of private actors in securing public interests and individuals 73

De Jonge, supra n. 57, pp. 54-55. Koenig-Archibugi, supra n. 33. OECD Watch, ‘OECD Watch Press Release: OECD Updates Ethical Business Standards, But Fails to Ensure Enforcement’, 25 May 2011, . 76 E.g. De Jonge, supra n. 57, pp. 31-33, 55. 77 De Jonge, supra n. 57, pp. 31-33, 54-55. 78 De Jonge, supra n. 57, p. 55. 74 75

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS rights, could ultimately benefit the main affected stakeholder in either discourse, namely, the (energy) poor individual which is the main object of development efforts and human rights protection.79

5. Conclusions This chapter has discussed how a human rights based approach might inform the design of accountability mechanisms for the governance of effective positive contributions by private actors to the realization of global public development interests and goals, in particular ‘universal access to modern energy services’. This question is important since the SE4ALL-intiative, which embraces this new development aim, but also the Post-2015 Development Framework, both have clearly stated that business investments for development are a conditio sine qua non for development. States are not likely to be able to secure access to energy for their populations by themselves, within the resources available to them internally. International contributions need to be leveraged, and the contributions of the private sector need to grow the most. Yet, both initiatives have also stressed the importance of effective accountability for various actors’ contributions to the overall effort, including private actors. The chapter discussed the observation by Boström and Garsten, who considered that problems may arise: ‘when elected and formally accountable actors and institutions [e.g. States] become dependent on non-accountable actors for the execution of public policy. In this muddle of complex, global relations among interdependent actors of various types, we may ask: “Which groups are held accountable to whom, to what principles and in what ways?”’ 80

The analysis demonstrated that ‘accountability’ is potentially a nebulous concept, but can at least entail so-called ‘internal’ and ‘external’ accountability, i.e. between those actors in a vertical, formal, hierarchical relationship to each other (e.g. a State and its citizens), or between actors who are substantially affected by each other’s behaviour and hence could be required to account for their conduct. External accountability between affected stakeholders is generally a prime concern in the international community, considering the absence of a single overarching governing entity, but impacts across the globe as a result of globalization grow more obvious every decade, and increasingly give rise to the

79 80

De Jonge, supra n. 57, pp. 54-55; United Nations, supra n. 12, p. 65. Boström & Garsten, supra n. 30, p. 5.

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REALIZING ‘UNIVERSAL ACCESS TO MODERN ENERGY SERVICES’ acceptance of certain responsibilities, or even obligations amongst various actors. The chapter also discussed the various elements of ‘accountability’ as a ‘mechanism’, which can give effect to these various external relations. This entails that there is an established accountability-relationship between actors, in which there is an account-giver providing information on its conduct to the account-holder or some forum, subject to meaningful evaluation and discussion of the conduct, with sanctions as required. The chapter concluded that the SE4ALL Accountability Framework currently provides for accountability for private actors’ contributions on the basis of a soft accountability mechanism which requires reporting to SE4ALL staff and potentially a sanction in the form of ‘reputational’ damage. On principle, reputational damage is counted as an effective avenue for accountability, yet at the same time, the chapter also noted some potential short comings of the SE4ALL Framework in engaging business efforts, for example, the fact that the truly affected stakeholders are not really given a place or are actively involved in the accountability framework, such as affected individuals, affected States, or representatives of affected persons. Moreover, similar accountability frameworks for other UN initiatives seeking to secure contributions by businesses have failed. In respect of these difficulties, the chapter suggested that a human rights perspective might usefully inform the design of governance and accountability frameworks in a development setting, considering that it focuses attention on the rights and interests of the persons (account-holders) who really stand to benefit, or loose, from the (in)action of the private sector to realize ‘universal access to energy services’. It places emphasis on the rights of affected individuals, and would demand that business efforts respond clearly to their needs. Secondly, the human rights framework can provide substantive (minimum) standards on the delivery of access to energy as an essential service, or as a human rights concern for the enjoyment of certain existing human rights – if not yet a human right in its own right. Unfortunately, despite the merits that a human rights perspective could bring for the design of effective accountability frameworks in a development-initiative context, there are also some shortcomings of the human rights framework in effectively engaging the private business sector towards greater accountability. These short comings are related, on the one hand, to the fact that the human rights framework does not (yet) currently articulate expectations for businesses to contribute in any positive manner to human rights enjoyment or fulfillment. This might increasingly be considered as an outdated position or shortcoming,

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS considering that the development discourse already boldly affirms the conditio sine qua non of business contributions towards successful realization of public development interests (and as a corollary human rights?). On the other hand, current (human rights based) corporate responsibility initiatives have not been able to capitalize on the effective design of (soft or hard) accountability mechanisms either, even though these are much supported. Accountability mechanisms either remain underdeveloped (i.e. the grievance mechanisms of the Ruggie Framework), or in soft cooperative initiatives, sanctions for businesses remain too ineffective to effectuate compliance with expectations or commitments. The chapter finally raised the question, whether better alignment and integration of the international human rights framework and its mechanisms with the softer development efforts such as in the SE4ALL-intiative, might ultimately benefit the prime affected stakeholders and intended beneficiaries in either discourse, namely the individual energy poor person. In this sense the recent developments and renewed discussions on the drafting of a binding international human rights treaty for corporations are worthwhile to watch, as is the development of a hopefully strong(er) governance and accountability mechanism for the implementation of the new Post-2015 Development Framework, or the SE4ALL initiative itself.

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Public Participation in Environmental Impact Assessments in China STATUS QUO AND THE WAY FORWARD Huanlin Lang*

Introduction Over the last three decades, rapid economic growth has led to severe environmental problems in China, such as air pollution, water shortages, soil erosion, and a loss of biodiversity. 1 Under such circumstances, Pan Yue, the deputy minister of the Ministry of Environmental Protection in China (MEP), pointed out that public participation should become an effective approach for dealing with China’s environmental challenges. 2 Meanwhile, Chinese citizens also show great enthusiasm in participating in decision-making on environmental protection.3 Therefore, further development of public participation in environmental protection has become both possible and necessary in China. Public participation has been widely accepted as a necessary element of good Environmental Impact Assessment (EIA) practice.4 International environmental law recognizes public participation as a fundamental right to protect human beings to live in a sound and harmonious environment.5 Relevant legal docu-

*

H. (Huanlin) Lang is a PhD Student at the University of Groningen. J.J. Kassiola & S. Guo, Introduction: China's Environmental Crisis – A Global Crisis with Chinese Characteristics: from Confucius to Cell Phones, in J.J. Kassiola & S. Guo (Eds.), China’s Environmental Crisis: Domestic and Global Political Impact and Responses, Palgrave Macmillan, New York 2010, pp. 2-5. S. Sitaraman, ‘Regulating the Belching Dragon: Rule of Law, Politics of Enforcement, and Pollution Prevention in Post-Mao Industrial China’, J. Int’l Envtl. L. & Pol’y, Vol. 18, No. 2, 2007, pp. 270-271. C.W. Cann, M.C. Cann & S. Gao, China’s Road to Sustainable Development, in K.A. Day (Ed.), China’s Environment and the Challenge of Sustainable Development, M.E. Sharpe, New York 2005, p. 5. 2 Y. Pan, ‘The Environment Needs Public Participation’, China Dialogue, 12 May 2006, p. 1. 3 C.C. Ni, ‘Wave of Social Unrest Continues across China’, 2006, available at: . T. Riley & H. Cai, ‘Unmasking Chinese Business Enterprises: Using Information Disclosure Laws to Enhance Public Participation in Corporate Environmental Decision Making’, Harvard Environmental Law Review, Vol. 33, 2009, p. 179. 4 Y. Wang, R.K. Morgan & M. Cashmore, ‘Environmental Impact Assessment of Projects in the People’s Republic of China: New Law, Old Problems’, Environmental Impact Assessment Review, Vol. 23, 2003, p. 562. Q. Chen, Y. Zhang & A. Ekroos, ‘Comparison of China's Environmental Impact Assessment (EIA) Law with the European Union (EU) EIA Directive’, Environ Monit Assess, Vol. 132, 2007, pp. 53-54 . 5 J. Verschuuren, ‘Participation Regarding the Elaboration and Approval of Projects in the EU after the Aarhus Convention’, in T.F.M. Etty & H. Somsen (Eds.), Yearbook of European Environmental Law, Vol. 4, Oxford University Press, Oxford, 2004, p. 29. 1

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS ments, such as the Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (the Aarhus Convention) and Convention on Environmental Impact Assessment in a Transboundary Context (the Espoo Convention), provide concrete guidance on how to organize public participation in EIA. In the European Union (EU), when the EIA was introduced by Directive 85/337/EEC in 1985, public participation became an essential part of it. Following the accession to the Aarhus Convention in 1998, the EU approved Directive 2003/35/EC in 2003 to guide the implementation of the Convention in its Member States. Article 3 of Directive 2003/35/EC provides an amendment to Directive 85/337/EEC based on Article 6 of the Aarhus Convention.6 In China, the EIA is the most fertile area for the development of public participation. The EIA was introduced in China in 1973, and it became one of the main regulatory instruments for environmental protection in the late 1990s.7 When the Environmental Impact Assessment Law (EIA Law) was adopted in 2003, public participation was recognized as a requisite part of the EIA. Later, in 2006, Interim Regulations on Public Participation in the EIA was promulgated as complementary to the implementation of public participation in the EIA, which is regarded as a milestone in the development of public participation in China.8 However, public participation in China’s EIA has only been developed over the last ten years, and neither the government nor the public has sufficient experience and capacity in the full and proper use of this instrument; therefore, the implementation of public participation in the practice of EIA is not always satisfying and calls for improvement.9 The objective of this chapter is to present the current status of public participation in China’s EIA, discover existing limitations, and provide suggestions for promoting the role of private actors in China’s environmental protection. To fulfil this objective, this study commences with an examination of existing Chinese legal provisions on public participation in EIAs; then, it provides a qualitative study to show the implementation of such legal provisions; and finally it ascertains the degree of limitations therein. It should be 6

Though China is not yet a member of the Aarhus Convention, since this Convention is one of the most advanced international legal documents in the field of public participation in environmental protection, which can provide plenty of precious legislative and practical knowledge. Some of its content and experience will be used to complement the evaluation on Chinese law and practice. 7 Wang, Morgan & Cashmore, supra n. 4, pp. 545-550. 8 J. Moorman & G. Zhang, ‘Promoting and Strengthening Public Participation in China’s Environmental Impact Assessment Process: Comparing China’s EIA Law and U.S. NEPA’, Vermont Journal of Environmental Law, Vol. 8, 2007, p. 282. 9 Y. Zhao, ‘Public Participation in China’s EIA Regime: Rhetoric or Reality?’, Journal of Environmental Law, Vol. 22, No. 1, 2010, pp. 106-122.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA pointed out that this qualitative study cannot present a complete picture of China’s practice of public participation in EIAs; instead, it is used to help understand related Chinese legislative content through the empirical research. Learning from the literature on public participation in environmental decisionmaking, the essential aspects of public participation can be summarised as: participatory objects, actors, procedural standards and legal remedies; moreover, procedural standards can be further divided into information disclosure, participatory modes, procedural arrangements, due account taken and outcome release, and capacity building.10 These aspects will be used as a framework for the analysis in this study. Section 1 summarizes the main provisions on public participation in EIA through the EIA Law and the Public Participation Regulation. Section 2 engages in a qualitative study on practice cooperated with the Tianjin Academy of Environmental Science (TAES) to display how existing legal provisions are being implemented. Section 3 critically analyses the limitations in the legal practice. Based on this, Section 4 presents general recommendations for the further development of public participation in EIAs in the long run.

1. Legal Provisions on Public Participation in the EIA in China 1.1. The Environmental Impact Assessment Law Article 5 of the EIA law provides the legitimacy for public participation in the EIA by stating that ‘the State encourages related units, experts and the public to participate in EIA in appropriate ways’. Public participation may take place both in a plan- and in a project-based EIA. In the plan-based EIA, when ‘a special plan may have negative environmental impact and directly relate to public environmental interests’, the planning department should organize public participation before submitting the draft plan for approval (Article 11). In a project-based EIA, depending on the specific degree of environmental impact – significant, moderate or negligible – an EIA report, form or registration form may be requested (Article 16). In 2007, the MEP published the Classification

10

S. Stec, S. Casey-Lefkowitz & J. Jendroska, The Aarhus Convention: An Implementation Guide, UN Publication, New York and Geneva 2000. G. Rowe & L.J. Frewer, ‘Public Participation Methods: A Framework for Evaluation’, Science, Technology and Human Values, Vol. 35, No. 1, 2000, pp. 3-29. M.K. Ewing, Public Participation in Environmental Decision-Making, 2003, available at: . M. Lee & C. Abbot, ‘The Usual Suspect? Public participation under the Aarhus Convention’, The Modern Law Review, Vol. 66, No. 1, 2003, pp. 80-108. M. Pallemaerts (Ed.), The Aarhus Convention at Ten: Interaction and Tension between Conventional International Law and EU Environmental Law, Europa Law Publishing, Groningen, 2011. Y. Wang, Public Participation in EIA, SEA and Environmental Planning (China), EU-China Environmental Governance Programme, 2012.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Catalogue for EIA on Construction Projects as concrete guidance on judging the degree of impact. Only if ‘the construction project may have a significant environmental impact and requires an EIA report’, should public participation be conducted in the preparation stage of the report (Article 21). In both planand project-based EIAs, related units, experts and the public should be consulted through the discussion meeting, the hearing or other appropriate ways by the planning department or developers. All comments from participants should be seriously considered and the reasons for accepting or rejecting should be included in the EIA report submitted for approval. Public participation may only be exempted in conditions where secrecy is required by the State law (Articles 11 & 21). Although the EIA Law merely involves brief regulations, it is still a significant step forward in the development of public participation in EIAs in China.11 1.2. Interim Regulations on Public Participation in the EIA In 2006 Interim Regulations on Public Participation in EIAs (hereafter referred to as the Public Participation Regulation) were promulgated by the State Environmental Protection Administration (SEPA) in order to improve and manage public participation in EIAs (Article 1). As a ministerial rule inferior to the EIA law, the provisions of the Public Participation Regulation for public participation in plan-based EIAs are similar to those in the EIA law, while the provisions on project-based EIAs are more detailed. The Public Participation Regulation expands participatory objects in a project-based EIA. Apart from EIAs on construction projects that may ‘have significant impact on the environment and should have an EIA report’, public participation should also take place if ‘the EIA report needs re-approval because of significant changes in the project, or the project does not start until five years after the approval of the EIA report’ (Article 2). Moreover, public participation could also be organized in the approval or re-approval process of the EIA report by the environmental department. Developers, the entrusted EIA institutions and the environmental department in charge of approvals are authorised to organize public participation activities. While developers and their entrusted EIA institutions must organize public participation before they submit their EIA report for approval (Article 12), the environmental department can organize public participation simply when they consider it necessary (Article 13). Moreover, while all members of the public are entitled to access information and to submit their comments on the EIA (Article 14), there is an obligation for organizers to consult members of the public, particularly those who may be affected by the project (Article 15). 11

Moorman & Zhang, supra n. 8, pp. 303-304.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA Strictly speaking, the public concerned should be selected comprehensively based on local conditions, their profession, capacity background, and the degree to which they are affected. Other procedural rules concern public participation in project-based EIAs. Firstly, the Public Participation Regulation outlines the content, the time scale, and how the information will be disclosed. Within seven days the developer decides which EIA institution to hire, and the following information should be given: the name with a brief introduction of the project, information on the developer and the EIA institution, procedures and the main content of the EIA, main issues calling for public comments, and the opportunities for the public to participate (Article 8). Before the EIA report is submitted for approval, the developer or the EIA institution should disclose information for the second time. This includes a brief introduction of the project, the potential impact on the environment, countermeasures on mitigating the environmental impact, and the main outcome of EIA. Furthermore, the means and the time allotted for the public to review the abridged edition of the EIA report and to ask for further information on the scope and main issues as well as the time-frame of public participation must be set out (Article 9). After accepting the EIA report, the environmental department should also disclose relevant information before they make the final decision (Article 13). Moreover, the information should be accessible and understandable for the public (Articles 10, 11). Secondly, the public is entitled to use letters, fax messages, e-mails or other appropriate means to submit comments following the publication of this information. Meanwhile, developers and EIA institutions are required to adopt a questionnaire investigation, an expert panel, a demonstration meeting, a hearing, or other appropriate means to obtain public opinion (Article 12). Chapter 3 of the Public Participation Regulation provides further guidance on how to organize the questionnaire investigation, the expert panel, the discussion meeting and the hearing. The most significant provision is that transparency, representativeness and justice must be guaranteed in the participatory process. Thirdly, a minimum of ten days is set for the participatory phase (Articles 12, 13), and organizers should design an appropriate time-frame according to special situations only if it meets this minimum period. Furthermore, if a hearing is held, its time, place, main issues, and registration should be announced ten days in advance, and representatives should be selected five days before the hearing (Articles 24, 25). These flexible rules meet the different needs of the projects. However, whether the minimum period is long enough is another question.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Lastly, comments from the public must be carefully reviewed, and reasons for their acceptance or rejection ought to be included in the EIA report (Articles 12, 13, 17, 34). The environmental department may organize advisory experts to evaluate the results of public participation if necessary (Article 17). Furthermore, developers and EIA institutions are advised to individually communicate with participants who have different ideas (Article 12). Unfortunately, whether records on public comments should be open to the public are not stipulated in the Regulation. Generally speaking, a basic legal framework for public participation in China’s EIAs, which includes both substantive and procedural standards, has been established. In the next section, I will assess the effects of these provisions on the implementation and evaluate the pros and cons in such a way to answer the question of whether the implementation of existing legislation needs further improvement. Therefore, the next section will focus on the practice of law through a qualitative study.

2. The Practice of Law: A Qualitative Study Rather than presenting a complete picture of the practice of public participation in China’s EIAs, the aim of this empirical research is to use a qualitative study to present some empirical data and provide readers with some knowledge of the implementation of the related legal provisions. This empirical research was conducted in cooperation with the TAES, Tianjin Academy of Environmental Science, which has completed more than 4,000 EIA cases since its establishment (including some important EIA projects entrusted to it by the MEP) and the Tianjin Environmental Protection Bureau. Therefore, its wealth of experience makes it ideal for this research.12 This study was conducted in two departments, which were dedicated to conducting project-based EIAs, through three essential research methods: interviews, case-studies and questionnaires. In the first place, two main interviews were held with the managers of the two departments. Both managers had been working on EIAs for more than seven years and were experienced in organizing public participation. Afterwards, the case-study and the questionnaire investigation were adopted to verify and complement information acquired from the interviews. The case-study includes nine cases (see Appendix 1). These cases were provided by the two managers on the condition that the cases did not interfere with national or business secrets and could illustrate the ordinary situation of public participation activities in EIA organized by the TAES. This means that the case selection was potentially influenced by the personal ideas of the two managers; however, since full EIA 12

More information of the TAES is available at: .

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA reports are rarely open to the public, access to such first-hand documents was already very valuable for the research. Under such circumstances, although these cases may not be representative of all EIAs organized by the TAES, they could still be used to show part of the practice of the implementation of the relevant provisions. According to the two managers, there were roughly 30 employees in their departments involved in conducting EIAs. Based on this, 30 questionnaires were handed out to these employees, and 21 of these were returned with questions answered. Questions included in the questionnaire can be found in Appendix 2.13 The findings in this empirical research are concluded as follows. 2.1. Participatory Objects An essential reference for the TAES to decide whether a project should integrate public participation as a necessary procedure is the Classification Catalogue for EIA on Construction Projects. This Catalogue classifies projects into three groups depending on the degree of the environmental impact,14 and states that only those projects that have significant environmental impact and need EIA reports must include public participation. According to interviewees, they usually make the judgment on the degree of the environmental impact with an all-round, long-term and comprehensive approach. This is backed up by Table 1. In this table, it can be seen that both the direct and indirect, positive and negative, short and long-term impact as well as the environmental, economic and social impact have all been taken into account during the evaluation. Interviewees considered that such a comprehensive evaluation could, to the greatest extent possible, guarantee that public participation would take place when necessary. However, according to my observation, a significant defect in the stage of deciding whether a project has to integrate public participation is that there are no available channels for the public to express ideas, thus limiting opportunities for the public to complement necessary knowledge and information. When the public shares different opinions with the TAES, the public can only accept the TAES’ decision instead of challenging or overruling it.

13

Questions were designed based on a legal framework for public participation in environmental decision-making that will be proposed in the author’s PhD thesis. The legal framework is based on international law governing public participation in environmental decision-making. The full text of the questionnaires and the results can also be looked into through the author's PhD thesis. 14 The Catalogue divides projects in to three groups: those incurring a significant environmental impact should make EIA reports, within which public participation is a necessary component, those that may incur moderate environmental impact should make EIA forms, and those that may incur negligible or may not have environmental impact at all should fill EIA registration forms.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Table 1: A form of identification matrix for environmental impact, Case 515 During During construction operation

Society & Economy

Land covered

Resources

Roadbed

●★ □

Employment

Road surface

●★ □

Economy

Material transport

●★ □ ●★ ↑□

Mechanical work

●★ □ ●★ ↑□

Tourism Land use Land resources

● ●

Conservation of water and soil Landscape Ecology

Environment

Discarded soil

●↓ ■ ○☆ ↓■

●↑ ■ ●↑ ■ ●☆ ↓■ ●☆ ↑■ ○☆ ↑□

●↓

Deforesting

○ ○↑ ■ ●↑ ■

●☆ ↓■ ●★ ↑■ ●↑

○☆ ↑

Sound environment

●☆ ↑□

●☆ ↑□

Air

●☆ ↑□

●☆ ↑□ ●☆ ↑□

●☆ □

○★ □ ●★ ↑■ ○↑ ■

●↑

Water

Solid waste

Transport

○☆ ↑ ●☆ ↑■ ●☆ ↑■

●/○：direct/indirect impact; ★/☆：positive/negative impact; ■/□：short-term/long-term impact

15

The Table is from the EIA report of Case 5. Case 5 is about a project-based EIA on the infrastructure construction. This project intended to build ten new roads in a range of 3.7 km 2 in the starting zone of an industrial area.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA 2.2. Actors In the case-study, the division of work among the EIA institution, the developer and the government meant that the TAES was mainly responsible for organizing public participation activities, developers may provide information and assistance if necessary, and the environmental department exercises examination and approval. Regarding participants, 16 while there were always participants from the public concerned who may be affected or have interests, few participants from the general public could be found. Meanwhile, most participants on records were invited by the TAES or developers; in other words, there were hardly any voluntary participants. This indicates that the general activeness of participants in EIAs is still low. Furthermore, since there is no guidance on the selection of participants, it becomes a challenging job in reality. In the questionnaire investigation organized by the TAES during the EIA process, questionnaires were usually randomly delivered to residents who lived in the area that might incur an environmental impact. In other participatory means, such as hearings and demonstration meetings, the TAES would ideally entrust this task to the local neighbourhood committee or village committee because they are the lowest management units in the Chinese administrative system and should have better knowledge of the composition and distribution of residents in the area under their jurisdiction. In EIA reports, the background information of participants, such as gender, age, educational background and career, would always be listed, such as information from Tables 2 and 3. The objective of this is to demonstrate that the selection of participants is reasonable and could represent the real makeup of local residents. However, taking Table 3 for instance, the proportion of male and female participants is 93% to 7% respectively, and since this investigation was done in several villages around the proposed park, it is difficult to believe that this can represent the real local proportion of men and women. Accordingly, there seems to be room for improvement in the identification of participants in EIAs

16

Hereinto, ‘participants’ refers to those who participate in public participation activities organized by the TAES in EIAs.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Table 2: The background information of participants in Case 417 Participants

Age

Type

20-35

36-50

50+

Numbers Proportion (%)

49 26.8

65 35.5

67 36.6

Participants Type Numbers Proportion (%)

Educational Background High/ Primary University+ Middle schoolSchool 39 122 9 21.3 66.7 4.9

Career Office workers, workers 70 38.3

Public servants, engineers 6 3.3

Teachers

Others

20 10.9

85 46.4

Table 3: The background information of participants in Case 718 Participants Type Numbers Proportion (%)

Gender

Age

M

F

30-

30-50

50+

93 93

7 7

21 21

72 72

7 7

Educational Background UniverHigh Middle sity+ School School19 46 36 19 46 36

2.3. Procedural Standards 2.3.1. Information Disclosure Information on the website of the TAES, the introduction of the questionnaire investigation and public billboards in affected communities are three frequent ways of information disclosure that have been used by the TAES. Among them, the publicity on the internet is the most frequently used. Through the examination of the online-publicity in these nine cases, the disclosed content strictly follows the required items in Article 8 and 9 of the Public Participation Regulation, within which a summary of the environmental impact, essential countermeasures and the conclusion are always included. However, one significant defect of their online-publicity is that the disclosed content was not always 17

The statistic is from EIA reports of Case 4. Case 4 is about a project-based EIA on the adjustment of the products structure of a steel plant. In this project, the plant intended to upgrade its production scale, increase the varieties of the products, enlarge the proportion of the products with higher additional value, and improve its ability in energy-saving and emission-reduction. It has to be noticed that there were some participants who did not fill age, educational background or career information in this case. 18 The statistic is from EIA reports of Case 7. Case 7 is about a project-based EIA on the construction of a gas distributed energy station. This proposed station intended to use the gas-steam combined the cycle unit to provide heat and electricity for surrounding industrial, business and living areas.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA sufficient or understandable enough for the public to thoroughly understand the projects. Take Case 7 for instance,19 the project was introduced as: ‘this project will cover 115,000 m2, and it will have 2 sets of 60MW level gassteam combined cycle units consuming natural gas. Each cycle unit (PG6581B or the same mode) will be equipped with one gas turbine, one gas turbine generator, one steam turbine, one steam turbine generator and one exhaust-heat boiler’.

Its impact was briefly concluded as ‘this project will use natural gas with lownitrogen combustion technology and construct nitrogen removal facility. The amount of discharged NOx and SO2 will be up to the national standard’. In my opinion, without any further explanation on professional content, such as ‘lownitrogen combustion technology’, or any additional information, the onlinepublicity of this project was too difficult for ordinary citizens to fully understand the project or its impact.20 Under such circumstances, if the public wishes to know more, they have to consult the full version of the EIA report through channels provided in the publicity. However, the problem is that the full version of the EIA report will rarely be open to the public for reasons that they may reveal state or business secrets.21 This has come under criticism for restricting the public’s exercise of power to oversee the complete EIA process and make to comments on necessary information. 22 The other defect is that such online publication is usually disclosed on professional websites, such as the TAES website and the environmental department website which ordinary citizens will not check regularly, increasing the difficulty for citizens to be well informed.23 Together with the fact that there are some people who do not know how to use a computer or have difficulties in accessing the internet, a better way to ensure the broad and timely accessibility of such information disclosure needs further consideration.24 A second means of information disclosure is through the introduction of questionnaires completed during public participation activities. This ensures that 19

Ibid. Information is from the second online-publicity of the project. However, since the name of the project is required to be sealed by the TAES, its website link cannot be provided here. 21 Such a situation was also confronted by the author during the research that some EIA files were refused to be studied because of their interference with business secrets. 22 Wang, Morgan & Cashmore, supra n. 4, pp. 565-566. S. Zhuang, The Lack of Credibility of Chinese EIA Report, 2013, available at: . 23 C. Yang, ‘The Application of the Network Dissemination to Governmental Information Disclosure in China’, Modern Information, Vol. 3, 2005, pp. 8-10. G. Wu, Countermeasures on Defects of Governmental Information Disclosure, 2013, see: . 24 Zhao, supra n. 9, pp. 102-103, 110-111. 20

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS people who are invited to fill in the questionnaire could get access to information, but those who are not invited may not be able to access such information. In addition, according to my finding, the amount of information and its accessibility via questionnaires is, by comparison, even worse than that of the online publication. Thirdly, putting up public billboards in the affected communities can make the public conveniently access disclosed information. However, the utilisation of this way is scarce throughout nine cases, and only Case 3 adopted it. So, generally speaking, both the content and the form of current information disclosure have defects. 2.3.2. Participatory Methods The TAES applies different participatory methods to communicate with different groups of the public. To the general public, a hotline, fax number, email address and other means of contact are open for everyone to give comments. Unfortunately, throughout all nine cases, there is rarely any feedback from the public through these open means. To the public concerned, 25 participatory methods would be selected depending on the degree of the environmental impact and social concerns. The questionnaire investigation has been used in all nine cases. The amount of delivered questionnaires was decided by the TAES depending on the impact of the project (see Table 4). One outstanding limitation of this participatory mode is that, throughout the questionnaire investigation of nine cases, the questions used are almost the same. As observed, the nine cases had their different features and level of impact, and proposed questions should be adjusted according to the circumstances so as to meet their respective needs. Otherwise the investigation easily becomes a formality without real meaning.26 If the environmental impact is significant or social concerns are widespread, methods such as the hearing and discussion meeting will be applied by the TAES. In Case 4,27 a hearing was organized. It was initiated by the construction plant and organized by the local sub-district office, and the TAES was in charge of introducing the project and its impact in the hearing. A total of 39 participants attended and expressed their personal opinions. As a result, the plant responded to each comment on the site and promised to adopt reasonable measures on environment protection. Moreover, comments were concluded and recorded in the EIA report along with their results. Generally speaking, current participatory ‘The public concerned’ refers to those who may be impacted by the decision or have interests involved. L. Meng, ‘Defects and Suggestions on Public Participation in Project-based EIA’, Technology and Industry, Vol. 4, 2013, p. 191. 27 See supra n. 17. 25 26

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA methods are used to collect comments rather than the setting up of a communicative platform, and if public comments from the hearing are compared with those from the questionnaire investigation, the former seems more meaningful and has more of an influence on the EIA result than the latter. 28 Table 4: The number of retrieved and delivered questionnaires in every case Case No. 1 2 3 4 5 6 7 8 9 Retrieved/ 38/ 30/ 102/ 183/ 40/ 30/ 100/ 30/ 30/ Delivered 38 30 160 200 40 30 100 30 30 2.3.3. Procedural Arrangement According to interviewees, the general time-frame for the entire EIA process was 40 to 60 working days. Among these, an average time-frame for information publication and public participation was 20 to 30 working days. A concrete time-frame of the questionnaire investigation or the hearing cannot be found in any EIA reports. Since the public can provide comments during the information disclosure period, the time-frame for information disclosure can be used to examine the current time related arrangements for public participation activities in EIA. In practice, it is claimed that the practical time-frame for public participation should be adjusted according to special needs of the exact project. 29 From Table 5, it can be seen that time-frames for different cases varied. Nevertheless, although Cases 3, 4 and 7 were more complicated than others, according to the two project managers, their adopted time-frames did not show significant differences. The TAES was used to make a particular plan for public participation, but it was only of guidance for organizing public participation without disclosure. Therefore, the public could hardly have an overview of the entire EIA process or its time-frame beforehand. The public is entitled to express their opinion on the time-frame during the participatory process. Until now, there have been no complaints from the public. This does not however prove that the current timeframe is satisfactory or adequate. While most interviewees considered the current time-frame capable of meeting actual needs, they also believed that a longer period for public participation would be better. Other professional

J. Chang, ‘How to Harmonize Community Autonomy and Administrative Responsibility in Environmental Decision-Making: Environmental Hearing Institutions in Wuhan’, TEMPLE ENV. L. & TECH. J., Vol. 24, 2005, p. 235. 29 ‘Special needs’ refer to, inter alia, the degree of the environmental impact, the influenced population, the construction period, and the social sensitivity. 28

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS persons also cast their doubt on the reasonableness of the present time arrangements.30 Table 5: Time-frames of twice information disclosure in cases (working days) Case No. 1 2 3 4 5 6 7 8 9 st 1 disN/A 6 3 N/A N/A 10 11 N/A N/A closure 2nd dis10 13 11 11 10 10 11 10 12 closure

‘Early participation’ means public participation should take place when all options are open, where it can be most effective. A general rule is that any action taken before public participation is strictly forbidden. 31 Interviewees believed that this could be guaranteed in most cases; nevertheless, there are at least two exceptional situations. One is that the public could not take part at the stage of deciding whether an EIA report, an EIA form or a registered form should be used. Without any public supervision in this stage, it is hard to guarantee that no cases, which require an EIA report, will escape the obligation of public participation. The other exceptional situation occurs when a project is part of a regional plan. The location may have already been decided and may no longer be open to change. In this situation, the TAES can only seek efficient approaches to control and reduce pollution instead of changing the site selection. Consequently, there are indeed exceptions for early participation in the practice of the TAES. 2.3.4. Due Account Taken and Outcome Release ‘Outcome’, hereinto, refers to the processing of the results of the public participation, as well as final decisions reached. Interviewees confirmed that if the public comments were indeed reasonable and helpful, they would like to learn from them. Over 30% of the interviewees had experienced a change of opinion as a result of public comments. In practice, the TAES requires its staff to take due account of different opinions from the public. Furthermore, in most cases, the EIA project will not continue until an agreement is reached among all actors. All nine EIA reports examined in this case-study include a specialised chapter for public participation, within which decisions on whether public comments were accepted and corresponding explanations were provided. In the 30 31

Zhuang, supra n. 22. See: . Article 31 of the EIA Law stipulates that any actions before the approval of the EIA report are forbidden. Since public participation is a compulsory part of the EIA report, any actions before the approval of public participation results should be forbidden as well.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA EIA report of Case 3, subjective comments were recorded in the EIA report individually, and decisions, as well as the reasons and considerations on which they were based, were also equipped. Concretely, suggestions on adopting a deodorisation project to improve surrounding air quality, strengthening management, speeding up the project and solving current environmental problems were adopted and promised to be carried out by the developer. In addition, suggestions on relocating the plant, forbidding reclaimed water from flowing into communities and improving water quality along the railway were rejected; the reasoning was based on the fact that other necessary requirements were beyond the developer’s capacity or responsibility. The outcome of public participation could be observed in the EIA report. However, the full EIA report is rarely open to the public and the public can only access the abridged version, where public participation results are only summarised. In addition, the public can acquire the outcome through another two channels. One is the local governmental website for administrative approval. Before making the final decision on the approval of an EIA report, the department in charge has to provide a brief introduction on this website, with the result of the public participation being a necessary component. However, it merely offers a short conclusion without any reasons for the acceptance or rejection of public comments. The other channel is that of personal communication between the EIA institution and participants who have expressed comments. In general, the TAES would like to consult the public and provide necessary explanations for the acceptance or rejection of public comments, but they cannot always guarantee the public access to these outcomes. 2.3.5. Capacity Building Capacity building is always regarded as the least developed aspect of public participation in environmental law and therefore needs improvement.32 ‘Capacity’ in this study mainly refers to the ability of the public to thoroughly understand the decision and make comments as well as their knowledge of how to participate in a good manner. According to Ewing, the lack of relevant public knowledge will easily lead to their suspicion, reluctance or criticism of the public participation in an EIA.33 In the opinions of the interviewees, the interest of the public relied on the extent of the environmental impact on their life. In Case 3, the sewage treatment plant had been operating for more than 25 years, producing a strong smell. As this plant was surrounded by some upmarket 32

J. Ebbesson, The Notion of Public Participation in International Environmental Law, in E.H. Jutta Brunnee (Ed.), Yearbook of International Environmental Law, Vol. 8, Clarendon Press, Oxford 1997, p. 94. 33 Ewing, supra n. 10.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS communities and nearby residents expected a high standard of living, they took environmental concerns seriously. Following the announcement of the project, any residents affected showed great enthusiasm in participation. In this situation, the TAES delivered 160 questionnaires and retrieved 102, and more residents who were not invited to fill questionnaires expressed their comments spontaneously through available channels. At the end of the EIA, the developer of this plant agreed to adopt reasonable pollution treatment solutions to meet needs of surrounding residents. Compared with other cases in the case-study, within which environmental impact on the life of residents were not as direct or significant as those in this case, the willingness of residents in Case 3 seems much higher. This example illustrates the direct proportional relationship between the degree of the environmental impact and the willingness of citizens to participate. While some participants contribute with constructive comments, some are less useful. Interviewees considered that fewer than 5% of all suggestions were helpful and the main problems the participants concentrated on was the weak awareness of environmental protection, limited understanding of the participatory right, inadequate knowledge of the EIA, and general confusion regarding the project. These may have attributed to the fact that the role of citizens in China’s environmental protection has been neglected for a long time in the past and therefore members of the public do not comprehend what is necessary for participation in an EIA.34 In attempting to address this, the TAES use a website, an introduction sheet and billboards to introduce to the public the content, potential environmental impact and countermeasures in an EIA programme. In addition, the TAES also pays attention to plain language and explains key professional terms to ensure the information is well understood. If the public has any questions, certain approaches, such as a hotline, an e-mail address and a fax number are available for consultation. According to my observation, such an intention is good, but the result is not always satisfactory. For instance, most information that was provided in the public participation activities of the nine cases only referred to the content of the project and its impact, and little knowledge of the significance of participation or how to participate in a proper way had been included. Moreover, even the information concerning the project itself was too brief for the public to have an overall understanding of the project, and as analysed in Section 2.3.1, the general comprehension of the project was deficient. Therefore, facilities

34

C. Wang, ‘Chinese Environmental Law Enforcement: Current Deficiencies and Suggested Reforms’, Vermont Journal of Environmental Law, Vol. 8, 2006-2007, pp. 172-173.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA provided by the TAES and developers for capacity building seems far from sufficient. 2.4. Legal Remedies In this study, ‘legal remedies’ mainly refers to that requirement that available approaches should be provided for participants, whose participatory right has been infringed in the Environmental Decision Making (EDM) process. In other words, remedies to guarantee the realization of participatory rights. An interviewee pointed out that when members of the public were not satisfied with the EIA report, they usually chose to first turn to the media or higher authorities or even to organize a protest or march, rather than to appeal to the environmental protection agency. He further stated that the main reason for this, in his view, was that the public did not trust EIA institutions or environmental departments because they consider developers, EIA institutions and environmental departments to have shared interests and it was therefore impossible for the public to expect justice from them. Furthermore, formal legal remedies for public participation in EIAs have never been confronted in practice by the staff involved in this research. Utilizing the empirical research in this case study, it can be concluded that the TAES has recognised the significant role of citizens in the EIA process and has indeed adopted necessary instruments to promote their interests. However, defects cannot be ignored and need to be remedied, and the next section will summarise limitations in the legal implementation process of the TAES.

3. Limitations in the Practice of Law The limitations in the legal implementation of the EIA law and Public Participation Regulation by the TAES can be summarized as follows. Firstly, the manner in which participants are identified is too arbitrary. According to the practice of the TAES, it seems there is no clear guidance on the identification of participants. Indeed, it is implemented in a random way, as can be seen from the random delivery of questionnaires. This results in the situation as seen in Case 7, whereby the constitution of participants was not in compliance with the real situation at all (see Section 2.2). Even when the TAES asks local committees to select participants, they do not provide any preliminary guidance or follow up check on how representative it is. The representativeness of participants is a decisive element in public participation in EIA, and thus, to ensure its compliance with local conditions it needs more attention.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Secondly, the effectiveness of information disclosure is limited and needs improvement. The two main methods of information disclosure are the online publication and the introduction section included in the questionnaire. While the former relies mostly on the initiative of the public to gain access to the information, the latter limits the coverage of information merely to participants who are invited to fill questionnaires. As can be learned from the statement of the Aarhus Convention Compliance Committee (ACCC), the ‘effectiveness’ of information disclosure is limited as: ‘it can ensure that all those who potentially could be concerned have a reasonable chance to learn about proposed activities and their possibilities to participate’. 35 According to the previous analysis, neither option is competent to ensure such ‘reasonable chance’ (see Section 2.3.1). The full EIA report is undisclosed, which limits the public from having a thorough understanding of the project. Furthermore, the disclosed content also has deficiencies, such as the use of technical terms and over-simplified conclusions. Thus, up-to-date, complete and understandable information is expected, but has not yet been delivered.36 Thirdly, there are an insufficient number of different methods of participation. The Public Participation Regulation enumerates some participatory methods, such as the questionnaire investigation, the hearing, and the demonstration meeting. In the empirical research, it was found that throughout the nine cases only Case 4 adopted the hearing as an additional participatory means, the other eight cases only used the questionnaire investigation (see Section 2.3.2). Though the questionnaire could collect public opinion, it did not construct a real communicative platform. In the view of Arnstein’s Ladder of Participation, public participation in China’s EIAs is on a consultation level, which means the public can contribute concerns and ideas, but there is no assurance that these will be taken into account.37 There is no clear indication which ladder should be applied for public participation in China’s EIA, however on account of the objective to fully integrate public opinions into decisions, the current position on the ladder seems insufficient. It is suggested that participatory ways should provide a real communicative opportunity for all actors, and such ways as the focus group, citizens advisory committee, and planning cells have been recommended.38

35

ACCC/C/2006/16 (Lithuania), ECE/MP.PP/2008/5/Add. 6, Para. 67. Zhao, supra n. 10, pp. 110-114. 37 S.R. Arnstein, ‘A Ladder of Citizen Participation’, AIP Journal, Vol. 35, No. 4, 1969, pp. 219-220. 38 F.H.J.M. Coenen (Ed.), Public Participation and Better Environmental Decisions: The Promise and Limits of Participatory Processes for the Quality of Environmentally Related Decision-Making, Springer Science & Business Media, Enschede 2009. 36

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA Fourthly, early participation cannot always be guaranteed. In Section 2.3.3, two exceptional reasons for the lack of early participation were outlined: public participation is excluded in the screening stage,39 and the location is unchangeable when public participation takes place. In the latter situation, the ACCC has commented in the Albania Case that: ‘once a decision to permit a proposed activity in a certain location has already been taken without public involvement, providing for such involvement in the other decision-making stages that will follow can under no circumstances be considered as meeting the requirement of early participation’.40

Thus, in order to maintain the complete participatory right of the public, such situations should be avoided. In general, without early participation the important opportunity for the public to participate in identifying the criteria on which to base the detailed EIA will be removed,41 so public participation must be invoked early enough when all options are open so as to ensure its effectiveness. Fifthly, measures on assisting the public to enhance their participation are lacking and should be added. In Section 2.3.5, it was outlined how most of the public will not participate in an EIA unless the project truly threatens their living conditions, and only a small group of people are ready to fight for public environmental interests. This situation is attributed to the insufficient consciousness of the public on environmental protection, and furthermore, the public has little knowledge of how to best participate in an EIA. Worse even, are the signs that the public distrusts EIAs and considers them a formality. 42 Therefore, members of the public rarely contribute any useful information or opinions on their own initiative, in other words, their participation is always passive. Public participation in an EIA should not only aim to enhance the quality of EIA, but also make the public understand the link between public and private environmental interests and improve their outlook and attitudes. 43 Educating the public is considered as an internal social goal of public participation, but it has not yet been incorporated into Chinese legislation.44

‘Screening’ refers to the stage within which whether public participation should be integrated is decided. 40 ACCC/C/2005/12 (Albania), ECE/MP.PP/C.1/2007/4/Add.1, Para. 79. 41 ACCC/C/2004/4 (Hungary), ECE/MP.PP/C.1/2005/2/Add.4, Para. 11. 42 Zhuang, supra n. 22. See: . 43 F.N. Laird, ‘Participatory Analysis, Democracy, and Technological Decision Making’, Science, Technology and Human Values, Vol. 18, No. 3, 1993, p. 345. 44 T.C. Beierle & J. Cayford, Democracy in Practice: Public Participation in Environmental Decisions, Resources for the Future Press, Washington, DC, 2002, pp. 31-32. Wang, Morgan & Cashmore, supra n. 4, pp. 568-569. 39

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Lastly, public supervision on the outcome of public participation is not sufficient to provide a necessary check. The full EIA report is closed to the public and since only the full report includes the detailed information on the results of public participation, the lack of disclosure will affect the right of the public to supervise the public participation outcome (see Section 2.3.4). Having said that, judicial review can provide an additional check over the outcome of public participation, but it is missing in China’s legislative framework. In the Public Participation Regulation, legal remedies are still highly administrative and endow the public with few approaches to protect their right of participation.45 In the experience of the TAES, the public rarely adopted ordinary means to oversee or protect their rights (see Section 2.4) because of their insufficient confidence in the EIA institutions and environmental departments. Therefore, a complete supervision mechanism for public participation in EIA needs to be established.

4. General Recommendations and Conclusion To overcome the above limitations, it is recommended that firstly, an implementation guide on the Public Participation Regulation should be set up. Such a guide can provide concrete guidance on substantive and procedural rules on organizing public participation and further regulate the implementation of related legislation. It may include such regulations on, inter alia, the way to identify participants, more recommended participatory methods, and public oversight on participation results. In fact, the Technical Guideline for EIA: Public Consultation (Draft) has already been delivered to related units in 2011 for advice, and it is expected that this guideline will become an interpretation of current legal provisions. However, until now, its formal version has not been published. Since public participation in EIAs has been ongoing in China for over ten years, both experience and lessons learned from the practice should be concluded to enrich this guideline so as to make public participation in EIAs more effective. Secondly, the role of the public should be further emphasised. Traditionally, the image of the public as troublemakers seems to be widely held, and such recognition is changing but far from enough.46 EIA institutions, developers and the environmental department should recognise the irreplaceable status of the public in EIAs and then they should endeavour to help improve the participant capacity of the public through various education campaigns. Real communica45 46

Zhao, supra n. 10, p. 119. Wang, Morgan & Cashmore, supra n. 4, p. 563.

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA tion among the public and organizers should be established, in other words, the public should not only be consulted for its consent but also for its knowledge and experience. Thirdly, pilot programs can be conducted to gather experience and verify envisaged ideas. As analysed, both information disclosure means and participation methods used nowadays are insufficient and need further improvement. Considering the large scale and complicated economic and social conditions in China, it may be difficult and unrealistic to apply new methods throughout China all at once, and therefore pilot programs can be used to make progress successively. In summary, the role of the public in China’s EIA has been recognized and encouraged; however, its current real effects are far from satisfactory. After establishing the legal mechanism, what is more significant is to consider how to ensure its effectiveness in the implementation process. Public participation in EIA should not become a show, on the contrary, it should help private actors contribute to the environmental interests protection and ultimately help realize a better environment.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Appendix 1: Cases in the case-study No.

Name

Year

1

The EIA on the Construction Project for the Infrastructure in the Starting Zone of an Industrial Area

2010

2 3 4 5 6 7

The EIA on the Construction Project for the Manufacturing Base for the Wind Power Equipment The EIA on the Upgrade and Improvement Project of a Sewage Treatment Plant The EIA on the Adjustment of the Structure of Products of a Plant The EIA on the Construction Project for the Infrastructure in the Starting Zone of an Industrial Area The EIA on the Research, Development and Industrialization Programme for the New Pattern of the Chip of a Semiconductor Cooperation The EIA on the Programme for the Gas Distributed Energy Station in a Wind Power Park

2009 2008 2008 2009 2010 2011

8

The EIA on the Construction of a Residence Community

2010

9

The EIA on the Investment on Painting Equipment by an Elevator Company

2009

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PUBLIC PARTICIPATION IN ENVIRONMENTAL IMPACT ASSESSMENTS IN CHINA Appendix 2: Summarized Questions in the Questionnaire No. 1 2

Categories

Questions

Participatory Objects

What kind of EIA should include public participation? How do you evaluate the environmental impact in EIAs?

3

Who are organizers of public participation in EIAs?

4

Who are main participants in public participation in EIAs?

5

Actors

How do you identify participants in public participation activities?

6

How do you guarantee that the public, especially the public concerned, can get to know and take part in the EIA process in time?

7

Are NGOs influential participants in public participation in EIAs?

8

What kind of information will be disclosed in EIAs?

9

What are usual means of information disclosure? Information Mechanism

10

How long is the average period of information disclosure?

11

Will you pay attention to the understandability of disclosed information?

12

Have you ever received useful information from the public?

13 Participatory Methods

14

Will the public show different degree of willingness when they incur different degree of the environmental impact? Will you provide different participatory opportunities for people living in different areas that may incur different degree of the environmental impact? What kind of participatory methods have been used in practice?

16

How do you usually arrange the time-frame for an EIA project?

17 18 19

Procedural Standards

15

Wellstructured Procedure

22

Due account taken and outcome release

23 24

25

Capacity Building

Are there any decisions, which may have the environmental impact, have already been made before public participation starts?

How is the result of public participation disclosed to the public? Will you provide any explanations on accepting or rejecting public comments? When the public are not satisfied with the results of public participation or EIAs, can they appeal? How is the general willingness of the public in participating in EIAs? If 10 represents the highest willingness, and 0 represents the lowest, how will you grade? How will you evaluate the comprehensive quality of participants in EIAs, such as their comprehended knowledge and recognition on the significance of participation? Will you provide any facilities for participants in EIAs?

26 27

When does public participation in an EIA project usually start?

Do you think that suggestions from the public can really influence EIA results?

20 21

Will you disclose a public participation plan before the EIA starts?

Legal Remedies

Do you know or have you ever encountered any actions of legal remedies in practice?

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Working in Concert REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE UNITED STATES Yun Ma*

Introduction The ‘protected area’ (PA)1 has been adopted worldwide as an effective legal tool to conserve nature and protect biodiversity. Governments have long been the principal agents to designate PAs worldwide. However, these state-owned or controlled PAs are insufficient to fully achieve the goal of nature conservation due to their under-representativeness of ecological and biological attributes. Furthermore, the methods that such a state-led model normally adopts, i.e., public ownership and environmental regulation also have their limitations, such as high costs and proscriptive nature. Therefore, private land conservation is of high necessity. A broad spectrum of policy options is available for private land conservation, which ranges from mandatory regulation to incentive-based and market-based conservation tools. Among these tools, most conflicts lie between the usage of regulation and incentives. It remains controversial whether these two rival each other, and whether too many incentives will undermine the regulatory approach. Each of these tools has its advantages and weaknesses. Since both carrots and sticks are needed, no single policy can fully realize the goal of conservation on private land. Therefore, a portfolio approach to private land conservation that combines different policy options is needed during the process of policy-making. This chapter will discuss how different policy options are formulated on private land conservation, and how different mechanisms interact with each other, with a particular focus on the interaction between regulation and incentives. In Section 1 of this chapter, the increasing necessities of private land conservation in light of the limitations of the state-led model to nature conservation on public *

Y. (Yun) Ma is a PhD Candidate at the department of Constitutional and Administrative Law and the China Law Center at Erasmus School of Law, Erasmus University Rotterdam in the Netherlands (contact: [email protected]). 1 To facilitate the discussion hereinafter, the definition of protected area is referred to the one developed by International Union for Conservation of Nature and Natural Resources (IUCN) in 2008, which reads as follows: ‘a protected area is a clearly defined geographical space recognized, dedicated and managed through legal and other effective means, to achieve the long-term conservation of nature with associated ecosystem services and cultural values’. See N. Dudley (Ed.), Guidelines for Applying Protected Area Management Categories, IUCN, 2008, p. 312.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS lands will be discussed. Then, the spectrum of available policy options based on existing practices across different jurisdictions will be explained. With a particular focus on the two most prominent and controversial approaches (i.e., regulation and incentive-based voluntary tools), it will be ascertained how regulation and incentives present themselves as a preferable policy option under different circumstances, and how they may interact with each other, either with supplementing or undermining effects. In Section 2, a case study on the United States (U.S.) will be utilized as an example to examine how different policy options are selected and combined. It will examine how the Endangered Species Act (ESA) regulates private land use, the problems it has encountered during its enforcement and the subsequent policy reforms to facilitate enforcement. Following this, the main forms of voluntary tools will be considered, with a particular focus on conservation easement (CE), and the challenges of CE from both theoretical and practical perspectives. In Section 3, concluding remarks will be made, as well as general policy recommendations on how to improve the policy-making and implementation of private land conservation in different scenarios.

1. Private Land Conservation: Necessities, Options and Challenges 1.1. Private Land Conservation: Necessities and Contexts In the regime of nature conservation, the dominant strategy to designate PAs is through state action.2 The most successful example is the birth of national parks and the spread of the national park system around the world.3 Public PAs have contributed to nature conservation and biodiversity protection on a global scale. However, the state-owned or state-controlled PAs are insufficient, which could be perceived from both practical and theoretical perspectives. From a practical view, firstly, the dearth of funding and professional management, especially in developing countries where nature conservation is of less priority compared to economic development and poverty alleviation, confines the effectiveness of public PAs and results in the ‘paper park syndrome’.4 This

E. Carter, W. Adams & J. Hutton, ‘Private Protected Areas: Management Regimes, Tenure Arrangements and Protected Area Categorization in East Africa’, Oryx, Vol. 42, No. 2, 2008, p. 177. The first national park in the world, the Yellowstone National Park, was established in the U.S. in 1872. Since then, the American idea of protecting natural landscape by designation of national parks has sprung out around the world. See A. Gillespie, Protected Areas and International Environmental Law, Martinus Nijhoff Publishers, Leiden, Boston, 2007. 4 J.A. Langholz & W. Krug, ‘New Forms of Biodiversity Governance: Non-State Actors and the Private Protected Area Action Plan’, Journal of International Wildlife Law and Policy, Vol. 2, 2004, p. 12; 2

3

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. situation is further deteriorated considering the cash-strapped government in time of crisis; secondly, public lands are under-representative of all types of ecosystems. In many countries, vast ecologically significant lands are privately owned or controlled. Taking the U.S. for example, though the national park system has preserved a large amount of valuable lands, it is said that one third of all potential vegetation types do not occur on public lands, 5 and 70% of threatened or endangered species are found on private land within which 10% are completely dependent on private lands.6 This is also the case in certain Latin American countries. Large parcels of private lands locate within the boundaries of public Pas. For example in Costa Rica, it is estimated that 11% of National Parks and 45% of Biological Reserves, National Monuments and Absolute Natural Reserves are in in private hands.7 From a theoretical perspective, the flaws of the state-led conservation model inherently stem from the methods that the state normally adopts to meet the demands of nature conservation (i.e. public ownership and environmental regulation). 8 The former refers to the retention and acquisition of ecologically significant lands by governments and the latter refers to environment-related land-use regulations. Both of these two methods have their limits. Firstly, public ownership means the government can purchase lands from private landowners and set them aside for conservation purpose, or it can exercise its eminent domain9 or similar power to expropriate private land for conservation purpose. There are two potential flaws with this method: firstly, it is economically costly, either in terms of purchase price or compensation provided; secondly, the exercise of eminent domain rests largely on justification of the public purpose which can always be contentious, and its coercive nature is vulnerable to

J. Harkness, ‘Recent Trends in Forestry and Conservation of Biodiversity in China’, The China Quarterly (Special Issue: China’s Environment), Vol. 156, 1998, p. 918. 5 J.M. Scott et al., ‘Nature Reserves: Do They Capture the Full Range of America’s Biological Diversity?’, Ecological Applications, Vol. 11, 2001, p. 1000. 6 Defenders of Wildlife, ‘Conservation Incentives Programs: Improving Effectiveness for Habitat and for Landowners’, 2004. Available at: . 7 C. Chacon, ‘Fostering Conservation of Key Priority Sites and Rural Development in Central America: The Role of Private Protected Areas’, Parks, Vol. 15, No. 2, 2005, p. 41. 8 J. Owley, ‘Changing Property in a Changing World: A Call for the End of Perpetual Conservation Easements’, Stanford Environmental Law Journal, Vol. 30, No. 1, 2011, p. 127. 9 Eminent domain is the power of the government to ‘force transfers of property from owners to itself’ for public purposes. Citing from A. Draper, ‘Conservation Easements: Now More than Ever – Overcoming Obstacles to Protect Private Lands’, Environmental Law, Vol. 34, No. 1, 2004, p. 264.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS democratic criticism. 10 Furthermore, the degree to which retention of public ownership can yield to sound management is still questionable.11 Secondly, the regulatory approach also has its limitations. Along with the emerging ‘regulatory state’, environmental regulation has become commonplace across jurisdictions and it is claimed with a fanfare to be ‘one of the great successes of American public policy’.12 However, regulation, either on public lands or private lands, has its intrinsic limitations. Firstly, it is piecemeal, fragmented and grid-locked due to its bureaucratic nature. It is asserted that scattered expertise and sectorial division cannot provide integrated protection of ecosystems.13 Secondly, the regulatory approach is vulnerable and sensitive to the changes of the political climate.14 Concerns over budgetary constraints, political environment and possible infringement upon personal liberties can impede or slow down regulation. 15 Thirdly, the command-and-control regulatory approach is predominantly proscriptive. It might be effective in ‘prevention of undesirable actions’, but those outcomes that were ‘dependent on the promotion of desired actions’ may not necessarily be achieved.16 Considering the insufficiencies of public land conservation stated above, the importance of private land conservation has been gradually acknowledged and elevated at both international and national levels. At the international level, the first scholarly reference was made at the First World Congress on National Parks in 1962.17 The Congress declared that quite a number of nature reserves were under private ownership around the world, but were nevertheless ‘dedicated in perpetuity to the conservation of wildlife and natural resources’.18 The See N. Sifuna, ‘Using Eminent Domain Powers to Acquire Private Lands for Protected Area Wildlife Conservation: A Survey under Kenyan Law’, Law, Environment and Development Journal, Vol. 2, No. 1, 2006, pp. 86-105. 11 S.K. Fairfax et al., ‘The Federal Forests Are Not What They Seem: Formal and Informal Claims to Federal Lands’, Ecology Law Quarterly, Vol. 25, 1999, pp. 635-636; see also Owley, supra n. 8, p. 128. 12 G. Easterbrook, A Moment on the Earth: The Coming Age of Environmental Optimism, Viking, New York 1995, pp. xiii-xxi. Citing from Owley, supra n. 8, p. 129 and n. 24. 13 D.J. Fiorino, ‘Toward a New System of Environmental Regulation: The Case for an Industry Sector Approach’, Environmental Law, Vol. 26, 1999, p. 461; A.M. Merenlender et al., ‘Land Trusts and Conservation Easements: Who is Conserving What for Whom?’, Conservation Biology, Vol. 18, 2004, p. 66; see also L.E. Hannah, Governance of Private Protected Areas in Canada: Advancing the Public Interest? (PhD dissertation University of Victoria), 2006, p. 9. Available at: . 14 C. Serkin, ‘Entrenching Environmentalism: Private Conservation Easements over Public Land’, The University of Chicago Law Review, Vol. 77, No. 1, 2010, p. 345. 15 A. Vinson, ‘Re-Allocating the Conservation Landscape: Conservation Easements and Regulation Working in Concert’, Fordham Environmental Law Review, Vol. 18, No. 2, 2007, p. 287. 16 L. Wayburn, ‘Conservation Easements as Tools to Achieve Regulatory Environmental Goals’, Law and Contemporary Problems, Vol. 74, No. 4, 2011, p. 175. 17 Hannah, supra n. 13, p. 9. 18 A. Adams (Ed.), First World Conference on Parks, National Park Service, 1962, p. 379. 10

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. 1996 field study on private initiatives to conserve biodiversity in African countries conducted by the World Conservation Monitoring Centre (WCMC) concluded that: ‘although practices vary from country to country, the private sector makes an invaluable contribution to biodiversity conservation’. 19 They also pointed out that the extent of private initiative in other parts of the world was un-quantified, but was likely to be significant, particularly in the U.S. and Europe. 20 In 2003, the first ‘Private Protected Area Action Plan’ was issued at the Fifth World Congress on National Parks held in Durban. In 2005, the International Union for Conservation of Nature and Natural Resources (IUCN) issued a special edition of ‘Private Protected Area’ in its journal Park, in which Mitchell explicitly asserted that it is no longer whether private initiatives exist, but rather ‘how best to integrate them into national PA system and global conservation strategies, and act to harness more private initiatives’.21 Besides recognition on the necessities of private land conservation, there is also an increasing attention to different models of governance of PAs (i.e. the process of decision making and the processes by which decisions are implemented). 22 The IUCN categorizes governance of PAs into four types: governance by government, governance by indigenous peoples and local communities, private governance, and shared governance.23 Private governance is a new and voluntary approach to nature conservation. PAs governed under this model are those owned or controlled by private landowners including individuals, NGOs, and corporations, and managed under not-for-profit or forprofit schemes.24 Concern for the quality of governance on private lands is also addressed under the good governance principles.25 Conservation activities on private lands show their merits from ecological, economic and social perspectives. Ecologically, private owned or managed PAs complement government actions to conserve the nature, such as protecting buffer zones and linking parks through conservation corridors.26 Economically, C.W. Watkins et al., ‘Private Protected Areas: A Preliminary Study of Initiatives to Conserve Biodiversity in Selected African Countries’, WCMC, 1996, p. 6. Available at: . 20 Ibid. See also M.J.B. Green, J. Paine & World Commission on Protected Areas (WCPA), State of the world’s protected areas at the end of the twentieth century (Conference paper presented at the IUCNWCPA Symposium on Protected Areas in the 21st Century: from Islands to Networks, 24-29 November 1997, Albany, Australia). 21 B. Mitchell, ‘Editorial: Private Protected Areas’, Parks, Vol. 15, No. 2, 2005, p. 3. 22 B. Lausche, Guidelines for Protected Areas Legislation, IUCN, 2011, p. 40. 23 Dudley, supra n. 1, p. 26. 24 Ibid. 25 Lausche, supra n. 22; G. Borrini-Feyerabend, Governance of Protected Areas: From Understanding to Action, IUCN, 2013. 26 B. Swift et al., ‘Private Lands Conservation in Latin America: The Need for Enhanced Legal Tools and Incentives’, Journal of Environmental Law and Litigation, Vol. 19, No. 1, 2004, p. 89; see also 19

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS they allow for a more cost-effective management. Benefits accrue not only to landowners through tax relief, ecotourism and sustainable wildlife use et cetera,27 but also to governments by reducing their regulation and management costs. Socially, they assist to showcase a land-ethic responsibility and to strengthen civil society.28 It is also stated that they indicate devolution of resources control and public participation in resource decision-making.29 However, limitations of private land conservation remain. Swift points out five such limitations. Firstly, the fact that private lands are smaller in size than national parks: private land conservation cannot be a substitute but only a supplement for public Pas. Secondly, only those private lands with conservation significance will draw attention from agencies and NGOs. This shows the ad hoc nature of private land conservation. Thirdly, many mechanisms such as private reserves and easements depend on adequate judicial enforcement, which is not available in every country. Fourthly, private conservation efforts can only protect surface rather than subsurface rights to lands that are owned by the state, as evident for example throughout Latin American countries. Lastly, private land conservation needs long-term stewardship. Lack of financial resources for current and future landowners may be a challenge for such long-term stewardship. 30 Besides these limitations, foreign NGOs and philanthropists buy large tracts of lands in developing countries for conservation purpose, this may lead to accusation of neo-colonialism and land grabbing.31 1.2. Available Policy Tools and Practices of Private Land Conservation With regards to private land conservation, there is a broad spectrum of policy options based on existing practices across different jurisdictions. From the perspective of government action, Doremus summarizes five types of strategies to pursue conservation on private lands: education programs, government acquisition of land or resource rights, direct incentives for private conservation action, market creation and improvement, and regulatory prohibitions and require-

L. Pasquini et al., ‘The Establishment of Large Private Nature Reserves by Conservation NGOs: Key Factors for Successful Implementation’, Oryx, Vol. 45, No. 3, 2011, p. 373. 27 Langholz & Krug, supra n. 4, pp. 16-17. 28 J. Brown & B. Mitchell, ‘Private Initiatives for Protected Areas in South America’, in S. Stolton & N. Dudley (Eds.), Partnership for Protection: New Strategies for Planning and Management of Protected Areas, Earthscan Publications, London, 1999, pp.173-183. Citing from Hannah, supra n. 13, p. 25. 29 Langholz & Krug, supra n. 4, p. 17. 30 Swift et al., supra n. 26, pp. 91-92. 31 E.g., in Chile, land purchase by the U.S. entrepreneur and philanthropist Douglas Tompkins has stirred fierce controversies about colonialism and sovereignty problem in the middle 1990s. See G. Holmes, ‘What Role Do Private Protected Areas Have in Conserving Global Biodiversity?’, Sustainability Research Institute Papers, No. 46, March 2013; J. Langholz & J. Lassoie, ‘Perils and Promise of Privately Owned Protected Areas’, Bioscience, Vol. 51, 2001, pp. 1079-1085.

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. ments. 32 The IUCN also summarizes five proliferating mechanisms adopted around the world for private land conservation, which include: system of voluntary PA designations (type 1); voluntary surrender of legal rights to land use on private property (type 2); charitable contributions (type 3); corporate setaside, donations, or management of an area (type 4); and involuntary surrender of some management rights in response to legal restrictions (type 5). 33 The IUCN’s summarization is largely made from the perspective of private sector’s actions, including both individual landowners and corporates. To a certain extent, Doremus’ categorization could be deemed as the cause, while the IUCN’s one could be deemed as the result. As far as I understand Doremus’ scenario, government acquisition is based on the rationale of public ownership. As shown earlier, it features the state-led conservation model. Education is broadly applied in nearly every form of cooperative program and has not stirred many controversies. The creation of a market is more or less an isolated mechanism. It can only come into play where there are needs for conservation products and needs for exchange. The market is a product arising from other mechanisms, which can be either regulation or incentive-based conservation tools. For example, regulation can create a demand for conservation products. According to Section 404 of the Clean Water Act in the U.S., mitigation requirements placed on those developers whose activities might threaten wetlands have created a market mechanism –‘Wetland Banking’– to help restore wetlands. Besides these three strategies, Doremus has summarized that most conflicts and controversies lie between incentives and regulations on this spectrum, which I will further discuss in the following section. The IUCN summarizes the results of these various strategies. Type 5 (i.e. involuntary surrender of some management rights in response to legal restrictions) is the other side of the coin of government regulation, while types 1 to 4 are mainly voluntary. An example of the former type is provided in Brazil. As early as 1990, the Brazilian government adopted Decree No. 98.914 on authorizing private areas to be formally designated as Private Reserves of Natural Patrimony (RPPN).34 In a RPPN, the private landowner submits his own lands to a formal PA designation, but retains the land title and still undertakes responsibilities in managing the area. This is also used in other Latin American countries, such as Guatemala, EI Salvador, Nicaragua and Costa Rica.35 Certain H. Doremus, ‘A Policy Portfolio Approach to Biodiversity Protection on Private Lands’, Environmental Science & Policy, Vol. 6, 2003, pp. 217-232. 33 Dudley, supra n. 1, p. 32. 34 Swift et al., supra n. 26, p. 105. 35 Chacon, supra n. 7, p. 43. 32

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS criteria (e.g., ecological and biological values of private lands) and procedural requirements (e.g. submission of periodic reports to the government) are prescribed by statutes in these countries, and a private reserve must meet all these criteria and requirements and be approved by the government in order to obtain a status of formal designation. Substantive requirements are also set. Brazilian laws require that a RPPN should be of perpetual duration and binding on all future owners. 36 By imposing these statutory constraints, the formal private reserves operate between a voluntary conservation practice and an entity of the system of officially designated PAs. In this sense, the formal private reserves functions like ‘mini-parks’.37 In the second type of strategies summarized by the IUCN (type 1 to 4 – voluntary surrender), landowners sell or donate certain rights to use their properties to a qualified institution. An example of this type is CE (conservation easement), which is broadly used in the U.S. and United Kingdom. CE will be given detailed discussion in Section 3.2. It also includes conservation management agreements reached between landowners and governments or other qualified institutions and tailored to specific conservation requirements. The third type refers to those activities where NGOs raise funds to purchase lands or receive donation of lands. Then, NGOs may further choose to designate the area as a formal PA, like the first type, or retain it outside the formal system in the form of the second one. The forth type refers to the one where corporations act as private actors. They conserve the lands for the purposes of gaining ‘green’ certification, making an investment for the future, maintaining good public relation, etc.38 1.3. Regulation or Incentive: A Smarter Conservation Choice? As evident from the above, both carrots and sticks are needed to achieve effective private land conservation. Regulation and incentives have become the two most important and controversial approaches to achieving this goal. Regarding the stick approach, regulation is used to prohibit certain activities or restrict the manner in which certain activities may be carried out. It can be enforced by the coercive power of the state in forms of civil, administrative or criminal punishments. Similar with regulations taking place on public lands as shown earlier, regulation on private lands also has its limitations, such as its command-and-control and proscriptive nature. However, its merits cannot be replaced. Echeverria summarizes four advantages that the regulatory approach 36

See Decree No. 1922, 5 June 1996 (Brazil). Citing from Swift, et al. supra n. 34, pp. 105, 108 and n. 76. Ibid., p. 112. 38 Dudley, supra n. 1, p. 32. 37

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. may have: it addresses the collective action problem and can avoid free riders; it encourages landowners to take adaptive behaviour which helps to minimize potential conflicts; it provides for relatively strong enforcement mechanisms; and it permits timely public response to address emerging public problems.39 As will be discussed later, regulation may be a preferable approach compared to incentives at least under certain circumstances. Since regulation usually takes place without compensation to private property owners, controversies remain with regards to whether private landowners should be compensated for their loss due to land-use control. Private property advocates may argue that they unfairly bear the costs of conservation for the benefits of the broader society. Economists and empirical researches have shown that failure to compensate private landowners for the costs of regulation ‘discourages voluntary conservation efforts and can encourage the destruction of environmental resources’. 40 Therefore, opponents of regulation argue for a substitution of regulation for incentives on private lands. Regarding the carrot approach, incentives play a crucial role in various voluntary conservation tools. This arises from the fact that it is purely discretionary for a private landowner to decide whether or not to conserve his own land (e.g. designate a private reserve), and if he decided to do so it is also at his own discretion in which way (e.g., to sell or donate) and to what degree (e.g. to retain ownership or not). Certainly, intrinsic incentives play a crucial role for private actors, such as the landowners’ personal concerns about nature, environmental altruism, et cetera. However, the desired outcome of nature conservation cannot be expected by solely depending on such ‘good will’. Extrinsic incentives are also needed. Incentives may occur in various forms and are not necessarily monetary. They include tax relief, forgiveness of debts, payment for ecological services, cost-sharing, technical and other assistances, etc. In some cases, prevention from expropriation of private property by the government also serves as an incentive for private landowners. For example, according to a Latin American study, juridical incentive that increases the security of land tenure is also deemed to be a main type of incentive. This is especially explicit in countries with relatively weak judicial systems. 41 Incentives may also be provided in some innovative forms. For example, Doremus discusses crop J. D. Echeverria, ‘Regulating versus Paying Land Owners to Protect the Environment’, Journal of Land, Resources & Environment Law, Vol. 26, No. 1, 2005, pp. 15-20. 40 J. Adler, ‘Money or Nothing: The Adverse Environmental Consequences of Uncompensated Land Use Controls’, Boston College Law Review, Vol. 49, 2008, p. 301. 41 Swift et al. supra n. 26, p. 134. According to Seift, ‘juridical incentive refers to increase of land tenure security by designation of the private property as a private PA. In this way, landowners hope to protect their lands from being seized or invaded. 39

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS damage insurance policies adopted by the Agricultural Conservation Innovation Center. Such policies have successfully been used to encourage farmers not to use ‘preventive’ spraying of pesticides that may cause adverse impacts on land and nature.42 Though incentive has its unreplaceable merits, there is anxiety among scholars that too many carrots may dis-incentivize legislature and policy-makers which will lead to the result of under-regulation and under-preservation.43 Defenders of regulation challenge the payment arrangement in incentive-based programs as conferring unfair burdens on taxpayers. Widespread use of voluntary conservation tools makes it more difficult to develop and enforce new regulation. It is pointed out that routine payment to landowners will ‘reinforce the prevailing view that private property ownership consists primarily of compensable rights’.44 Both regulation and incentives have their firm supporters and opponents. However, no approach can eradicate the other. Incentives are of crucial importance and regulation is not necessarily detrimental to the goal of conservation. Empirical studies have supported the effects of regulation. In a study on endangered plants, Rachlinski found that some U.S. states that imposed regulatory controls on harm to such plants had achieved better protection of these species than those states that did not do so.45 However, we see that no single policy can fully achieve the desired outcome of conservation. An argument for a portfolio approach is thus proposed by scholars. In such an approach, different options are meticulously combined and coordinated instead of merely relying on one single strategy. As shown earlier, Doremus proposes five types of strategies for private land conservation, i.e. education programs, government acquisition of land or resource rights, direct incentives for private conservation action, market creation and improvement, and regulatory prohibitions and requirements. A portfolio of different strategies shows the potential to reinforce each other and offset the limitations that each single strategy may possess. Doremus summarizes four benefits that a policy portfolio may have: it can address various conservation goals, such as ecosystem service, biodiversity protection, conservation of esthetic values, and distributive fairness, which cannot be achieved by a single strategy; it may have synergistic effects from 42

Doremus, supra n. 32, p. 220. Owley, supra n. 8, p. 123. 44 F. Cheever & N. McLaughlin, ‘Why Environmental Lawyers Should Know (and Care) About Land Trusts and Their Private Land Conservation Transactions’, Environmental Law Reporter, Vol. 34, 2004, p. 10228. 45 J. Rachlinski, ‘Protecting Endangered Species without Regulating Private Landowners: The Case of Endangered Plants’, Cornell Journal of Law and Public Policy, Vol. 8, 1998-1999, pp. 1-36. 43

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. synergies among the various strategies; it can reduce the overall risk of failure; and it can reduce the pervasive uncertainties embodied in the experimental nature of conservation strategies that currently make conservation choices so difficult.46 Regulation and incentives are not intrinsically at odds with each other, but rather interact with each other. Incentives can be used to achieve regulatory goals. Such incentives can be regulatory reliefs and assurances, such as the ‘Safe Harbor’ and ‘No Surprise’ policies adopted in the U.S. These policies relieve landowners from regulation or assure landowners they will get regulatory approvals in the future. More details on this will be provided in Section 2.1. Furthermore, incentives can be used to supplement regulatory measures when affirmative management measures are needed. For example, the red-cockaded woodpecker is an endangered species nesting in pine forests in the southeast of the U.S. More than three-quarter of its habitat is located on private lands. Regulation can forbid destruction of existing woodpecker nest tress. However, unless the hardwood understory is controlled affirmatively by private landowners, forests will become too dense for woodpeckers to nest. Such affirmative management can be achieved by providing incentives to landowners.47 Moreover, one mechanism may be more effective than the other under certain specific circumstances. For example, Vinson points out that regulation would be more effective than adoption of CE where the goal is to ‘impose comprehensive restrictions across a large geographical area’.48 Where there is an imminent necessity to protect nature against some irreversible change, such as extinction of species, adoption of incentives and market-based approaches may be riskier than the regulatory approach.49 From a practical perspective, differences can be found in different countries’ attitudes towards selecting, designing and implementing the portfolio of policies on private lands. In general, mandatory land use restrictions are widely used in Latin America and in some European countries. Studies show that nearly all Latin American countries have legislation imposing mandatory land use restrictions on private land, principally to assure sound land use planning and erosion control. 50 For example, in Brazil, it is required that ‘all rural private landowners [should] preserve from twenty to eighty percent of their property in

46

Doremus, supra n. 32, pp. 225-228. Ibid., p. 226. 48 Vinson, supra n. 15, p. 283. 49 Doremus, supra n. 32, p. 226. 50 Swift et al., supra n. 26, pp. 92-93. 47

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS natural conditions’.51 In the Netherlands, regulation on private land use is intensively reflected in its Spatial Planning Act (in Dutch: Wet Ruimtelijke ordening) of 2008 and Environmental Licensing (General Provisions) Act (in Dutch: Wet algemene bepalingen omgevingsrecht) of 2010. According to these Acts, both municipal zoning plans and local environment permits can impose conservationoriented land-use regulation on private landowners.52 Furthermore, in Provincial Environmental By-laws (in Dutch: Provinciale Milieuverordeningen), provincial authorities may establish land-use regulations in specific water protection zones, such as water extraction areas, groundwater protection areas and drilling exclusion zones.53 Compared to these countries, regulation on private lands in the U.S. is not commonly seen. At least this is the case at the federal level. Also, some existing regulations, such as the ESA, are frequently objected to by private property advocates for unconstitutionally ‘taking’ 54 private property. Some scholars refer to this difference as a divergence in legal cultures between civil law countries and common law countries.55 In the U.S., the controversy remains on whether the growth of CE, the most popular voluntary conservation tool, is inimical to the exercise of state zoning powers. Some even argue to introduce state zoning power, which is widely practiced in Europe.56

2. Private Land Conservation in the United States Private land conservation in the U.S. is not as well-known as its public counterpart, especially the National Park System. However, the history of private conservation dates back to as early as 1891 when the first land trust was established. This almost rivals the public conservation efforts that are symbolized by the establishment of Yellowstone in 1872.57 Private lands play an important role in the conservation strategy of the U.S., since roughly 60% of lands in the U.S.

51

Law No. 4.771 of 1965 (Brazil). Citing from ibid., p. 128 and n. 165. See A. Blomberg, A. Gier & J. Robbe, ‘The Integration of the Protection of Nature Conservation Areas in Dutch Spatial Planning Law and Environmental Management Law’, Utrecht Law Review, Vol. 5, No. 1, 2009, pp. 140, 153. 53 See Answers for Business, ‘Water Extraction Area and Groundwater Protection Area’, available at: . 54 The ‘Taking Clause’ states: ‘private property shall not be taken for a public use, without just compensation’. See the Fifth Amendment of the U.S. Constitution. 55 Some scholars point out that ‘the limitations reflect the extensive state power in civil law countries to regulate uses of land, and have few equivalents in common law countries’. Swift et al., supra n. 26, p. 126. 56 J. Bernstein & B. Mitchell, ‘Land Trusts, Private Reserves and Conservation Easements in the United States’, Parks, Vol. 15, No. 2, 2005, p. 57; Hannah, supra n. 13, p. 39. 57 Bernstein & Mitchell, ibid., pp. 48-49. 52

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. are owned by private individuals, families, organizations, and corporations.58 Currently, about 2% of private lands are formally protected, either owned or under conservation arrangements like CE, which almost equals the size of the entire National Park System in the lower 48 states.59 Besides those private lands outside the boundaries of public lands, there is quite a big number of private lands scattered within the boundaries of public PAs, including national parks and national forests. These private lands are called ‘inholdings’. Disposal of such private inholdings by private landowners is sometimes at odds with the overall management policy of national parks. For example, at Zion National Park in Utah, there are nearly 3,400 privately owned acres.60 With the concern that private lands might lead to subdivisions sprouting inside the parks, the National Park Service (NPS) and environmental groups have sought to acquire these sandwiched personal properties based on the Land and Water Conservation Fund of 1964. However, due to financial retrenchment, the NPS is seldom sufficiently funded to acquire these personal properties. It is still of concern as to how to handle these inholdings and curb landowners’ desires to dispose their properties in an incompatible manner with park environment. Besides specific concerns of the inholding problem, conservation on other ‘separate’ private lands is also a considerable challenge. Generally speaking, direct land use regulation is not commonplace in federal legislation with a few exceptions of congressional statutes enacted in the beginning of the 1970s. Various voluntary conservation tools, CE in particular, are frequently used for the purpose of private land conservation. As a product of regulation and voluntary tools, conservation-related markets are also formulated in the U.S. The main forms of such markets include the Wetland Banking arising from Section 404 of the Clean Water Act, the Conservation Banking ran by the Fish & Wildlife Service (FWS),61 and transferrable development rights where owners subject to government regulation are granted to sell the development opportunities to another landowner or developer at other locations separate from their restricted lands.

USFWS, ‘The State of the Birds 2013: Report on Private Lands United States of America’, available at: . Ibid., p. 4. 60 T. Burr, ‘Anonymous donor preserves the view of Zion’s Tabernacle Dome’, The Salt Lake Tribune, 12 October 2012, available at: . 61 Conservation banks are those land permanently protected by bank owners. Through the banking system, they may sell habitat or species credits to developers, as a mechanism for off-site mitigation. The FWS has approved conservation banks in 10 states with more than 105 banks. For more information, see FWS, ‘Conservation Banking’, available at: . 58

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS In this section, I will first take the ESA as an example to examine the regulatory practices on private lands. Problems of the ESA enforcement and the reformative adoption of voluntary conservation agreements will also be analyzed. Then I will discuss voluntary conservation tools adopted in the US with a particular focus on the usage of CE. Debates over the increasing popularity of CE in lieu of regulation will also be discussed. 2.1. Regulation on Private Lands: The ESA and Its Enforcement Frustrated by the constitutional constraints reflected in the ‘taking clause’, direct land use control did not gain momentum in the U.S. until the early 1970s. Land use control at a federal level is intensively reflected in statutes like the Clean Water Act of 1972, the Coastal Zone Management Act of 1972 and the ESA of 1973.62 However, expansion of this regulatory approach to private land use was confronted with strong resistance from the property rights movement, which was claimed to be inspired by the work of Professor Epstein’s in 1985.63 Since then, no more regulatory statutes have been enacted at federal level especially targeting land use control. Instead, various incentive-based voluntary conservation tools have been flowering since the 1980s, which will be shown in the following section. Among these federal regulations, the most controversial one is the ESA. The key provision applied to private landowners is found in Section 9, which prohibits anyone to ‘take’ any endangered or threatened species (Taking Provision 64 ). ‘Take’ is statutorily defined in Section 3 as: ‘to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or attempt to engage in any such conduct’. Since the case of Babbitt v Sweet Home Communities for a Greater Oregon, judicial rulings have confirmed that habitat alteration is a kind of ‘take’ under a broader definition of Section 9.65 The ESA hereby becomes a regulation on land use. This regulatory approach is criticized by scholars that the ESA requires a few landowners to provide benefits to the public while bearing all costs themselves. A constitutional argument for treating ESA regulation as taking of private property which deserves just compensation is proposed.66 It is also argued that the ESA regulation has failed to attain its objectives of endangered species 62

Respectively, 16 U.S.C. §§1531-1544; 33 U.S.C. §§1251-1387; 16 U.S.C. §§1451-1465. See Echeverria, supra n. 39, p. 3. R. Epstein, Private Property and the Power of Eminent Domain, Harvard University Press, Cambridge, 1985. Cited from Echeverria, supra n. 39, p. 4. 64 Cf., the ‘Taking Clause’ in the US Constitution. See supra n. 54. 65 See Babbitt v Sweet Home Communities for a Greater Oregon, 515 U.S. 687 (1995). 66 See B. Thompson, ‘The Endangered Species Act: A Case Study in Takings & Incentives’, Stanford Law Review, Vol. 49, No. 2, 1997, pp. 305-380. 63

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. protection. Two arguments are provided: firstly, it is ‘all sticks and no carrots’, because it attempts to deter harmful conduct by landowners, but does nothing to encourage and reward desirable behaviour. 67 Secondly, it generates perverse incentives that might compel landowners to manage their lands in a way that harms endangered species. This syndrome is well known as SSS, which stands for ‘shoot, shovel and shut up’.68 This effect is especially detrimental to those species that are in decline, but not listed and protected by the ESA yet. Since the process of listing a species needs to go through notices and comments, this will warn landowners that there might be restrictions on their properties in the near future if such a candidate species is found therein. Before the listing is finalized, landowners will remove these candidate species or alter their habitats making it impossible for them to habitat anymore. To eliminate perverse incentives, the ESA may bring to private landowners and encourage private landowners to actively engage in conservation activities, the FWS, the main agency for enforcement of the ESA, has adopted several reforms to enforce the ESA. The core of such reforms is conclusion of voluntary agreements between the authority and private landowners which provide for regulation assurance, for example, the adoption of Habitat Conservation Plan (HCP) with a ‘no surprise’ policy, 69 and the conclusion of a Safe Harbor Agreement (SHA),70 a Candidate Conservation Agreement (CCA), and/or Candidate Conservation Agreements with Assurances (CCAAs).71 The 1982 amendment to the ESA allowed incidental taking of an endangered species if a HCP was approved by the FWS that provided mitigation for the takings.72 The ‘No Surprise’ policy assures that the FWS will not require additional commitment or additional land-use restrictions beyond the level agreed in the HCP if unforeseen circumstances arise. By entering into a SHA agreement, landowners commit to undertake land management activities that contribute to the recovery of listed species. In return, the FWS assures that it will not require any additional or different management activities without landowners’ consent. Furthermore, by issuing the EnhanceC. Langpap, ‘Conservation of Endangered Species: Can Incentives Work for Private Landowners?’, Ecological Economics, Vol. 57, 2006, p. 559. Echeverria, supra n. 39, p. 20; D. Lueck & J. Michael, ‘Preemptive Habitat Destruction under the Endangered Species Act’, Journal of Law and Economics, Vol. 46, No. 1, 2003, p. 29. 69 See USFWS, ‘Habitat Conservation Plans: Frequently Asked Questions’, available at: . 70 See USFWS, ‘Safe Harbor Agreements: Frequently Asked Questions’, available at . 71 See USFWS, ‘Candidate Conservation Agreements (CCAs & CCAAs)’, available at . 72 Section 10(a)(1)(B) of ESA. 67

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS ment of Survival Permit to landowners, the FWS also authorizes incidental take of species that may result from actions undertaken by landowners under the SHA. CCA is adopted between agencies and other public or private parties to protect candidate species to eliminate the need to list them under the ESA. The CCAA is an expansion of the CCA, which provides private landowners with additional incentives. Under a CCAA, a property owner voluntarily commits to implement specific conservation measures to protect species covered by the CCAA. In return, the FWS issues a permit that assures that additional conservation measures or land-use restrictions under the ESA will not be imposed if the species under the CCAA will be listed in the future. Research has proven that voluntary conservation agreements with assurance may generate higher levels of conservation and higher net social benefits than those agreements that do not offer assurances.73 However, it is also revealed that assurance-based conservation agreements may yield inefficient levels of conservation, perhaps even lower than those attainable through regulation. 74 Effects of such agreements in reality are influenced by a series of factors, such as: ‘bargaining power of the parties, the background threat of regulation, and the cost advantage provided by voluntary agreements, as well as on the irreversibility of actions taken in the first period’.75

2.2. Voluntary Conservation Tools: CE and Its Limitations As mentioned before, voluntary conservation tools flourished during the 1980s; the period when regulatory approach was thwarted in the 1980s. Generally speaking, private activities for land conservation are mainly accomplished in the following three ways: first, establishment of freehold private reserves by private landowners and land trusts (by purchasing lands or receive gifts of lands from private donators); second, conveyance of lands to public sector for long-term stewardship by landowners and land trusts; and third, private landowners sell or donate partial legal interests on their own land, such as CE which sets permanent use restrictions on lands, to land trust or government agencies. The easement holders monitor the land against violations.76

C. Langpap & J. Wu, ‘Voluntary Conservation of Endangered Species: When Does No Regulatory Assurance Mean No Conservation?’, Journal of Environmental Economics and Management, Vol. 47, 2004, pp. 435-457. 74 Ibid., p. 437. 75 Ibid., p. 451. 76 Bernstein & Mitchell, supra n. 56, pp. 49, 59. 73

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. In terms of the first way, large land trusts, like The Nature Conservancy (TNC) in the U.S., purchase lands in fee simple 77 and conserve them for protection purpose.78 Obviously, this is too costly for a land trust, especially concerning the subsequent management costs. To avoid long-term stewardship costs, many land trusts then convey the lands to public agencies at federal, state and local levels. Besides these two ways, the most commonly used way is the third one. Various conservation arrangements have been achieved between private property owners, conservation groups, and government agencies. For example, the Wetland Reserve Program run by the Natural Resources Conservation Service under the Department of Agriculture provides financial incentives for farmers and landowners to convert croplands in drained areas back into wetlands. It has restored 2.6 million acres of private wetlands across the nation. 79 The Conservation Reserve Program run by the Farm Service Agency provides a yearly rental payment to farmers who agree to remove environmentally sensitive land from agricultural production and plant species that will improve environmental health and quality.80 Among all of these programs, the most frequently used mechanism is the so-called CE, conservation easement. According to the Uniform Conservation Easement Act (UCEA) adopted in 1981, CE is defined as follows: ‘a non-possessory interest of a holder in real property imposing limitations or affirmative obligations the purposes of which include retaining or protecting natural, scenic, or open-space values of real property, assuring its availability for agricultural, forest, recreational, or open-space use, protecting natural resources, maintaining or enhancing air or water quality, or preserving the historical, architectural, archaeological, or cultural aspects of real property’.81

Simply put, CE is a legal device through which private landowners can transfer certain rights82 on their lands to qualified organizations (‘easement holders’) for the purpose of nature conservation. To be specific, the rights that landowners 77

An absolute title/ownership of the land. Owley, supra n. 8, p. 130. 79 USFWS, supra n. 58, p. 6. 80 See Farm Service Agency, ‘Conservation Reserve Program’, available at: . 81 §1 of UCEA. UCEA was drafted and approved by the National Conference of Commissioners on Uniform State Laws in 1981. Until 2010, 22 states and the District of Columbia have adopted the UCEA, and other states have adopted their own CE enabling statutes. Considerable variances exist among different states with regards to their own CE statutes. See A.H. Smith, ‘Conservation Easement Violated: What Next – A Discussion of Remedies’, Fordham Environmental Law Review, Vol. 20, 2009-2010, pp. 601-602. 82 The metaphor of ‘bundle of sticks’ is frequently used. Easement is conceptualized as one stick out of the bundle of rights that comprise fee ownership. See F. Cheever, ‘Environmental Law: Public Good and Private Magic in the Law of Land Trusts and Conservation Easements: A Happy Present and a Troubled Future’, Denver University Law Review, Vol. 73, 1996, pp. 1079-1080. 78

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS relinquish are those to prevent or prohibit certain activities on their own properties that are incompatible with conservation values. Such restrictions may include a reduction of livestock number, prohibition of house building or other construction projects, prohibition of recreational off-road vehicle use, etc. By entering into an agreement of CE, landowners agree to refrain from exercising these rights. In this sense, the CE is called a ‘negative easement’.83 CE takes the form of donation or purchase. A landowner may sell or donate the easement to a qualified organization. Varieties of tax relief have been provided by federal and state legislations. The federal Internal Revenue Service authorized charitable income tax deductions for CE donation in 1964. Congress enacted the first federal statute for the deductibility in 1976, which is now Section 170(h) of the Internal Revenue Code (IRC).84 Different tax incentives are provided to CE donators, such as income tax deduction and credits, property and estate taxes deduction, etc. 85 Pursuant to Section 170(h), a donator of CE will be eligible for a federal charitable income tax deduction only if the easement is: (1) of a qualified real property interest; (2) to a qualified organization; and (3) exclusively for conservation purposes.86 Firstly, as further clarified by the IRC, a ‘qualified real property interest’ means that the easement should be ‘granted in perpetuity’.87 Secondly, a qualified organization refers to either a government agency or a nonprofit organization which has both ‘the commitment to enforce’ the easement and ‘the ability to protect’ the conservation purpose of the easement in perpetuity.88 Thirdly, qualifying conservation purposes include outdoor recreation or education for the public, natural habitat protection, preservation of open space, and preservation of historic structure.89 This requirement is also called the ‘public benefit test’.90 CE is advantageous to both governments and private actors. Firstly, in a CE agreement, the land ownership is not transferred, and the landowner still retains the daily management duties.91 To government agencies and land trusts, purchasing CE is cheaper and faster than purchasing fee simple title. Secondly, CE 83

Easement could be distinguished into affirmative and negative. The former one is the right to use another’s property for a specific purpose, while the latter one refers to the right to prevent another from performing an otherwise lawful activity on his property. See Bernstein & Mitchell, supra n. 56, p. 51; A. Draper, ‘Conservation Easements: Now More than Ever – Overcoming Obstacles to Protect Private Lands’, Environmental Law, Vol. 34, No. 1, 2004, p. 252; Owley, supra n. 8, p. 131, etc. 84 §170 (h) of I. R.C. 85 Bernstein & Mitchell, supra n. 56, p. 53. 86 §§ 170 (h)(1) of I.R.C. 87 §§ 170 (h)(2)(C) of I.R.C. 88 §§ 170 (h)(3) of I.R.C. 89 §§ 170 (h)(4) of I.R.C. 90 M. Campopiano, ‘The Land Trust Alliance’s New Accreditation Program’, Ecology Law Quarterly, Vol. 33, No. 3, 2006, p. 907. 91 Owley, supra n. 8, p. 138.

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. is flexible and tailored to specific needs of landowners and targeted natural areas.92 Parties of a CE agreement can draft each agreement with specific restrictive terms and thus customize conservation to specific environment attribute.93 Thirdly, a private owner could have monetary gain by selling the easement of his land or tax deduction by donation. This is claimed to internalize social costs.94 Lastly, social advantages of CE have also been recognized. CE can help foster cooperative conservation and has the potential to ‘foster a sense of community in a way top-down environmental regulation could never achieve’.95 However, the increasing popularity of the usage of CE on private lands also incurs controversies. The first concern arises from the limitations of CE per se. Efficacies of CE are questioned based on insufficiencies of enforcement mechanisms, difficulties in accurately valuing easement, patchwork protection and lack of a uniform recording and tracking system.96 There are also arguments to further liberalize CE and loosen the perpetuity requirement placed on CE holders. Since a deductible CE should satisfy the ‘perpetuity’ requirement and ‘public benefit test’, a CE cannot be easily terminated. In an ordinary private agreement, the party is entitled to terminate the agreement by referring to the doctrine of changed conditions. However, landowners who seek to remove the CE restriction in a same way are frustrated when the purposes of such restriction are clearly stated. In practice, it is difficult or even impossible for the landowner to prove that all of these objectives are thwarted by the changes of conditions.97 It is also pointed out that even if the objective statement has truly become obsolete, the landowner should consider other alternatives rather than outright termination.98 Scholars have expressed their doubts on the necessity and effectiveness of these requirements. For example, Owley asserts that the current perpetual structure of CE is ill-suited to the need of adaptive management and it should be replaced by the renewable term CE which will more closely align with the management goals. 99 McLaughlin expresses a similar opinion. She points

92

Owley, supra n. 8, p. 138; Draper, supra n. 8, p. 254; Smith, supra n. 81, p. 603. For example, one easement can prescribe that construction and building is prohibited, while another may prescribe that hunting and timbering is not allowed. 94 Echeverria, supra n. 39, p. 23. 95 Owley, supra n. 8, p. 138. 96 Vinson, supra n. 15, p. 273; N. McLaughlin, ‘A Constructive Reformist’s Perspective on Voluntary Conservation Easements’, Ecosystem Marketplace, 31 August 2005; Cheever & McLaughlin, supra n. 44, pp. 10227-10231. 97 Draper, supra n. 8, p. 275. 98 J.A. Blackie, Do Conservation Easements Last Forever? Conservation Easements and the Doctrine of Changed Conditions, The Back Forty, 1990, p. 5. Citing from Draper, supra n. 8, p. 275 and n. 259. 99 Owley, supra n. 8, pp. 122-123. 93

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS out that perpetual CE is not appropriate in all circumstances. Non-perpetual CE should be considered to accomplish land protection goals instead.100 The second concern arises from the influences of CE on traditional regulatory mechanism on private lands. Concerning the popularity of the usage of CE, suspicions arise on the tax expenditure by the government on providing tax reliefs for CE donators and purchasing CE from private landowners. 101 Echeverria worries that the use of CE may intensify the conflicts between landowners and regulatory authorities and consequently undermine and crowd out regulation. Once they are accustomed to receiving financial benefits for making decisions to conserve nature, they will probably resist enforcing the regulatory rules.102 He also points out that there is a risk that the widespread use of CE may ultimately result in a change in the standard for a constitutional taking which makes it impossible to enforce regulation without compensation.103 Moreover, the lack of democracy and accountability of CE is criticized. It is stated that when private actors make decisions and implement their decisions with regards to nature conservation, ‘the democratic process suffers’. 104 With regards to CE, firstly, private actors are not as accountable as public agencies in a democratic process. Secondly, as CE is a private agreement, the public is not provided with the opportunity to participate in the formation of such agreement, thus the public interest is jeopardized. Thirdly, the public cannot oversee the terms formulated in the CE agreement. 105 Due to these considerations, some scholars thus advocate democratization of the process to create a CE.106 This issue was also debated when the UCEA was drafted. It was proposed that public agencies should be ‘involved in all aspects of the conservation easement process as a balancing or controlling force.’107

N. McLaughlin, ‘Conservation Easements: Perpetuity and Beyond’, Ecology Law Quarterly, Vol. 34, No. 2, 2007, pp. 673-712. 101 R. Colinvaux, ‘The Conservation Easement Tax Expenditure: In Search of Conservation Value’, Columbia Journal of Environmental Law, Vol. 37, No. 1, 2012, p. 1. 102 Echeverria, supra n. 39, p. 40. 103 Ibid. 104 Owley, supra n. 8, p. 147. 105 Ibid. 106 M.A. King & S.K. Fairfax, ‘Public Accountability and Conservation Easements: Learning from the Uniform Conservation Easement Act Debates’, Natural Resource Journal, Vol. 46, 2006, pp. 65-129; G. Korngold, ‘Privately Held Conservation Servitudes: A Policy Analysis in the Context of in Gross Real Covenants and Easements’, Texas Law Review, Vol. 63, 1984, p. 462. 107 National Conference of Commissioners on Uniform State Laws, ‘Proceedings in Committee of the Whole: Uniform Conservation and Historic Preservation Agreements Act 22’, 1979, pp. 38-39. Citing from Owley, supra n. 8, p. 147 and n.101. 100

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REGULATION AND INCENTIVES FOR PRIVATE LAND CONSERVATION IN THE U.S. 3. Concluding Remarks This chapter shows that private land conservation is playing an increasingly significant role in the overall nature conservation scheme. Since it has the full potential to supplement traditional public conservation efforts, both governments and conservation groups need to pay more attention to it. It is also shown that there is a broad spectrum of policy options available for private land conservation, ranging from mandatory regulation to various incentive-based tools. Each has its own pros and cons. No single policy can fully achieve desirable outcomes of private land conservation. Therefore, a portfolio approach that combines different policy options is of necessity in the policy-making process in order to address various conservation problems in different contexts. Through the regulatory practices of the ESA in the U.S., it is seen that command-and-control regulation may incur constitutional challenges on taking of private property and may result in perverse incentives to private landowners. Perceiving potential limitations of the regulatory approach, incentive-based voluntary tools are needed to best harness private initiatives for conservation purpose. This is of crucial policy importance to those countries that have dominantly relied on the regulatory approach to private land conservation. Moreover, incentives may take place in various forms. It is not necessarily to be monetary. Design and formulation of incentives need to be more innovative and tailored to specific contexts. This chapter further finds that regulation and incentives are not necessarily at odds with each other, but can be inherently interactive. No single tool can completely exclude the other. Instead, a better coordination can yield better results. Incentives can be used to facilitate enforcement of regulation and achieve regulatory goals. Such incentives may appear in the form of regulatory assurance or compensation. The effects of these incentives are testified through the case of enforcement practices of the ESA in the U.S. Different mechanisms may be preferable in different contexts; for example, comprehensive regulation may be more effective across a large geographical area. Therefore, adoption and design of a specific policy needs to be situated in and connected with the surrounding context. This chapter leads to the following recommendations: for those jurisdictions where policy options are not well developed, it is recommended that the role of private land conservation is elevated to the level of policy-making and design diversified policy tools to fit into domestic contexts. For those jurisdictions that largely rely on a single type of conservation strategy, for example, regulation, it is recommended to adopt a portfolio approach in the policy-making process. To

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS those that have developed incentive-based tools, it is recommended to deeply explore and innovatively design various types of incentives that may best serve the needs of private landowners. To those that have adopted both regulation and incentive-based tools, it is recommended to cautiously identify potential conflicts between them, and selectively choose proper mechanism to address specific environmental issues.

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IV. THE PROTECTION AND DISSEMINATION OF INFORMATION

Private Actors in the ‘WikiLeaks World’ CHANGING BOUNDARIES OF TRADITIONAL SECRECY Vigjilenca Abazi*

Introduction In the WikiLeaks world, private actors play a crucial role in changing the boundaries of traditional secrecy in ‘public’ decision-making. 1 Some private actors bypass the official machinery for keeping information undisclosed, such as the system of classified information, by ‘leaking’ information, and transform the dichotomy of ‘arcane lines between information that has to be released and information that stays secret’.2 As a result, their contribution goes beyond the confines of typical national or regional Freedom of Information Acts to gain access to confidential information, in accordance with which formal obligations to disclose information have to be balanced against necessary secrecy by one central authority who claims ownership of information. Not all private actors use the route of leaks to challenge the culture of institutional secrecy; some do so through judicial or non-judicial means. For example, Access Info, an NGO based in Spain established to promote openness throughout Europe, challenged through judicial means the level of accepted secrecy in European Union legislation by demanding disclosure of the identity of member states’ position in the reform process of the EU’s Transparency Regulation.3 However, the role of private actors is not one-dimensional and uncontroversial. Apart from enhancing openness, private actors can also be seen as facilitating secrecy by protecting sensitive information or other means of involvement.4 For example, some private contractors or sub-contractors in the European Union are involved in the protection of sensitive information and in that capacity have access to official secrets, which remain undisclosed even to democratically

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V. (Vigjilenca) Abazi is a PhD researcher at the Amsterdam Centre for European Law and Governance (ACELG) and a Fulbright Visiting Scholar at Columbia Law School. The author would like to thank Antenor Hallo de Wolf for valuable comments and Adam McCann for his great assistance. 1 Christopher Hood, ‘From FOI World to WikiLeaks World: A New Chapter in the Transparency Story’, Governance, Vol. 24, 2011, pp. 635-638. 2 Ibid., p. 635. 3 Case T-233/09, Access Info Europe v Council, Judgment of 22 March 2011, nyr. See also Regulation No. 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding Public Access to European Parliament, Council and Commission documents, OJ L145/43 31-05-2001. 4 A. Roberts, Blacked Out: Government Secrecy in the Information Age, Cambridge University Press, Cambridge, 2006.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS elected European representatives. 5 Other actors, such as SWIFT, a private company based in the EU, allow for financial messaging data to be transferred to the United States and processed by the Terrorist Finance Tracking Program (TFTP). This raises privacy protection concerns, to the extent that the European Parliament vetoed an earlier version of the TFTP Agreement.6 This chapter examines the role of private actors in fostering the principle of openness, particularly through the utilisation of the right to access documents in the European Union. 7 It discusses some of the most significant cases about access to public documents adjudicated by the Court of Justice of the European Union (CJEU) brought by private actors. The notion of private actors contributing to public interests is broadly understood as actors that are not direct members of the executive, legislative or judicial branch of traditional commandand-control-type legal institutions and that that seek to constrain, encourage or otherwise influence an activity of public interest.8 For the purposes of the discussion here, private actors encompass non-state actors who have brought cases before the CJEU regarding access to information cases. The discussion on openness in the European Union, although not new, has left the engagement of private actors and their impact underexplored.9 The paper aims to address this gap, but also to contribute to the discussion on the role of private actors for the principle of openness more generally. In doing so, it also discusses the relevance of information for democracy and the right to access documents as one of the key direct realisations of information flow between government and citizens. Firstly, the paper provides a conceptual understanding of why information is important within different democratic models despite sometimes having a D. Curtin, ‘Open Government in the EU’, presentation at Transatlantic Conference on Transparency Research, Utrecht School of Governance, 7-9 June 2012. See E. Fahey, ‘Law and Governance as Checks and Balances in Transatlantic Security: Rights, Redress, and Remedies in EU-US Passenger Name Records and the Terrorist Finance Tracking Program’, Yearbook of European Law, 2013, pp. 1-21. 7 Stipulated by primary law Article 15 TFEU, and secondary legislation Regulation No. 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding Public Access to European Parliament, Council and Commission documents, OJ L145/43 31-05-2001. See further the discussion on openness and transparency, A. Alberto, ‘Unpacking the Principle of Openness in EU Law: Transparency, Participation and Democracy’ (July 30, 2013), HEC Paris Research Paper No. LAW2013-1003. 8 See G. de Búrca & J. Scott, ‘Introduction: New Governance, Law and Constitutionalism’, in G. de Búrca & J. Scott (Eds.), New Governance and Constitutionalism in Europe and the US, Hart, Oxford, 2006. 9 See inter alia A. Héritier. ‘Composite Democracy in Europe: The Role of Transparency and Access to Information’, Journal of European Public Policy, Vol. 10, No. 5, 2003, p. 814; A. Meijer, ‘Understanding the Complex Dynamics of Transparency’, Public Administration Review, Vol. 73, No. 3, 2013, pp. 429-439; B. Bugaric, ‘Openness and Transparency in Public Administration: Challenges for Public Law’, Wis. Int. Law J., Vol. 22, 2004; D. Heald, ‘Varieties of Transparency’, in C. Hood & D. Heald (Eds.), Transparency: The Key to Better Governance, Oxford University Press, Oxford, pp. 25-43. 5

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ limited flow, a limitation that in turn must be checked. Secondly, through the framework of governance, the paper elaborates on the different roles of private actors in the discussion of openness. Thirdly, having elaborated more broadly on these matters, the paper turns specifically to the European Union to examine the role of private actors regarding the right to access information. Finally, the paper draws some preliminary conclusions.

1. Democracy and Information 1.1. The Importance of Information Information is salient for the functioning of democracy. Democratic procedures, as networks of pragmatic considerations, compromises and discourses, are grounded on the ‘presumption that reasonable or fair results are obtained insofar as the flow of relevant information and its proper handling have not been obstructed’. 10 This necessity for the flow of relevant information can be witnessed in many models of democracy. A comprehensive discussion of democratic models is beyond the scope of the current elaboration on the importance of information; the focus is on three particular models: participatory, representative, and deliberative democracy. The starting premise of all these models is that information is power.11 Participatory democracy strives to create opportunities for all members of a certain community to make meaningful contributions to decision-making and seeks to broaden the range of parties who have access to such opportunities.12 In both of these essential aspects information flow is needed. Members of a community cannot participate in that community if information is lacking or is only available after a considerable time.13 Additionally, if certain information is at the diposal of only a certain group within a community, the range of 10

J. Habermas, Between Facts and Norms: Contributions to a Discourse Theory of Law and Governance, MIT Press, 1996, p. 269 (edited by William Rehg). 11 See A. Vermeule, Mechanisms of Democracy: Institutional Design Writ Small, Oxford University Press, Oxford, 2007. See also T. Franck, Secrecy and Foreign Policy, Oxford University Press, Oxford, 1974, p. 8. See also D. Curtin, ‘Betwixt and between: Democracy and Transparency in the Governance of the European Union’, in Winter et al. (Eds.), Reforming the Treaty on European Union: The Legal Debate, Kluwer, The Hague, 1996, pp. 95-121. 12 See D. Mutz, Hearing the Other Side – Deliberative versus Participatory Democracy, Cambridge University Press, Cambridge, 2006. See also K.G. Roberston, Public Secrets: A Study in the Development of Government Secrecy, St. Martin’s Press, 1982, p. 12. See A. Gutmann & D. Thompson, Democracy and Disagreement, Harvard University Press, Cambridge, Mass., 1996, p. 98, arguing that openness is just a mechanism ‘to make the self-interest of officials coincide with the general interest’. 13 See also D. Curtin & J. Mendes, ‘Transparence et participation: des principes démocratiques pour l’administration de l’Union européenne’, Revue française d’ administration publique, Vol. 137-138, 2011, pp. 101-121.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS participation is also limited to that group. In this respect, Francis Rourke argues that information is crucial for citizens to participate in the process of governance, in addition to their right to have knowledge of the conduct of public officials.14 For representative democracy, information is significant on the one hand, for the act of electing the representatives, whilst on the other hand, the representatives themselves should have possession of information in order to best defend the interest of their electorate. Availability of information is a means of ensuring that actions of a public authority are representative of the interests of the citizenry, and enables the citizens to formulate an opinion and conditions of consent to different public policies, the adherence to which can then be checked.15 Moreover, information is indispensable to the obligations to explain and justify public conduct as well as the scrutiny over possible abuse of power.16 Lastly, deliberative democracy holds that for a decision to be legitimate it must be preceded by authentic deliberation and that the mere aggregation of preferences that occurs in voting is not sufficient.17 Information is key to enable an informed discussion which is the gist of deliberative democracy. In order for the deliberation to take place, information is necessary not after decisions are taken but while the process of decision-making is ongoing. In Democracy and Disagreement, Amy Guttmann and Dennis Thompson argue that if the reasons for certain policies are public then citizens and other actors can contribute to making the perspectives of agreement broader.18 In addition, the accessibility of information clarifies the nature of disagreements regarding different courses of action and enables the self-correcting character that deliberative democracy wants to achieve. However, full information is not empirically expected, and even in cases such as that defended in A Preface to Democratic Theory by Robert Dahl, who takes as one of the central assumptions of democracy that ‘all individuals possess identical information’, it is acknowledged that gaps of information can (and

14

F. Rourke, Secrecy and Publicity: Dilemmas of Democracy, The John Hopkins Press, 1961, p. 90. See also J. Bentham, ‘Of Publicity’, in J. Bowring (Ed.), Essays on Political Tactics in the Works of Jeremy Bentham, Vol. 2, Edinburgh, William Tait, 1839. 15 K.G. Roberston, Public Secrets: A Study in the Development of Government Secrecy, St. Martin’s Press, 1982, p. 12. 16 For the elements of the notion of accountability see M. Bovens, ‘Analysing and Assessing Accountability: A Conceptual Framework’, European Law Journal, Vol. 13, 2007, p. 447, pp. 449450. 17 M. Bessette, ‘Deliberative Democracy: The Majority Principle in Republican Government’, in R.A. Goldwin & W.A. Schambra (Eds.), How Democratic Is the Constitution?, American Enterprise Institute, 1980, pp. 102-116. 18 A. Gutmann & D. Thompson, Democracy and Disagreement, Harvard University Press, 1996.

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ actually do) exist. 19 The main concern is, nevertheless, to enable citizens to create independent and informed opinions within a democratic system where checks and balances mechanisms are maintained. It is further acknowledged that certain legitimate democratic policies and processes, typically those involving security and diplomatic negotiations, require some degree of limitations of information flows in order to be realised effectively or at all. 20 For example, most would agree that a detailed military plan should in principle not be publically accessible. Nevertheless, in light of the importance of information, the question arises of how to ensure that the limitation of information is legitimate. 1.2. Information Flows: Limitations and Checks A basic mechanism to limit the flow of information is secrecy, which is widely considered as a deliberate act to withhold information.21 In administrative practice, this mechanism mostly appears in the guise of the system of classified information. Blocking information intentionally is the starting point of secrecy, which is the first and most important step in the system of classified information. In this light, an administrative official makes a rational and deliberate decision to withhold the information and to include it in the classified information system. 22 In addition, secrecy in practice can be manifested in closed meetings, official oaths of confidentiality, and other obligations not to transmit information during and after the official duties are completed.23 The use of secrecy is primarily foreseen as being necessary for some fields of public policy or decision-making due to their nature and functionality, such as security or diplomatic negotiations. For 19

R.A. Dahl, A Preface to Democratic Theory, University of Chicago Press, Chicago, 1956, p. 70. D. Thompson, ‘Democratic Secrecy’, Political Science Quarterly, Vol. 114, 1999, p. 181, p. 182. This is not to say that openness too does not make them effective of efficient. The argument is rather that a higher degree of secrecy as opposed to openness is necessary. Hence, to make it clear openness too is required. There is only a change of degree for what is needed more. See for example the argument of the necessity of secrecy in diplomatic negotiations, A. Colson, ‘The Ambassador Between Light and Shade: The Emergence of Secrecy as the Norm for International Negotiation’, International Negotiation, Vol. 13, 2008, pp. 179-195. 21 S. Tefft, Secrecy: A Cross-Culture Perspective, New York: Human Science Press, 1980, p. 39; S. Bok, Secrets: On the Ethics of Concealment and Revelation, Pantheon Books, Vintage Paperback Editions, 1984; D.H. Moynihan, Secrecy: The American Experience, Yale University Press, New Haven, 1999; S.L. Katz, Government Secrecy: Decisions Without Democracy, Washington, DC: People for the American Way, 1987; I. Galnoor, Government Secrecy in Democracies, New York University Press, New York, 1972. 22 See about the working methods of classified information in the context of the EU, D. Galloway, ‘Classifying Secrets in the EU’, Journal of Common Market Studies, Vol. 52, 2014, pp. 668-683. 23 S. Maret, Government Secrecy: Classical and Contemporary Readings, Connecticut: Libraries Unlimited, 2009; Along similar lines see I. Galnoor, Government Secrecy in Democracies, New York University Press, New York, 1972; D. Gibbs, ‘Secrecy and International Relations’, Journal of Peace Research, Vol. 32, No. 2, 1995, pp. 213-228. 20

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS example, Article 4(1a) Regulation 1049/01 foresees a mandatory exception to the right to access documents in the EU when public interests of security are at stake.24 Furthermore, the right to freedom of expression as stipulated in Article 10(2) European Convention on Human Rights may be: ‘subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety […]’.25

Insofar as information is withheld, mechanisms of checks and balances within a system could be challenged,26 and situations of abuse of discretion are possible. 27 The main goal, therefore, once the use of secrecy is accepted as a necessary exception, is to ensure that the use of secrecy does not obstruct the relevant flow of information and procedures of accountability.28 Consequently, a variety of oversight procedures are established in order to ensure the legitimate use of secrecy. In order to control the use of secrecy and hence maintain openness, mainly two types of mechanisms are used, which are categorised in accordance with the actor in charge of the check. Firstly, there are direct mechanisms, such as citizens’ access to information.29 The objective here is to establish and maintain a direct link with the citizens as primary checks on the system, but also as a means for them to acquire information. For instance, in the U.S. practice under the Freedom of Information Act, citizens have the authority to demand a review of a classified document in order to establish if such classification was indeed necessary.30 This creates an obligation for the administrative official in charge of the particular document to review whether the information was classified properly, although the citizen might not receive the classified information.31 Secondly, control over secrecy functions is exercised through indirect or secondary mechanisms, which are realised not through the citizens but through institutions that either represent them or are supposed to adjudicate in favour of transparent democracy. In other words, the parliament European Parliament and Council (2001) ‘Regulation No. 1049/2001 of 30 May 2001, regarding public access to European Parliament, Council and Commission documents’, OJ L 145/43. 25 Convention for the Protection of Human Rights and Fundamental Freedoms (European Convention on Human Rights, as amended) (ECHR). 26 Franck, supra n. 11, p. 8. 27 M. Weber, Economy and Society, Bedminster Press, New York, 1968, p. 233. (edited by Guenther Roth). 28 D. Curtin, ‘Overseeing Secrets in the EU: A Democratic Perspective’, Journal of Common Market Studies, Vol. 52, 2014, pp. 684-700. 29 For an elaborate discussion on why the citizens are the primary check see V. Abazi & E. Tauschinsky, ‘Control Is Good, Trust Is Better? Management of Information in the EU through the Lenses of Control and Trust’, Paper for Third Global Conference on Transparency Research, Paris 2013. 30 H.C. Relyea, Security Classified and Controlled Information: History, Status, and Emerging Management Issues, Congressional Research Service Prepared for Congress, February 2008. 31 H.C. Relyea, ‘Opening Government to Public Scrutiny: A Decade of Federal Efforts’, Public Administration Review, Vol. 35, No. 1, 1975, p. 3. 24

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ and the judiciary have significant instruments at their disposal in order to ensure that the executive use of secrecy is within the confines of legitimacy.32 However, some reservations persist for these avenues of control over secrecy, considering that the judiciary is not always willing to engage in an in-depth judicial review but merely deploys a procedural review,33 and oversight committees of parliaments often do not have the right structural and functional resources to provide a comprehensive check.34 Private actors, such as NGO-s, also engage in ensuring openness and access to information. In this capacity they function as an intermediary between the public authorities holding information and the citizens. Notably, some private actors aim to acquire information that otherwise remains undisclosed or unnoticed in public debates.35 Moreover, due to technological resources, private actors are able to share information faster and to a larger audience. For example, Transparency International as an NGO committed to monitor and publicize corporate and political corruption, systematically publishes reports regarding transparency and accountability.36 Another important factor for private actors’ contribution is the context in which they function. The shift from government to governance, seen as the ‘erosion of the boundaries that separate the governors from the governed’,37 enables private actors to be not mere outsiders insisting on openness, but also participants in the collective decision-making process.38 For example, in the (still ongoing) legislative reform of Regulation 1049/01, many transparency-friendly NGOs have tried to influence the process and prevent

S.J. Schulhofer, ‘Secrecy and Democracy: Who Controls Information in the National Security State?’, Public Law and Legal Theory Research Paper Series, Working Paper No. 10-53, New York University School of Law, 2010. 33 D. Adamski, ‘How Wide is “the Widest Possible”? Judicial Interpretation of the Exceptions to the Right of Access to Official Documents Revisited’, Common Market Law Review, Vol. 46, No. 2, pp. 521-549. For implications regarding the Court of Justice of the EU, see Ch. Eckes, ‘Decision‐making in the Dark? – Autonomous EU Sanctions and National Classification’, in I. Cameron (Ed.), EU Sanctions: Law and Policy Issues Concerning Restrictive Measures, Intersentia, Antwerp, 2013, pp. 177-197. 34 A. Samaha, ‘Executive Exposure: Government Secrecy, Constitutional Law, and Platforms for Judicial Elaboration’, UCLA Law Review, Vol. 52, 2006, p. 927. See also See G. Griffith, Parliament and Accountability: The Role of Parliamentary Oversight Committees, Report of Oversight of Parliaments, Briefing Paper No. 12/05, 2005. See also, the Eleventh Bi-annual Report: Developments in European Union Procedures and Practices Relevant to Parliamentary Scrutiny, Prepared by COSAC, Prague, May 2009. 35 See Section 3.2 of this chapter, below. 36 See the latest Report on European Union: The European Union Integrity System, available at: . 37 M. Shapiro, ‘Administrative Law Unbounded: Reflections on Government and Governance’, Indiana Journal of Global Legal Studies, Vol. 8, No. 2, 2001, p. 374. 38 Ibid., p. 369. 32

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS reforms that would hinder access to public information in the EU. 39 The following section discusses this new context as a framework to analyse the role of private actors. Building upon the elaboration on the significance of information for democracy and the relevance to ensure information flows, the paper subsequently focuses more closely on the impact of private actors in this regard.

2. Governance and Private Actors 2.1. The Framework of Governance for Private Actors Within the context of governance, 40 there is dissolution of the boundaries between private and public spheres of regulation and control, which also challenges previous assumptions about the locus of political and economic authority.41 The context of governance recognises the importance of international institutions, but also highlights the relevance of actors and instruments which are of a private or hybrid nature, hence going beyond affairs merely involving public actors.42 For example, one of the latest key efforts to improve and clarify the balance between transparency and the need for secrecy in sensitive areas such as security, the so-called ‘Tshwane Principles on National Security and the Right to Information’,43 is undertaken by 22 organizations and academic centres, 44 recently endorsed by the Parliamentary Assembly of the Council of Europe.45 As opposed to the traditional hierarchical model of government, governance indicates a mode of functioning whereby state and non-state actors participate and often cooperate in the formulation and implementation of public policy.46 Governance as a framework of analysis enables the encompassment of a broader See L. Phillips, ‘Transparency NGOs Call on EU Not to Restrict Document Access’, 2 February 2011, available at: . A. von Bogdandy, ‘Developing the Publicness of Public International Law: Towards a Legal Framework for Global Governance Activities’, German Law Journal, Vol. 9, 2008, pp. 1375-1400. 41 G. de Búrca, ‘Reappraising Subsidiarity's Significance after Amsterdam’, Harvard Jean Monnet Working Paper, 7/99, 2000, p. 2. See also M. Poto, ‘The Principle of Proportionality in Comparative Perspective’, German Law Journal, Vol. 8, 2007, p. 835. 42 J.N. Rosenau, ‘Governance, Order, and Change in World Politics’, in J.N. Rosenau & E-O. Czempiel (Eds.), Governance without Government, Cambridge University Press, Cambridge, 1992. 43 Global Principles on National Security and the Right to Information (2012), Open Society Justice Initiative, available at: . 44 Some of the actors include: Africa Freedom of Information Centre, Article 19, the Global Campaign for Free Expression, Amnesty International, et cetera. 45 See S. Coliver, ‘A Question of Public Interest’, 10 October 2013, EuropeanVoice, available at: . 46 A. Gatto, ‘Governance in the European Union’, Columbia Journal of European Law, Vol. 12, 2006, p. 487. 39

40

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ range of actors and their interactions in significant policies, openness being one such example. This is particularly relevant for the European Union where decisions are made in a complex and multi-layered fashion with a variety of actors involved.47 Examining the role of private actors in openness within a governance framework is justified and salient considering the following reasons. First, governance as a framework actually encapsulates the position of private actors that participate in services traditionally reserved for public authority, such as security trainings and private prisons. 48 In such cases, private actors actually contribute to less openness due to the simple fact that typical national legislation, such as the Freedom of Information Act, was mostly enacted in a context that did not foresee the involvement of private actors. 49 Second, the framework of governance captures the nature of information exchange and decision-making as being interwoven. The emergence of transnational information and communication networks challenges the effectiveness of national governments to act solely on the basis of one source of information.50 To take an example from the context of law enforcement, during an investigation about a certain serious crime, national investigations are often conditioned upon information received from other national teams.51 In this context, most national laws such as the Freedom of Information Act and the role of representatives for scrutiny becomes a moving target because either the scope of the law or the prerogatives for scrutiny are jurisdictionally limited in their application.52 2.2. Private Actors in Many Guises Private actors engage in ‘public’ decision-making in a myriad of ways, yet their participation in the past has been ‘barely noticed by the public, acknowledged by politicians, or scrutinized by scholars’.53 More recent literature has changed that course of attention. 54 Moreover, current debates go beyond questions of 47

D. Curtin, Executive Power in the European Union: Law, Practices and the Living Constitution, Oxford University Press, Oxford, 2009. 48 A. Roberts, Blacked Out: Government Secrecy in the Information Age, Cambridge University Press Cambridge, 2006. 49 Ibid. 50 C. Knill, & D. Lehmkuhl, ‘Private Actors and the State: Internationalization and Changing Patterns of Governance’, Governance, Vol. 15, 2002, pp. 41-63. 51 Europol operates in a similar manner albeit it does not have coercive powers but remains mainly a coordinative agency. For more see V. Abazi, ‘Unveiling the Power over Europol’s Secrets’, Amsterdam Centre for European Law and Governance Working Paper Series 2013 – 04. 52 A. Roberts, ‘OCRON Creep: Networked Governance, Information Sharing, and the Threat to Government Accountability’, Government Information Quarterly, Vol. 21, No. 3, 2003, p. 249. 53 J. Freeman, ‘Private Role in the Public Governance’, New York Law Review, Vol. 75, 2000, p. 543. 54 See A.C. Cutler, V. Haufler & T. Porter, Private Authority and International Affairs,
 State University of New York Press, 1999; and R.B. Hall & T.J. Biersteker, The Emergence of Private Authority in Global Governance, Cambridge University Press, Cambridge, 2002.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS whether non-state actors matter, shifting the analytical focus to how they matter. 55 Private actors are an active and relevant actor in the spectrum of balances between openness and secrecy. On the one hand, private actors have advocated for more openness. One of the methods of achieving this aim has been through campaigns for the adoption of national and international legislation in order to make access to information a right recognised for as many citizens worldwide as possible. In this capacity, nongovernmental actors such as The Open Society Institute, Transparency International, and Article 19, a London-based freedom of expression organisation, are but a few to enumerate. An additional contribution of such actors is ‘Reporting’, through which these actors have named good or bad practices regarding the manner in which certain States implement Freedom to Information Laws with the aim to raise public awareness, pressurise states with bad practices, and develop good examples to be followed.56 Apart from advocating for legislation, once Acts on Freedom of Information have actually been adopted, private actors have been at the forefront of filing access requests. 57 This is particularly important considering that generally it is less likely that individuals would themselves file access to information directly, either for lack of knowledge of the possibility of doing so and/or lack of resources.58 Yet, requests for access to information are not always responded to positively. In many important cases, private actors have actually needed to seek redress through judicial or non-judicial manners in order to gain access to information. On the other hand, as previously mentioned, private actors can also be seen as participants in the system of classified information, or can be involved in secrecy in a different way. Security is one of the key areas where secrecy has been sustained by the increased reliance on private contractors, 59 leading to changes of earlier practices of ‘balance’ between openness and secrecy in the field. Such state of affairs has been partly due to the fact, as it was mentioned above, that requesting information from private contractors largely remains outside of the confines of Freedom of Information Acts. Hence, despite the impact on human rights that the security work undertaken by private firms can have, the public cannot be directly informed regarding their operations. This raises concerns since academic research has T. Büthe, ‘Governance through Private Authority: Non-State Actors in World Politics’, Journal of International Affairs, Vol. 58, No. 1, 2004. 56 See for example the following Report by Access Info, available at: . 57 See for example the Report of the Council of the European Union regarding access request for the period of 2008-2012, NGOs access is on a rise and in 2012 amounts to 28.5% of access request to Council’s documents. Available at: . 58 Roberts, supra n. 4, p. 116. See also Council Annual Report on Access to Documents, 2012. 59 A. Roberts, ‘Transparency in the Security Sector’, in Ann Florini (Ed.), The Right to Know: Transparency for an Open World, Columbia University Press, New York, 2007, pp. 309-337; A. Bryden & M. Caparini (Eds.), Private Actors and Security Governance, DCAF, 2006. 55

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ shown in some countries such as Iraq or Colombia there have been questionable issues regarding the work of contractors,60 yet they had legal protection and their activities fell outside of the ambit of possible access to information requests.61 Hence, private actors can either be pushing for openness in a formal (adjudication) and informal fashion (leaks) or they can also be part of the system of keeping secrets and in other manners add to the obscurity of the system of decision-making. The latter might not result as a direct action from their part as such, but it is a reflection of the need to reform and enlarge the scope of application of access to information legislation. What is particularly relevant and novel is the speed and the extent to which the actions of private actors contribute to change the boundaries of traditional secrecy.62 Technological progress coupled with social media has made it possible for actors to reach a high number of individuals going beyond geographical borders.63 But there are also factors that hinder private actors’ contribution to openness. Such factors include the punishment of whistle-blowers’ as a counter-response to uncontrollable distribution of classified information once it is leaked. 64 Moving beyond the theoretical discussion, the following part of the paper examines the role of private actors by examining concrete cases within the EU.

3. Private Actors in the European Union: Towards More Openness 3.1. The European Union Legal Framework for Secrecy and Openness The European Union, in accordance with Article 2 Treaty on European Union (TEU) is founded on ‘democracy […] the rule of law and respect for human rights’. These foundational values directly bind the EU to handle information in a manner that ensures their relevance and realisation. Since 1992, Article 1 TEU stipulates that in the Union ‘decisions are taken as openly as possible’. After a decade, the European Commission, in its White Paper on Governance, highlighted that open governance is a major principle.65 More importantly, the year of 2001 marked the adoption of the legally binding Regulation 1049/2001, coined as the EU Transparency Regulation, which could be referred to as an

60

Roberts, supra n. 4. Ibid., See P.W. Singer, Corporate Warriors, Cornell University Press, Itacha, 2003. 62 C. Hood, ‘From FOI World to WikiLeaks World: A New Chapter in the Transparency Story’, Governance, Vol. 24, 2011, pp. 635-638. 63 For example, both Access Info and Transparency International have pages in social media. 64 The case of Bradley Manning is one such example. See A. Gobatt, ‘History Suggests Bradley Manning's Punishment Does Not Fit His Crimes’, The Guardian, 21 August 2013. 65 European Commission, European Governance: A White Paper, COM (2001) 428 final, OJ (2001) C 287/1, 25 July 2001, Section II. 61

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS equivalent to the Freedom of Information Acts known in national legislations worldwide.66 In the post-Lisbon phase in the European Union legal order, the principle of openness enjoys a fundamental constitutional status.67 The scope of the principle of openness covers all aspects of the decision-making process: legislative, administrative, regulatory and operational.68 Article 15(3) of the Treaty on the Functioning of the European Union (TFEU) and Article 42 of the Charter of Fundamental Rights (the Charter) grant an individual right of access to documents.69 These provisions should be read in conjunction with Article 10(3) TEU ensuring that every citizen has a right to participate in the democratic life of the Union. Hence, any restriction of openness should be read as a narrow exception that must be justified on the basis of prominent objectives that the EU aims to achieve. One such limitation to openness stipulated in primary law is professional secrecy.70 Another example is the qualification made to the right to access documents, in accordance with Article 15 TFEU, whereby the right is limited on the basis of public or private interests, which are set in more detail in Regulation 1049/01.71 A similar qualification is also stipulated in Article 41 of the Charter regarding access to one’s files within the process of administrative procedures, which foresees that ‘the legitimate interest of confidentiality and of professional and business secrecy’ must be preserved. Another, more fundamental aspect of the limitation of openness in the European Union is secrecy, expressed in the European Union Classified Information system (EUCI system). Unlike other limitations, the system of classified information as such is

66

Regulation No. 1049/01 does not mention the EU agencies. But, in practice they are also under the public access regime and it is also stipulated in their founding acts, see Article 45 Europol Decision, 2009 and Decision of the Management Board of Europol laying down the rules concerning access to Europol documents, 8 July 2009. See Roberts, supra n. 4. 67 See op. cit. supra n. 29. 68 This has not always been the case. Access to information started as merely an administrative rule regarding a limited scope of documents. Some have argued that regarding access to information, the Council always preferred a more limited approach presumably to avoid interference of the European Parliament. See U. Oberg, ‘EU Citizen’s Right to Know: The Improbable Adoption of a European Freedom of Information Act’, The Cambridge Yearbook of European Legal Studies, Vol. 2, 1999, pp. 303-329, at p. 312. 69 Article 15(3) TFEU stipulates ‘Any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State, shall have a right of access to documents of the Union's institutions, bodies, offices and agencies, whatever their medium, subject to the principles and the conditions to be defined in accordance with this paragraph.’ Article 42 Charter of Fundamental Rights stipulates as follows ‘Any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State, has a right of access to documents of the institutions, bodies, offices and agencies of the Union, whatever their medium.’ 70 See Article 339 TFEU. 71 See Article 4 Regulation 1049/2001.

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ not stipulated in the Lisbon Treaty. Rather, it finds way into the Union’s legal system on the basis of each Institution’s Rules of Procedure.72 Secrecy in the EU was the predominant manner of decision-making, or to put it in the words of a judge of the European Court of Justice, it was a ‘non-issue’.73 The EU’s origin as an international organisation meant that maximum secrecy and sensitivity attended its diplomatic relationships. 74 Until the early 1990s, institutions were subject to a general confidentiality principle: everything was secret except what had intentionally been made public.75 The system of classified information as such was not given a particular political consideration and was established as a technical tool of information management and security; it was perceived in the narrowest sense as the identification of the information that must be protected.76 Currently, the classification of documents’ legal regime is based on the Council’s Rules of Procedure.77 After more than a decade since the initial establishment of a comprehensive system for classified documents, the new framework – the Decision on security of European Union Classified Information (Decision EUCI II) – was established in 2011 and revised in 2013.78 The classification system, according to principles of best practice, should be established in a manner that is transparent and enables the public to have a say in the creation of the policy prior to its entry into force.79 Moreover, the policy itself should be public and accessible.80 The Decision EUCI II is public, inclu72

Primary law basis for rules of procedure see Article 240 TFEU about the Council and Article 249 TFEU about the Commission. In the European Union the following decisions are representative of the regime applicable to classified information: The following decisions are applicable: Council Decision 2013/488/EU of 23 November 2013 on the security rules for protecting EU classified information OJ L 274; Council Decision 2009/968/JHA of 30 November 2009 adopting the rules on the confidentiality of Europol information OJ 2009 L 332/17; Decision of the High Representative of the Union for Foreign Affairs and Security Policy of 19 April 2013 on the security rules for the European External Action Service (2013/C 190/01) OJ C 190/1; European Commission, Rules of Procedure (C(2000) 3614) OJ L 308, 8.12.2000, Amended by Commission Decision 2011/737/EU, Euratom of 9 November 2011 OJ L 296. 73 K. Lenaerts, ‘In the Union We Trust: Trust Enhancing Principles of Community Law’, Common Market Law Review, Vol. 41, 2004, pp. 317-343, at p. 318. 74 P. Birkinshaw, Freedom of Information: The Law, the Practice and the Ideal, 4th edn, Cambridge University Press, 2010. 75 H. Ragnemalm, ‘The Community Courts and Openness within the European Union’, The Cambridge Yearbook of European Legal Studies, Vol. 2, 1999, pp. 19-31, at p. 21. 76 A. Quist, Security Classification System, Volume II Principles for Classification of Information, 1993, p. 6. See also the Article 4(2), Commission Decision on Security of Information , OJ L 317/1. The term ‘classification’ means the allocation of an appropriate level of security to information the unauthorised disclosure of which might cause a certain degree of prejudice to Commission or to Member State interests. 77 See Article 240 TFEU; Council Decision 2009/937/EU of 1 December 2009 adopting the Council's Rules of Procedure L 325/35. 78 Council Decision 2013/488/EU of 23 November 2013 on the security rules for protecting EU classified information OJ L 274. See prior to this Council Decision of 31 March 2011 on the security rules for protecting EU classified information, OJ L 141, 2011, pp. 17-65. 79 Global Principles on National Security and the Right to information (2012), Open Society Justice Initiative. 80 Ibid.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS ding the more detailed annexes regarding different steps taken during the classification process. However, considering that it is a decision based on the rules of procedure, hence treated as an internal executive matter, the public has had no opportunity to comment on the procedures and standards governing classification prior to their entry into force. Similarly, the European Parliament has not been in a position to influence the process or decisions regarding the rules on classified information in the EU. Moreover, the European Parliament has only recently established agreements or prerogatives via other legal means to gain access to classified information.81 An active role in transforming the culture of secrecy in the EU is noticeable in key judgments of the Court of Justice of the European Union (the Court). The Court has developed openness from access to information on an individual level to a general principle in EU law.82 Treating openness as a general principle is important because it enables the Court to assess the legality of the different exceptions themselves in light of the general principle, as opposed to only examining whether refusal to access a particular document fell within the exceptions.83 Some of the most striking cases in this line of development have been brought forward by private actors, either with the clear aim to foster openness or through adjudicating matters relevant for openness as a government policy. The next section elucidates some of these cases. 3.2. Private Actors in the European Union: Some Landmark Cases Private actors play an important role for the EU through strategic contacts with European institutions, judicial and non-judicial manners (such as redress via complaints to the European Ombudsman), leaking, and public exposure campaigns.84 For instance, regarding the Council of the EU particularly, recent research shows that actors external to the Council provide an important additional explanation for the development of its transparency policy due to their consistent advocacy at the EU institutions.85 Moreover, Brussels is perceived as distant and incomprehensible, which does not encourage citizens to file 81

See for example, forwarding to and handling by the European Parliament of classified information held by the Council on matters other than those in the area of the common foreign and security policy European Parliament decision of 13 September 2012 on the conclusion of an inter-institutional agreement between the European Parliament and the Council concerning the forwarding to and handling by the European Parliament of classified information held by the Council on matters other than those in the area of the common foreign and security policy (2012/2069(ACI)), OJ C 353E. 82 See T. Heremans, ‘Public Access to Documents: Jurisprudence between Principle and Practice (between Jurisprudence and Recast)’, Egmont Paper, No. 50, September 2011. 83 See op. cit. supra n. 52. 84 M. Hillebrandt, ‘A European Transparency Tangle? Mapping Supranational Advocacy Coalitions and Their Impact on Council Transparency’, Draft Paper for the Transatlantic Conference on Transparency Research, 7-9 June 2012. 85 J. Heliskoski and P. Leino, ‘Darkness at the Break of Noon: the Case Law on Regulation No. 1049/2001 on Access to Documents’, Common Market Law Review, Vol. 43, 2006, pp. 735-781.

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ access to information requests themselves.86 In these cases, private actors such as the Svenska Journalist forbundet – the Swedish Journalist Association, or the Verein für Konsumenteninformation – the Austrian Consumer Organisation have enabled the release of more information about important issues affecting European citizens, such as consumer protection or security policies, and have contributed to the development of key principles for the application of the right to access information. The cases discussed here represent actors of various backgrounds, both in terms of field of activity and geographical location (note for example the difference between the Swedish Journalist Association and the Austrian Consumer Organisation). Time-wise, the cases represent both more recent case law as well as cases in the early 1990s, before Regulation 1040/01 was in force. The crucial question is to what extent could it be claimed that the private actors actually contributed to openness in the EU, considering that it is the Court of Justice of the European Union as the judicial authority that interpreted Regulation 1049/2001 in a manner that results to enhanced openness and protection of access to information. The relevance of private actors becomes apparent once we consider the following: first, these private actors filed the cases against the EU administrative / executive institutions with the particular interest to defend a higher and more rigid standard of application of access to information. This particularly becomes visible for actors such as Access Info, whose very establishment is directed at the aim to increase transparency in the European Union (see more below). Secondly, some actors, such as the Svenska Journalist forbundet used access to information to challenge the EU administrative practices and point out at the culture of secrecy in the EU beyond rationales of necessity for the limitation of information. They helped shape public opinion and contributed to mobilise transparency-friendly EU states to enhance openness.87 In other words, the role and contribution of the private actors, as we see below in these cases, is directly dependant on the adjudication process. However, their significance remains in instigating access to documents requests about key issues, either in the decision-making process (Access Info) or substantive issues (consumer protection, see below), their advocacy for openness both in national capitals and in Brussels, and lastly, their commitment to make information available to the citizens.

86 87

See op. cit. supra n. 20. See M.Z. Hillebrandt, D. Curtin & A. Meijer, ‘Transparency in the EU Council of Ministers: An Institutional Analysis’, European Law Journal, Vol. 20, No. 1, 2014, pp. 1-20

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Svenska Journalist forbundet v Council The basic principle underlying the application of the Regulation 1049/2001 is that the widest possible access to documents applies. This principle was established by the Court in the case of Svenska Journalist forbundet v Council88 that arose out of an access request initiated by Swedish journalists. After Sweden's accession to the EU the applicants wanted to test the manner in which the Swedish authorities would apply Swedish citizens' rights of access to information regarding documents connected to EU activities. With that aim, they contacted the Swedish authorities seeking access to a number of documents in the possession of the Council of the EU relating to the establishment of Europol, the European Police Office. Of the twenty documents requested, eighteen were released, although some were redacted. The applicants then made the same request to the Council. The Council allowed access initially to only two of the twenty documents, but on reconsideration released two further documents, withholding sixteen from disclosure. The applicants challenged this decision before the Court of First Instance, which held that the objective of access to information is to: ‘give effect to the principle of the largest possible access for citizens to information with a view to strengthening the democratic character of the institutions and the trust of the public in the administration’.89

There has been criticism that the Court missed the opportunity to express its views on more fundamental issues such as the appropriateness of the Council's desire to withhold documents of this nature or about the contrast between the response of the Council and that of the Swedish authorities.90 Nevertheless, the impact of the case is relevant both in legal and political terms. Regarding the legal significance, the Court was explicit that the institutions are obliged to ensure the widest access to documents and hence any derogation from access must be interpreted in a strict manner. In addition, the widest access implies that when full access to documents cannot be granted, the institutions must consider partial access to the documents requested. In political terms, the case is significant in showing the difference of administrative culture between the EU level and some member states that defend openness more strongly. Consequently, it became evident that the choice between openness and secrecy is not merely a question of genuine necessity of protection of certain documents but it is a question of administrative culture. The case of Svenska Journalist 88 89 90

Case T-174/95, Svenska Journalist forbundet v Council [1998] ECR II-2289. Ibid., Para. 66. A. Tomkins, ‘Transparency and the Emergence of a European Administrative Law’, Yearbook of European Law, Vol. 19, No. 1, 1999, p. 217, at p. 230.

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ forbundet v Council hence showed that secrecy in the EU, besides necessity, is due to administrative culture, and one that can change when principles such as the widest access are applicable. Verein für Konsumenteninformation v Commission The second very important principle regarding access to information derives from the case of Verein für Konsumenteninformation v Commission. 91 The Verein für Konsumenteninformation (‘the VKI’) is a consumer organisation constituted under Austrian law, which has the right to bring proceedings before the Austrian civil courts in order to assert certain financial claims of consumers. The VKI requested a relevant cartel file from the Commission of the European Union that was at the basis of the so-called ‘Lombard Club decision’.92 In this decision, the Commission found that several Austrian Banks had participated in a cartel known as the ‘Lombard Club’, fixing jointly the interest rates for certain investments and loans. The VKI filed an access to information request which the Commission refused since the application pertained to a large number of documents.93 The Commission justified its refusal by invoking the principle of proportionality stating that examining the application would result in an administrative burden that would undermine the principle of a sound administration.94 However, the Court disagreed and found the Commission’s assessment not compatible with the idea of widest access possible and that it is not sufficient to assess the documents by references to categories rather than on the basis of the actual information contained in them. The Court established that any request for access to documents is to be subject to a concrete and individual examination.95 Hence, the relevance of the judgment is notable regarding the standard of review that an EU institution must conduct when access to information is requested: the assessment of documents must be concrete and individual. This approach ensures that categories of documents or a file containing numerous documents are not kept undisclosed merely because the category or the file as such are subject to the exceptions stipulated in Article 4 of Regulation 1049/01. It results in greater transparency since more documents would be disclosed.

91

Case T-2/03, Verein fur Konsumenteninformation/ Commission [2005] ECR II-1121, Para. 69. Ibid., see Paras. 6-12. 93 Ibid., Paras. 17-22 94 Ibid., Para. 20. 95 Exceptions do apply however, see P. Leino, ‘Just a Little Sunshine in the Rain: The 2010 Case Law of the European Court of Justice on Access to Documents’, Common Market Law Review, Vol. 48, 2011, p. 1215. 92

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Access Info Europe v Council Thirdly, a more recent case and one that is arguably the most important in political terms for EU legislation process so far discussed is Access Info Europe v Council.96 An additional reason why this case is important concerns the nature of the private actor, Access Info Europe, which actually has as a specific aim to ‘advance and defend the right to know in Europe and globally’, to put it in its own words.97 Access Info requested a document of a Council working party comprising positions of national delegations on the Commission’s legislative proposal to amend the EU Transparency Regulation. The applicant received the document in a redacted version; the identities of the Member States putting forward individual proposals to amend the original legislative proposal of the Commission were removed, which was explained by the Council in terms of the decision-making exceptions stipulated in Regulation 1049/2001. The Council argued that: ‘[The] legislative process is very fluid and requires a high level of flexibility on the part of Member States so that they can modify their initial position […] to ensure a ‘negotiating space’ and thereby preserve the effectiveness of the legislative process, it is necessary to ensure that Member States have maximum room for manœuvre [… which] would be reduced if the identity of the delegations were disclosed [.] [I]t would have the effect of triggering pressure from public opinion, which would deprive […] the effectiveness of the Council’s decision-making process.’98

However, the General Court concluded that full disclosure of the Council documents, including the name of the delegation making a particular proposal should be included and that the general practice of blanking out names could not be accepted.99 The General Court held that public access to the entire content of Council documents constitutes the general rule subject to exceptions, which must be interpreted and applied strictly. 100 In this particular case the Council failed to show that there was a genuine risk of seriously undermining the Council’s decision-making process.101 As could be expected, the Council filed an appeal. The Advocate General Cruz Villalón in his opinion to the European Court of Justice (ECJ), put forth that democratic debates leading to legislation must ‘above all’ ensure accountability, which implies that it is essential to know ‘the identity of those participating in the debate and, in particular, the terms on

96

Case T-233/09, Access Info Europe v Council [nyr]. See Access Info website: . 98 Case C-280/11 P Council v Access Info [nyr], Para. 24. 99 Ibid., Para. 69. 100 Ibid., Paras. 57-59. 101 Ibid., see particularly Paras. 70-80. 97

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ which they are doing so’.102 In the appeal, the ECJ did not address in length the issues of legislation and legitimacy and the need for more openness in this regard. But it did indeed dismiss the appeal by the Council, and reiterated that the application of the exceptions to the right of access is justified only if there is a risk that one of the protected interests might be undermined and that risk must be reasonably foreseeable and not purely hypothetical.103 In this regard, the ruling of ECJ is remarkable in that it favours the possibility for citizens to find out the considerations underpinning legislative action as a precondition for the effective exercise of their democratic rights.104 It has been also argued that the case opens, on a more profound level, the question to whom is the Council accountable, and on a less democratically profound level, the question as to what the scope of Regulation 1049 would be.105 Regarding the first point, should the identity of the member states behind the proposals as preparatory work in a legislative process be disclosed, it implies that the European citizens would form a clearer picture of the position of their national ministers when acting in Brussels.106 As for the scope of Regulation 1049/01, the Access Info judgment illustrates that especially when legislative processes are in question, access to documents and transparency in general should be interpreted widely to encompass preparatory work as well. This case has a particular bearing considering that Regulation 1049 is still under review. Namely, the revision process of Regulation 1049/01 is on-going albeit currently being in a stalemate and once the discussions resume, they must do so in line with the case law, which implies that the Access Info judgment becomes a norm on the level of legislative transparency, i.e. fully encompassing the process and the actors behind legislation. The role of Access Info is therefore significant in its contribution to ensure that the legislative process in the European Union is more transparent and to shift the administrative working methods of the Council from a diplomatic body to a transparent legislator.

Advocate General’s Opinion, Council v Access Info, Case C-280/11 P [nyr], Para.71. See also D. Banisar, Government Secrecy: Decisions without Democracy (Washington D.C., 2009), at 5. Case C-280/11 P Council v Access Info., see Paras. 53-68. 104 See also Case C-39/05 Sweden and Turco v Council [2008] ECR 1-4723, Para. 46. 105 D. Adamski, ‘Approximating a Workable Compromise on Access to Official Documents: The 2011 Development in the European Courts’, Common Market Law Review, Vol. 49, 2012, p. 521, 533. 106 For example, see how secrecy facilitates the differentiation between the public statements at the national level by ministers and their actual voting position in the Council: M.Z. Hillebrandt (2014, January 7). Complaining about a decision that we agreed to ourselves cuts us a strange figure: . 102

103

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 3.3. Common Aspects of Different Cases The cases reveal that private actors have contributed to the enhancement of openness in the EU. Specifically in respect of the right to access information, private actors have contributed to the establishment of key principles concerning the application of Regulation 1049/01 in the sense that they have filed cases against EU executive and administrative secrecy and have brought arguments for more openness, which have been adopted by the Court of Justice of the European Union. In this respect, a few common aspects emerge as salient. Firstly, the aim of the private actors in the cases discussed is the intention to contribute to a more open EU, most evident in the cases of Svenska Journalist forbundet and Access Info. Either for direct democratic debate or due to corporate interests, these actors have brought forward cases that changed the manner decisions in EU are taken and enabled a transformation in the understanding of administrative discretion. Secondly, these cases demonstrate that private actors can be a reliable intermediary between citizens and EU administration for issues that are relevant to the former’s wellbeing, such as consumer protection. In such issues, citizens directly or by their own means could be less resourceful to address them either through the administrative means (for example the ombudsperson) or through adjudication, whereas the private actors had access to both the financial sources and, importantly, the necessary legal expertise. However, some issues for further considerations also arise from these cases. First, the interest and gain of the actors involved can be put to question. Although generally, as shown here, their primary concern was justified, that does not necessarily exclude potential motives of actors that could be less acceptable (for instance personal financial or reputational gains). 107 Secondly, although the involvement of private actors enhances openness through new legal principles established in case law, direct access of citizens to these documents remains more difficult to measure or assess. In other words, it is less clear to what extent citizens actually access the documents that the private actors help in disclosing.

4. Conclusions This chapter examined the role of private actors in fostering openness through the right to access information in the European Union. To that end, it first laid out the theoretical assumptions and understanding of why information is important in the first place and what the control thereof means for different 107

It is important to stress however that no such negative example is known in the practice of actors advocating for transparency in the EU.

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PRIVATE ACTORS IN THE ‘WIKILEAKS WORLD’ democratic models. In addition, an important factor to consider when examining the role of private actors, it was argued, is the context of governance that brings private actors within the decision-making circle or other means of exercising public power and therefore changes the position of private actors from merely being external actors pushing for more openness to actors that are actually participants in the system. Although this chapter evidenced the different positions private actors can have in the broad spectrum of openness and secrecy, the focus was particularly on the private actors’ role in fostering the right to access information through judicial redress. In doing so, the example of the European Union was more closely examined and important case law for the relevance of private actors was reviewed. Further and more in-depth research is necessary to encapsulate the broad role private actors have in the debate of openness and secrecy in the EU and worldwide. Yet, some preliminary conclusions from the current discussion can be drawn. Firstly, the role of private actors in promoting and defending the right to access information is significant. The extent of their influence could increase due to their strong advocacy in policy-making but also shaping public opinion through traditional and social media. For the EU in particular, we can expect that private actors will continue to play a very important role, as their recent activities both in advocacy and judicial redress of access to information cases illustrate. Secondly, the role of private actors is not one-dimensional, as we saw regarding private contractors operating in security issues, their activities remain outside the scope of Freedom of Information Acts, since the legislation was enacted in a time that did foresee actors as participants in public policies or issues that deal with public interest. Lastly, due to a lack of current in-depth empirical and quantitative research, in the future it remains to measure and assess to what extent we could actually claim that citizens are informed about decision-making in the European Union by the information that is undisclosed through the private actors’ activism.

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Regulating the Information Society THE REPRODUCTION RIGHT IN EUROPEAN COPYRIGHT LAW Hein Scholtens*

Introduction It has been almost thirteen years since the Copyright Directive was introduced into the European Union.1 After a scholarly evaluation that took place at the start of 2012, it may now be considered opportune to further asses its contents.2 Consequently, I have chosen to examine the copyright reproduction right as laid down in Article 2(a): ‘Member States shall provide for the exclusive right to authorize or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part: (a) for authors, of their works […].’

My motivation is as follows: I believe that the reproduction right is inadequate for the proper regulation of the production of copyright works, or multimedia works, as referred to in the context of the information society which is the subject of the Copyright Directive (Paragraph 1). Alongside their potential to be copied onto various media, for instance music that can be played from the memory of a laptop or iPhone, one of the key features of multimedia works is their transformative nature. This means that they are likely to be based on previous works, to which may also be attached another meaning – as in the use of parody. On the basis of the legal history of European copyright law and the content of international copyright law, I will argue that the reproduction right is not built to cope with the transformative aspect of multimedia works production (Section 2). Instead of interpreting this right broadly, which seems to be the approach chosen by the Court of Justice so as to fit the act of transformation within that of reproduction (Section 3), I suggest implementing an explicit adaptation right in the Copyright Directive (Section 4). Not only would this conform to the treaty *

H.N. (Hein) Scholtens is a PhD Candidate at VU University Amsterdam. European Parliament and Council Directive 2001/29/EC of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ 2001, L 167/10). 2 Available at: . Indeed the time is ripe for assessment of the directive; the Commission has also just launched a public consultation on the review of EU copyright rules, available at: . 1

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS obligations that follow from the Berne Convention, TRIPS Agreement and WIPO Copyright Treaty, it would also be in accordance with the European acquis communautaire consisting of the Software and Database Directives. Lastly, I consider whether the implementation of an adaptation right can be considered a valid means to come to grips with the development of the information society, and further consider the option of awarding financial compensation to authors whose works have been transformed, as the preservation of the resulting derivatives relies on these private actors’ acceptance. In this regard, actors need not adopt an aggressive attitude. The example of versioning in reggae music shows that derivative and original works can coexist peacefully (Section 5). In conclusion, therefore, public copyright policy should be built on this positive co-existence.

1. Importance of Multimedia Works In this section, I will focus on the role of copyright works during the rise of the information society in the late eighties and early nineties. Multimedia works, as they are referred to in this historical context, play an important part in the response to the changing technological circumstances. They can emancipate people both on the level of employment and personal development, enabling them to contribute to European economy and culture. In the late 1980s, the European Commission set the tone for what was to become the core of its future legislative programme. In the ‘Green Paper on Copyright and the Challenge of Technology – Copyright Issues Requiring Immediate Action’,3 the Commission formulated the following spearheads: piracy, home copying, distribution and rental of works in general, and the protection of computer programmes and databases specifically. With the successive enactment of the Software, Rental Right, Satellite and Cable, Terms of Protection and Database Directives, most of the issues requiring immediate action were covered.4 It took until 1993, however, before the first steps were taken to tackle the remaining problem areas. 3 4

Commission Document 88/172 final, p. 15. Council Directive 91/250/EEC of 14 May 1991 on the protection of computer programmes (OJ 1991, L 122/42) (later codified as European Parliament and Council Directive 09/24/EC of 23 April 2009 on the legal protection of computer programmes (OJ 2009, L 111/16)), Council Directive 92/100/EEC of 19 November 1992 on rental and lending right and on certain rights related to copyright in the field of intellectual property (OJ 1992, L 346/61), Council Directive 93/83/EEC of 27 September 1993 on the co-ordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission (OJ 1993, L 248/15), Council Directive 93/98/EEC of 29 October 1993 harmonizing the term of protection of copyright and certain related rights (OJ 1993, L 290/9) and European Parliament and Council Directive 96/9/EC of 11 March 1996 on the legal protection of databases (OJ 1996, L 077/20).

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REGULATING THE INFORMATION SOCIETY In the White Paper ‘Growth, Competitiveness, employment. The challenges and ways forward into the 21st century’, the Commission introduced the ‘information society’ as a development to which European copyright law must adapt. The information society is based on the idea that the presence of information and communication technology (ICT) influences all human activity.5 Considering that safeguarding the free movement of persons and services is one of the main goals to be achieved within the European Union (Articles 45-62 TFEU), the effects of the information society on the work environment were the most relevant.6 ICT has caused the character of the economy to shift from the manufacturing of goods to the provision of services. In this knowledge economy, the exchange of information is becoming more important and the boundaries between supporting technologies are fading.7 These developments translate to the rate of employment in two ways: firstly, the convergence of supply chains provides possibilities for intermediaries; secondly, employees must learn to deal with the digital storage and conversion of information.8 ICT also has additional advantages in regard to the personal lives of employees. It offers individuals new channels to distribute their creative expressions.9 These ‘multimedia works’ are of an eclectic nature.10 They allow consumers to elaborate and make combinations that defy classic copyright categorization. The character of multimedia works was recognized by the Commission in the Green Paper: ‘Copyright and Related Rights in the Information Society’.11 The Commission viewed these qualities as cultural aspects that the European Union must take into account in its regulative action (Article 167(4) TFEU). This consists of the establishing and ensuring the functioning of the internal market (Article 26(1) TFEU), the safeguarding of the freedom of establishment

5

Commission Document 93/700, pp. 92, 93. OJ 2012, C 326/47; See for an assessment of the rules on all four freedoms: C. Barnard, The Substantive Law of the EU. The Four Freedoms, Oxford University Press, Oxford, 2010. 7 Commission Document 93/700, pp. 10, 39, 61. 8 Commission Document 93/700, pp. 94-98. 9 European Commission, Growth, competitiveness and employment. White Paper follow-up. Report on Europe and the global information society. Interim report on trans-European networks. Progress report on employment. Extracts of the conclusions of the Presidency of the Corfu European Council, Office for Official Publications of the European Communities, Luxembourg, 1994, pp. 10-15. 10 P.B. Hugenholtz, Intellectual Property Rights on the Information Superhighway. Report to the Commission of the European Communities (DG XV). Draft version, IViR, Amsterdam, 1994, Para. 1.2. While this does not detract from the eclecticism of the works, it must be admitted that their connection with a range of distribution channels is based on multimedia in the literal sense; however, ‘[t]he main distinctive characteristic of multimedia is that its technology is meant to combine, in a single medium, diverse types of works or information’: I.A. Stamatoudi, Copyright and Multimedia Products. A Comparative Analysis, Cambridge University Press, Cambridge, 2002, p. 18. 11 Commission Document 95/382 final, pp. 11, 19, 25, 27, 28. 6

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS (Articles 49-55 TFEU), the provision of services (Articles 56-62 TFEU), and to a lesser extent the safeguarding of the free movement of goods (Articles 28-37 TFEU), as multimedia works are more likely to be transferred in an immaterial, electronic form.12 The view of the Commission was confirmed by the European Parliament.13 On the other side of the coin, and in addition to the acknowledgement of consumer interests, right holders must be guaranteed a high level of copyright protection. Therefore, a balance was sought between the easy transmission and modification of multimedia works, and the difficulty to acquire permission for such actions.14 Furthermore, the balance to be achieved in the Copyright Directive had to be in accordance with international law as per the Berne Convention, TRIPS Agreement and WIPO Copyright Treaty, and the other directives mentioned earlier.15 Of these, the Software and Database Directives are the most relevant. The Software and Database Directives are relevant due to the fact that the interpretation of the reproduction right, as contained within the Copyright Directive, must follow their approach.16 The Database Directive is also important because it is foreseen that multimedia works will be accessed from these collections (Article 1(2) Database Directive).17 The other copyright directives: the Rental Right, Satellite and Cable and Terms of Protection Directives, need not be consulted; they do not contain reproduction rights and are therefore excluded from the relevant part of the acquis communautaire.18 After re-tracing the origins of the information society, it can be concluded that the versatility of multimedia works is an important factor in work and personal life. Against the background of the protection of the four freedoms, works must be protected by copyright. The copyright protection that is provided for in the Copyright Directive must not deviate from Treaty standards and the acquis communautaire, in order to maintain a high level that also accounts for cultural interests. In the following paragraph, the consequences of this approach for the content of the reproduction right are illustrated (re: Article 2(a) Copyright Directive). 12

Commission Document 95/382 final, pp. 16, 30, 31. OJ 1996, C 320/177. 14 European Commission, supra n. 14, pp. 21, 22. Currently this search is becoming more and more interesting, as creative speech arguments gain weight against copyright enforcement: Ashby Donald v France, ECHR (2013), No. 36769/08; D. Voorhoof & I. Høedt-Rasmussen, ‘ECHR: Copyright vs. Freedom of Expression’, available at: . 15 See cit. op. supra n. 4; Commission Document 95/382 final, pp. 16, 30, 31. 16 Commission Document 95/382 final, pp. 51, 52; Commission Document 96/586 final, p. 10. 17 Commission Document 95/382 final, p. 31. 18 Commission Document 96/586 final, pp. 11; Commission Document 97/628 final, pp. 24, 28; P. Craig & G. de Búrca, EU Law. Text, Cases, and Materials, Oxford University Press, Oxford, 2008, p. 16. 13

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REGULATING THE INFORMATION SOCIETY 2. Content of the Reproduction Right In this section, I will compare reproduction rights as they are included in international and European copyright law. For this comparison, I turn to the Berne Convention, TRIPS Agreement, WIPO Copyright Treaty and the Software and Database Directives. I will show that all sources combined portray a cohesive image of what reproduction means. This definition, however, only partially applies to the multimedia works the right is supposed to regulate in accordance with the Copyright Directive. I find that reproduction rights do not address the pivotal aspect of re-use when their international and European contexts are considered. To begin with the international context; in the Berne Convention (1971), which refers to the Paris Act – the last revised version of the treaty, the reproduction right is included in Article 9(1)(3).19 Paragraph 2 holds the three-step test, which I have excluded underneath as it applies to exceptions and limitations to the reproduction right, but does not define the act itself: ‘Authors of literary and artistic works protected by this Convention shall have the exclusive right of authorizing the reproduction of these works, in any manner or form. Any sound or visual recording shall be considered as a reproduction for the purposes of this Convention.’20

The inclusion of the reproduction right had already been achieved during a previous revision conference, namely that of Stockholm.21 At this meeting, the participating member states debated on overall copyright reform in general, and the broadening of exclusive rights or the granting of new ones in particular.22 In line with these topics, the reproduction right was introduced as a general rule overseeing the making of copies of works (Paragraph 1).23 Adoption of this rule was of such importance that without agreement, the Stockholm Conference would have to be considered a failure.24 Thankfully, unanimity was achieved by the attending Committee.25 Accordingly, the third paragraph was added.26 This 19

WIPO, Records of the Diplomatic Conference for the Revision of the Berne Convention (Paris, July 5 to 24, 1971), WIPO, Geneva, 1974, p. 183. 20 See for an assessment of the three-step test: M. Senftleben, Copyright, Limitations and the Three-Step Test. An Analysis of the Three-Step Test in International and EC Copyright Law, Kluwer Law International, The Hague, 2004. 21 WIPO, Records of the Intellectual Property Conference of Stockholm, June 11 to July 14, 1967, WIPO, Geneva, 1971, p. 1294. 22 Ibid., p. 80. 23 Ibid., p. 21, pp. 81, 82, 111, 114; WIPO, Guide to the Berne Convention for the Protection of Literary and Artistic Works (Paris act, 1971), WIPO, Geneva, 1978, p. 54. 24 WIPO, supra n. 21, pp. 111, 113. 25 WIPO, supra n. 21, p. 856.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS confirms that not only the recording of sound, which previously was treated individually (Article 13(1)(i) Berne Convention (1948)), but also the recording of film, which is still the subject of a superfluous, specific right (Article 14(1)(i) Berne Convention (1971)), constitutes a form of reproduction.27 Despite consensus on the core meaning of reproduction, deviating amendments had been submitted, but only on the outskirts of the right. Along with the reference to different manners or forms, it was proposed that the meaning of reproduction also refers specifically to the reproduction of parts of works (United Kingdom), any reproduction purpose (France) and certain reproduction methods that allow indirect communication to the public (Austria), such as the recording of a song to tape from which it can be played for an audience.28 All amendments were however withdrawn: the British and French for the reason that their proposals had already implied elements of the right of reproduction, and the Austrian proposal for the reason that the inclusion of an enumeration was considered too elaborate, and the reliance on indirect communication too limited since the condition would narrow the scope of the reproduction right and thus make it less sensible to media that serve another purpose.29 The kind of carrier should however not make a difference.30 The common denominator of what constitutes reproduction (Article 9(1)(3) Berne Convention (1971)) is therefore the making of copies of a work, regardless of the circumstances under which the right is enforced. The other parts of international copyright law, the TRIPS Agreement and WIPO Copyright Treaty, join Article 9(1)(3) Berne Convention (1971) via connections in Article 9(1) respectively 1(3)(4). These establish that members, such as the European Union, which is party to the WIPO Copyright Treaty, shall comply with Articles 1 to 21 and the Appendix of the Berne Convention (1971). Only in the context of the TRIPS Agreement, an exception is made with regard to moral rights (Article 6bis Berne Convention (1971)). Amongst other actions, these provide a measure of protection against unlawful modification of works. 31 Accordingly, moral rights must still be protected within the European Union. In 26

WIPO, supra n. 21, p. 927. Union internationale pour la protection des oeuvres littéraires et artistiques, Documents de la Conférence réunie à Bruxelles du 5 au 26 juin 1948, Bureau de l’Union internationale pour la protection des oeuvres littéraires et artistiques, Bern, 1951, p. 541; S. Ricketson & J.C. Ginsburg, International Copyright and Neighbouring Rights. The Berne Convention and Beyond, Oxford University Press, Oxford, 2006, pp. 642, 643. 28 WIPO, supra n. 21, pp. 611, 630, 683, 687, 690, 856. 29 WIPO, supra n. 21, pp. 852, 853, 856; Ricketson & Ginsburg, supra n. 27, p. 644. 30 T. Dreier & P.B. Hugenholtz (Eds.), Concise European Copyright Law, Kluwer Law International, Alphen aan den Rijn, 2006, p. 41. 31 Generally see: E. Adeney, The Moral Rights of Authors and Performers. An International and Comparative Analysis, Oxford University Press, Oxford, 2006. 27

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REGULATING THE INFORMATION SOCIETY addition, member states are not relieved of the task of continuing to fulfil other obligations and strictly formulated rules that derive from previous Acts of the Berne Convention (Article 2(2) TRIPS Agreement in conjunction with Article 1(2) WIPO Copyright Treaty).32 In respect of the other obligation, namely the protection of the reproduction right, an agreed statement was issued concerning Article 1(4) WIPO Copyright Treaty. This provided that Article 9(1)(3) Berne Convention (1971) fully applies in the digital environment, in particular to the use of works in digital form such as the storage in an electronic medium. Although this observation could already be made on the basis of the fact that, apart from the realization of a copy, the reproduction right does not impose time or other limitations, no unanimity could be achieved on the treatment of the electronic storage of works. The agreed statement is therefore said to reflect both the view that this should be placed outside the scope of the reproduction right, and the view that electronic storage should be included.33 For reasons of continuity, I give preference to the latter, and more traditional view.34 As is preferred with regard to the WIPO Copyright Treaty, a broad scope of the reproduction right is also one of the principles underlying the Software and Database Directives. Both directives aim at providing effective protection against unlawful reproduction and adaptation of computer programmes and collections of data.35 These programmes and collections are treated as works in terms of Article 2 Berne Convention (1971), and as a result the connection with international copyright law is established (Article 1(1) Software Directive).36 In the above section, I introduced the term ‘adaptation’. Adaptation, or the arrangement or other alteration of a copyright work, is regulated by Article 12 Berne Convention (1971). Although in this paper I will only briefly touch upon its ambiguous meaning in the fourth section, it is important to indicate that

32

J. Busche & P. Stoll (Eds.), TRIPS. Internationales und europäisches Recht des geistigen Eigentums. Kommentar, Heymanns, Cologne, 2007, pp. 145, 146; J. Reinbothe & S. von Lewinski, The WIPO treaties 1996. The WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Commentary and Legal Analysis, Tottel, Haywards Heath, 2007, p. 35; Dreier & Hugenholtz, supra n. 30, p. 90. 33 Dreier & Hugenholtz, supra n. 30, p. 91, 92; WIPO, WIPO Intellectual Property Handbook. Policy, Law and Use, WIPO, Geneva, 2004, p. 271. 34 Reinbothe & Von Lewinski, supra n. 32, p. 45; M. Ficsor, The Law of Copyright and the Internet. The 1996 WIPO Treaties, Their Interpretation and Implementation, Oxford University Press, Oxford, 2002, p. 450. 35 Commission Document 88/816 final, pp. 5, 7, 16; consideration 7, 38 Database Directive. 36 Commission Document 93/464 final, p. 3.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS adaptation can be described as the ‘remodelling of a work into another form’, for instance turning a book into a play or parodying its main characters.37 The reproduction right, which means the copying of a work, has been implemented in a way similar to Article 9(1) Berne Convention (1971). Article 4(a) Software Directive and Article 5(a) Database Directive both include a reference to any reproduction manner or form. The directives however combine this with references to temporary and partial reproduction, and Article 4(a) Software Directive also with an enumeration of reproduction methods. Considering the way computer programmes and databases are treated, these Articles do not demonstrate historical understanding, as the reproduction right need not be defined in great detail.38 Arguably, it would have been preferable to exclude extra references e.g. the reference to any purpose, which was deleted from Article 4(a) Software Directive. 39 On the other hand, the software and database reproduction rights can be considered as the forerunners of the discussion on the treatment of electronic storage of works under the WIPO Copyright Treaty. In this context, they also reflect the opinion that electronic storage should be included, after which the reproduction that is necessary for the lawful use of software and databases is exempted from the authorization of the right holder (Article 5(1)(2) Software Directive in conjunction with Article 6(1) Database Directive).40 Thus far, European copyright law has shown an overlap with its international counterparts. Article 9(1)(3) Berne Convention (1971) sets a broad standard. As both systems of law however developed further, it became more difficult to bear in mind the traditional meaning of reproduction: the making of copies. This needs no further explanation to enable it to continue to be of value in the future. With the realization of multimedia works, electronic storage is not however the only relevant aspect. The works are equally characterized by elaboration of following authors. Moral rights and the right of adaptation seem better equipped to regulate this feature. The following section illustrates how the directive that was specifically written to counter the challenges of the information society, the Copyright Directive, deals with transformative use. Ricketson & Ginsburg, supra n. 27, p. 652; A. Ramalho, ‘Parody in Trademarks and Copyright: Has Humour Gone too Far?’, Cambridge Student Law Review, Vol. 5, No. 1, 2009, pp. 59, 60. Actually, a case in which the comic book characters Spike and Suzy were parodied, is currently pending with the Court of Justice: OJ 2013, C 189/6. On the basis of the decision, the description of adaptation and the correctness of the example can probably be verified. 38 See cit. op. supra n. 29. 39 OJ 1990, C 320/22. 40 See cit. op. supra n. 34. 37

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REGULATING THE INFORMATION SOCIETY 3. Application of the Reproduction Right In this section, the reproduction right as set out in Article 2(a) Copyright Directive will be reintroduced. It will further be demonstrated that it was designed to be a continuation of the previous rights, but that it has been interpreted to also encompass the adaptation right. On a primary evaluation of the structure in which the Copyright Directive is embedded (Section 1), it can be seen that important elements are mentioned in the preamble: employment and the supply of services within the internal market (fourth consideration); expansion of the acquis to stimulate the demand for new services and multimedia works (second and seventh consideration); notion of the cultural aspects of works (eight and twelfth consideration); strong protection on the level of the WIPO Copyright Treaty (ninth and fifteenth consideration); and a broad definition of the acts covered by the reproduction right (twenty-first consideration), which includes temporary reproduction (thirty-third consideration). These elements result in the following reproduction right (Article 2(a) Copyright Directive): ‘Member States shall provide for the exclusive right to authorize or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part: (a) for authors, of their works […].’

According to the Explanatory Memorandum: ‘the provision sets out a broad, comprehensive definition of the reproduction right covering all relevant acts of reproduction, whether on-line or off-line, in material or immaterial form.’ 41 Again, the aim of this provision could have been better achieved by a streamlined, concise formulation.42 During the deliberations in the Council and European Parliament however, hardly any time was devoted to the reproduction right, apart from lengthy discussions on the exception for temporary reproductions (Article 5(1) Copyright Directive). 43 Throughout these discussions, the debate that started while negotiating the WIPO Copyright Treaty was continued.44 Contrastingly, consensus on the wording of Article 2(a) Copyright Directive was reached quickly. The only amendment, the deletion of the phrase ‘of the original and copies [of their works]’, was adopted at an early stage.45 The 41

Commission Document 97/628 final, p. 24. See cit. op. supra n. 29. 43 See for an overview: Council Report 00/7179, pp. 3, 4; Council Report 00/8647, pp. 4, 5. 44 See cit. op. supra n. 33. 45 OJ 1999, C 180/6; Council Report 99/12913, p. 2. 42

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS reason for this amendment seems to be that in a digital environment it is difficult to distinguish between the originals and copies of works, for instance on the basis of quality.46 The difficultly in distinguishing between the reproduction and adaptation right took time to become apparent as it took nearly a decade after the Copyright Directive was adopted (2001) for Article 2(a) to be interpreted. In its Infopaq judgment of 16 July 2009, the Court of Justice decided on the reproduction of newspaper snippets with the interference of a search engine.47 It declared that, as in the case of the Software, Terms of Protection and Database Directives, these snippets must reflect the originality of the whole articles in order to be protected. 48 Given the importance of the supporting legal framework, this analogy is correct. 49 In cases following Infopaq, the protection threshold was further developed, up to the point where the choices underlying the parts used show the author’s original creativity. 50 It was also in one of these cases, the Painer judgment, that expanding the scope of the reproduction right was first suggested. In her Opinion, Advocate General Trstenjak considered the issue of whether copyright works are protected against unlawful adaptation. 51 She concluded: ‘the notion of reproduction in Article 2 of Directive 2001/29 is a combination of the notions of reproduction in the preceding directives’.52 I fully agree with this conclusion.53 I do not, however, agree with her other assertion that the broad Committee on Legal Affairs and Citizens’ Rights Report 99/225.907 final, pp. 33, 70. Judgment of 16 July 2009 in Case 5/08, Infopaq International A/S v Danske Dagblades Forening (Infopaq) [2009] ECR I-6569, Paras. 25, 26. The snippets were reproduced through a ‘data capture process’ that involved scanning, saving and printing. In the follow-up case Infopaq II, the Court decided that only the first two actions met the criteria of the exception for temporary reproductions (Judgment of 17 January 2012 in Case 302/10, Infopaq International A/S v Danske Dagblades Forening (Infopaq II) [2012] I-0000, Para. 36). 48 Case 5/08, Infopaq, in particular Paras. 35, 38 of the Judgment. This standard fails, however, to take into account that parts of works can also be original in their own right: E. Rosati, ‘Originality in a Work, or a Work of Originality: The Effects of the Infopaq Decision’, EIPR, Vol. 33, No. 12, 2011, p. 749. 49 See cit. op. supra n. 15. 50 Judgment of 22 December 2010 in Case 393/09, Bezpečnostní softwarová asociace – Svaz softwarové ochrany v Ministerstvo kultury (Softwarová) [2010] ECR I-13971, Para. 48; Judgment of 4 October 2011 in Case 403/08, Football Association Premier League Ltd. et al. v QC Leisure et al. (Premier League) [2011] ECR I-0000, Paras. 155, 156; Judgment of 1 December 2011 in Case 145/10, Eva Maria Painer v Standard VerlagsGMBH et al. (Painer) [2011] ECR I-0000, Paras. 88, 89; Judgment of 1 March 2012 in Case 604/10, Football Dataco Ltd. et al. v Yahoo! UK Ltd. et al. (Football Dataco) [2012] ECR I-0000, Paras. 38, 39; Judgment of 2 May 2012 in Case 406/10, SAS Institute Inc v World Programming Ltd. (SAS Institute) [2012] ECR I-0000, Para. 67. 51 Advocate General in Case 145/10, Painer [2011] ECR I-0000, Paras. 106, 107, 118. 52 J. Reinbothe, ‘Die EG-Richtlinie zum Urheberrecht in der Informationsgesellschaft’, GRUR Int., 2001, pp. 733-745; S. von Lewinsky, ‘Der EG-Richtlinienvorschlag zum Urheberrecht und zu verwandten Schutzrechten in der Informationsgesellschaft’, GRUR Int., 1998, pp. 637-642. 53 See cit. op. supra n. 16. 46 47

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REGULATING THE INFORMATION SOCIETY wording and broad definition of acts that are within the reach of the reproduction right suggest that this should also cover the making of adaptations. 54 Although there have always been different approaches to the treatment of adaptations, either as a part of the reproduction right or as objects of an individual right, and these still effect the interpretation of Berne Convention (1971) Articles 8 (right of translation), 12 (right of adaptation) and 14(1)(i) (right of cinematographic adaptation), it is my view that they have not influenced the coming about of Article 9(1)(3) Berne Convention (1971).55 In truth, the Advocate General’s understanding of the resulting Article 2(a) Copyright Directive may be a good example of the confusion that the member states tried to avoid when deleting the reference to parts of works from the international reproduction right. This would invoke a narrow interpretation of the other exclusive rights, which do not contain such a phrase. 56 By emphasizing that Article 2(a) Copyright Directive ‘expressly also covers publications in a modified form’, she adds a meaning different from the making of material or immaterial copies. 57 The reference to reproduction in any form means that it does not matter whether the copy is made onto the same or a different sort of medium, for example making a mere technical photograph of a work of architecture.58 Thus the reproduction right relates less to the protection of copyright works, and more to their exploitation.59 This view also better corresponds with the presence of adaptation rights in the Software and Database Directives (Article 4(b) Software Directive in conjunction with Article 5b Database Directive). Although in this paper I do not intend to make definite statements on the content of these rights, remodelling the form of a work that is the author’s own intellectual creation (Article 1(3) 54

Advocate General in Case 145/10, Painer [2011] ECR I-0000, Paras. 126, 127. See Ricketson & Ginsburg, supra n. 27, pp. 623, 634, 647, 654, 655; see cit. op. supra n. 25. Regarding the interpretation of Article 12 Berne Convention (1971), it seems to me that the translation and cinematographic adaptation rights, should be treated as its leges speciales: H. Scholtens, ‘Het maken van bewerkingen in het auteursrecht: een alledaagse bezigheid waarbij in Europa niet is stilgestaan’, in M. Cupido et al. (Eds.), Europa: bedreiging of kans?, Boom Juridische uitgevers, The Hague, 2013, p. 41. 56 WIPO, supra n. 21, p. 852. 57 If this meaning was intended originally, it should have been made clear somewhere in the directive: D.J.G. Visser, ‘Aanleiding voor de veronderstelling dat zulks naar Europees recht anders zou zijn, is er niet’, available at: . 58 A.R. Lodder & H.W.K. Kaspersen (Eds.), eDirectives. Guide to European Union Law on E-commerce. Commentary on the Directives on Distance Selling, Electronic Signatures, Electronic Commerce, Copyright in the Information Society, and Data Protection, Kluwer Law International, The Hague, 2002, p. 100. 59 Advocate General in Case 145/10, Painer [2011] ECR I-0000, Para. 128; J.H. Spoor, ‘Copies in Continental Copyright’, in Copies in Copyright, Sijthoff & Noordhoff, Alphen aan den Rijn, 1980, p. 55. 55

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Software Directive in conjunction with Article 3(1) Database Directive) seems more likely to be regulated by the specific adaptation rights.60 In this regard, exercise of the adaptation right directly influences the creative content of the message that is protected by copyright law, whereas the reproduction right only addresses the literal way in which this is conveyed. 61 The rights therefore express the traditional distinction between corpus mysticum and corpus mechanicum.62 Following from the different corpora and the broad wording of Article 2(a) Copyright Directive, the broad definition of the acts that are within the reach of the reproduction right still needs to be scrutinised. The Advocate General asserts that this definition suggests that the making of adaptations should also be covered.63 In my view, this connection does not appear to be plausible, as it must be fixed in conformity with the acquis communautaire and to ensure legal certainty within the internal market (twenty-first consideration, Copyright Directive). When reviewing the legal history of the Copyright Directive, the outer bounds of the reproduction right have always been explored with regard to the different conditions under which copies can be made, most notably those for only a limited period of time. 64 If Article 2 should now also be interpreted broadly in the direction of acts of adaptation, this would constitute a breach of custom and lead to legal uncertainty. Prudently, the advice of Advocate General Trstenjak was not followed by the Court of Justice, at least not in the Painer case.65 The SAS Institute Judgment seems however to confirm her approach. In this case, the Court ruled on a dispute between two software developers. Amongst other things, the party World Programming Ltd. had allegedly copied and adapted the user manuals of its competitor SAS Institute Inc.66 When referring to this claim, the Court of Justice observed that it was to be determined, ‘whether Article 2(a) Copyright Directive stretches out to the reproduction in a computer program or its user manual, of another protected manual’s elements’. 67 This question must be

60

See cit. op. supra n. 37. J. Spoor, ‘Verveelvoudigen: Reproduction and Adaptation under the 1912 Copyright Act’, in B. Hugenholtz, A. Quaadvlieg & D. Visser (Eds.), A Century of Dutch Copyright Law. Auteurswet 19122012, deLex, Amsterdam, 2012, p. 206. 62 J. Kohler, Urheberrecht an Schriftwerken und Verlagsrecht, Enke, Stuttgart, 1907, pp. 26-28. 63 See cit. op. supra n. 54. 64 See cit. op. supra n. 43. 65 Case 145/10, Painer in particular Para. 99 of the judgment. By stating that I find this decision sensible, I do not mean to convey that I am opposed to harmonization of the adaptation right. Only do mean to indicate, that the arguments put forward do not support this objective. 66 Case 406/10, SAS Institute in particular Para. 27 of the judgment. 67 Case 406/10, SAS Institute in particular Para. 63 of the judgment. 61

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REGULATING THE INFORMATION SOCIETY answered in the affirmative, as long as the elements express the intellectual creation of the author.68 The partial expression of the author’s intellectual creation corresponds with the copying, in the sense of borrowing, of the original features of his work.69 This is, for instance, the Dutch standard used to assess whether adaptation has occurred. In the Netherlands therefore the overlap has been recognized, at least by some commentators.70 It may be that they have exaggerated the weight of the ‘reproduction in’ formula, or others have underestimated this. Either way, it is my view that the formula deserves further (international) investigation. From a perspective of national autonomy, it is important to ascertain if the ruling in SAS Institute is experienced more widely as limiting the freedom of EU member states to hold on to their own adaptation rights. Within the European Union, the reproduction right was included in Article 2(a) Copyright Directive to retain the connection with the preceding copyright treaties. Since the Opinion in Painer and arguably the Judgment in SAS Institute, however, its meaning has evolved and moved away from the making of copies of works. Inspired by the goal of attaining comprehensiveness, individual words have been taken out of their original context to embrace the making of adaptations. In this pursuit, the presence of specific rights in other directives, the legal history of the Copyright Directive, and fundamental ideas have been neglected. This should not go unnoticed. Scholarship will need to devote more time to investigate the possible expansion of the reproduction right and the effects thereof. Meanwhile, in the following paragraph, I will argue that is better to include in the Copyright Directive an explicit adaptation right. Thereafter I will show that this opportunity was not seized.

4. Explicit Adaptation Right In this section, I argue that the European Commission recognizes the adaptation right as an individual competence, and therefore should have incorporated it separately in the Copyright Directive. An independent rule to assess transformative use would put conformity with the WIPO Copyright Treaty beyond doubt, and be similar to the approach taken in the Software and 68

Case 406/10, SAS Institute in particular Para. 68 of the judgment. See Spoor, supra n. 61, p. 207. 70 Case 406/10, SAS Institute, AMI 2012-4, No. 16, with case comment K.J. Koelman, p. 172; J. Becker, ‘Harmonisatie van auteursrechtelijke exploitatiebegrippen door Europees Hof afgerond’, available at: . 69

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Database Directives. If the Court of Justice would temper its activism, the Commission could take into account the latest developments in multimedia works production, as well as the right to remuneration of the authors whose works have been transformed. Multimedia works are transformative, as they build upon previous works by remodelling their intellectual form.71 This results in adaptations, for instance by means of sampling, which is to ‘incorporate portions of existing sound recordings, into a newly collaged composition’.72 The right to make adaptations is to be distinguished from the reproduction right (Section 3) and moral rights of the author. 73 With regard to the second distinction, moral rights also protect against unlawful modification. The adaptation right is however an economic right, like the exclusive reproduction right. The exercise hereof does not depend on the infliction of damage to the reputation of the author. Despite the concern of rights holders over formal recognition of the integrity of their works, moral rights have not yet been harmonized (nineteenth consideration Copyright Directive).74 As this does not relieve member states of the obligation to offer such protection, it was feared that national differences would continue to impede Union-wide exploitation of copyright works.75 This danger is also present where consumers are granted compulsory licenses for transformative use.76 Nevertheless, both the protection of moral rights and collective rights management were not regulated, for the reason that the subjects needed further consideration.77 Stemming from the Collective Rights Management Directive, this subject has finally been given due consideration. 78 Be that as it may, at the time of the design of the Copyright Directive, the Commission already foresaw an important role for collecting societies to mediate between authors and creative consumers. By setting up ‘one stop shops’, national societies could combine repertoires. If all rights information was made centrally available on the European level, it would be easily accessible and contribute to lawful 71

See supra n. 10, p. 60. Commission Document 95/382 final, pp. 25, 27; K. McLeod & P. DiCola, Creative License: The Law and Culture of Digital Sampling, Duke University Press, Durham, 2011, p. 1. 73 Commission Document 95/382 final, pp. 44, 65; Commission Document 96/586 final, p. 27. 74 See cit. op. supra n. 31. 75 Commission Document 96/586 final, p. 28. In a broader context, namely to also ‘decriminalize file sharing’, is the granting of compulsory, blanket licenses most famously advocated by Lawrence Lessig: L. Lessig, Remix. Making Art and Commerce Thrive in the Hybrid Economy, Bloomsbury, London, 2008, p. 271. 76 Commission Document 95/382 final, p. 77. 77 Commission Document 97/628 final, p. 9. 78 European Parliament and Council Directive 2014/26/EU of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market (OJ 2014, L 84/72). 72

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REGULATING THE INFORMATION SOCIETY transformation of copyright works. However, the organization of alliances was left to the collecting societies, as was the licensing of the adaptation right, which remained subject to the permission of the original authors in accordance with national law.79 The absence of an adaptation right in the Copyright Directive is understandable considering that the related subjects of moral rights and collective rights management were not harmonized either. As the Collective Rights Management Directive is now here, however, the time is ripe to reconsider moral rights and particularly the adaptation right. This need is further increased by the fact that the criteria for copyright protection have also been settled.80 If the adoption of the adaptation right reappeared on the European agenda, it would be preferable for it to align with Article 12 Berne Convention (1971). Although there would still be some difficult theoretical hurdles, an explicit adaptation right has the advantage of certain compliance with Article 1(3)(4) WIPO Copyright Treaty.81 Furthermore, such an inclusion follows the distinction with the reproduction right made in the Software and Database Directives (Article 4(b) and 5(b) respectively). Lastly, a more reserved Court of Justice would provide an opportunity to review the changes undergone by the information society over nearly thirteen years. In this context, it might be interesting to try coping with the economic significance of multimedia works outside the field of copyright limitations (Article 5.7(1) of the experimental European Copyright Code).82 Limitations are currently part of a restricted list (Article 5 Copyright Directive). They cannot therefore be expanded easily with an exception for transformative use.83 Even if expansion was achieved, it is questionable if this would have the desired effect since the limitations are said only to restrict the scope of the

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Commission Document 95/382 final, p. 76, 78; OJ 1996, C 320/177. Van Eechoud et al., Harmonizing European Copyright Law. The Challenges of Better Lawmaking, Kluwer Law International, Alphen aan den Rijn, 2009, p. 84; see cit. op. supra n. 50. 81 See cit. op. supra n. 55. 82 Available at: ; see for an overall commentary: J.C. Ginsburg, ‘European Copyright Code – Back to First Principles (with Some Additional Detail)’, Auteurs & Media, No. 1, 2011, pp. 5-21. 83 This however might not be necessary considering the nature of the quotation and parody exception (Article 5(3)(d)(k) Copyright Directive). On their origin, see: S. Ricketson, ‘The Boundaries of Copyright: Its Proper Limitations and Exceptions: International Conventions and Treaties’, Intellectual Property Quarterly, No. 1, 1999, pp. 64, 65; D. Mendis & M. Kretschmer, The Treatment of Parodies under Copyright Law in Seven Jurisdictions. A Comparative Review of the Underlying Principles, Intellectual Property Office, Newport, 2013, pp. 18-20. 80

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS reproduction right.84 In conclusion, and in order to compensate losses brought by multimedia works to the financial interests of authors, their right to remuneration needs to be considered within the adaptation right itself. Whether this is actually possible, particularly from the premise that the Copyright Directive may not grant more restrictive rights than the Berne Convention (Article 1(1) WIPO Copyright Treaty), must be examined elsewhere. At this stage, it can be observed that multimedia works should be treated as adaptations. The adaptation right, which is an economic right to be distinguished from the right of reproduction, has not been harmonized. The reason for this gap seems to be that moral rights and collective right management were not regulated. With the Collective Rights Management Directive adopted, a consonant adaptation right should follow. This should take its cue from examples that are available in Treaty and Union law, but should also address the financial interplay between adaptations and original copyright works. In the last Section I will present the example of reggae music production in Jamaica in the 1970s, in order to illustrate the relevance of this interplay. Though this may sound distant from the omnipresence of ICT in the information society, such old-fashioned practices may still provide worthy insights to deal with transformative use today.85

5. Lessons to Be Learnt from Versioning In this section, I will use reggae music production to illustrate that a harmonious relation between adaptations and their underlying works can exist. By highlighting a famous song, I will show that popular music is very much indebted to reggae’s tradition of versioning. Although at a certain point in reggae music legal interests grew in prominence, the previous relaxed attitude towards the making of derivative works proves that is worthwhile considering financial effects when the adaptation right is invoked. In November 1992, the English band The Prodigy released their single Out of space.86 As this song is arguably one of their biggest successes, you are probably familiar with its down tempo chorus, in where the singer sings about ‘send him 84

Guibault et al., Study on the Implementation and Effect in Member States’ Laws of Directive 2001/29/EC on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society. Final Report, IViR, Amsterdam, 2007, pp. 17, 18. 85 See cit. op. supra n. 5. 86 For more info see: .

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REGULATING THE INFORMATION SOCIETY to outer space; to find another race’. This person is actually the devil, and the singer is neither of the members of The Prodigy. Instead they sampled the lyrics and music of I Chase The Devil, a song performed by the singer Max Romeo and his band The Upsetters.87 It was written by him and the artist Lee Perry, the latter who also produced the entire album War Ina Babylon. This was originally published in Jamaica by Federal Records. Although sampling is by now a common phenomenon that recently gained attention again through the making of mash-ups, most people are not aware of the fact that re-use has been a fundamental aspect of reggae music production since the 1970s’.88 Briefly returning to the song I Chase The Devil; one year after War Ina Babylon was released in 1976, Lee Perry along with The Full Experiences came up with his own version, entitled Disco Devil. 89 From the beginning of the song, the original music is subjected to the effects of phase shifting and delay, and the lyrics are altered. These practices of sound processing and singing new lyrics over an old rhythm, are called ‘dubbing’ and ‘versioning’.90 They are inextricably connected to Jamaica’s sound system culture that centres around ‘the dancehall’.91 Contrary to its association, the dancehall implies an open-air party where selectors play the latest versions. In order to draw crowds and allow them to get wholly absorbed, the music has to be loud and new records need to be produced fast. 92 The importance of the recording studio, brought with it that copyright law enforcement was given a low priority.93 Some commentators state that this deemphasis was infused by an idea of collective authorship.94 Given the vitality of the Jamaican music industry, this would prove copyright’s economic incentive 87

See: . See cit. op. supra n. 72; the best known know mash-up is probably that of the vocals of Jay-Z’s The Black Album, and the music of The Beatles’ The White Album by the artist Danger Mouse, see: . See for an economic approach towards the resulting The Grey Album: D. E. Bambauer, ‘Faulty Math: The Economics of Legalizing the Grey Album’, Alabama Law Review Vol. 59, No. 2, 2007, pp. 345-407. 89 See: . 90 M.E. Veal, Dub. Soundscapes and Shattered Songs in Jamaican Reggae, Wesleyan University Press, Middletown, 2007, p. 63; P. Manuel & W. Marshall, ‘The Riddim Method: Aesthetics, Practice, and Ownership in Jamaican Dancehall’, Popular Music, Vol. 25, No. 3, 2006, pp. 447, 450. 91 Manuel & Marshall, supra n. 90, pp. 448, 449. 92 J.F. Henriques, ‘Sonic Dominance and the Reggae Sound System Session’, in M. Bull & L. Back (Eds.), The Auditory Culture Reader, Berg, Oxford, p. 457; Manuel & Marshall, supra n. 90, p. 449. 93 Manuel & Marshall, supra n. 90 p. 463. 94 J. Toynbee, ‘Reggae Open Source: How the Absence of Copyright Enabled the Emergence of Popular Music in Jamaica’, in L. Bently, J. Davis & J. Ginsberg (Eds.), Copyright and Piracy. An Interdisciplinary Critique, Cambridge University Press, Cambridge, 2010, pp. 359-363, 369; D. Howard, ‘Copyright and the Music Business in Jamaica-Protection for Whom?’, Revista Brasileira do Caribe, Vol. 9, No. 18, 2009, p. 512. 88

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS theory to be superseded. On the other hand, this notion is considered an exaggeration. Rather than being sympathetic, producers such as Lee Perry, who is regarded the right holder to the songs recorded at his Black Ark Studio, were far from tolerant of the re-use by others. 95 They have therefore embraced Jamaica’s adoption of the Berne Convention, TRIPS Agreement and WIPO Copyright Treaty.96 Given the divergent views on the importance of copyright law in Jamaica, it seems realistic to adopt a middle course. Even then, the flourishing of reggae music production makes an interesting example with which to evaluate copyright claims.97 With regard to the right of adaptation, it is a pressing concern to ascertain whether the economic effects of derivative works can be grasped, as the limitations that apply to the reproduction right cannot be expanded to outweigh this factor.98 Pop music production methods have come to resemble those of reggae. Given this, current right holders should also learn from the way in which adaptations were treated up to a certain point. When these lead to financial gain, the consequences for the original works should be considered. If such initiative is not taken by industry itself, European copyright law might need to enforce it. Although it has yet to be examined when the threshold should be met, the adaptation right would provide a suitable opportunity to prevent the information society from cultural deprivation.

6. Conclusion After more than ten years of the Copyright Directive, an interim conclusion can be drawn. In essence, it is all about missed opportunities and trying to make the best of what is at hand. Concerning the missed opportunities, the European Parliament and Council could have adopted an explicit adaptation right. This would have made sense from the perspective of international copyright law and their previous legislative actions. Probably influenced by the sensitive nature of J. Okpaluba, ‘‘Free-Riding on the Riddim’? Open Source, Copyright Law and Reggae Music in Jamaica’, in L. Bently, J. Davis & J. Ginsberg (Eds.), Copyright and Piracy. An Interdisciplinary Critique, Cambridge University Press, Cambridge, 2010, pp. 380, 385; Manuel & Marshall, supra n. 90, p. 466. 96 See: ; . 97 L. Mann, ‘Decolonizing Networked Technology: Learning from the Street Dance’, in S.A. Pager & A. Candeub (Eds.), Transnational Culture In The Internet Age, Edward Elgar Publishing, Cheltenham, 2012, pp. 288, 289. 98 See cit. op. supra, n. 84. 95

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REGULATING THE INFORMATION SOCIETY the right and the confidence in national collective rights management, only the reproduction right was retained. By so doing, the Commission lost sight of all the distinctive features of multimedia works. Since then, it has been up to the Court of Justice to make the best of what is available. While the court seems to have succeeded in repairing the gap left in the Copyright Directive, the opportunity of adding a modern adaptation right should not be overlooked. In order to develop ideas on which form the right should take, policy makers and private actors should draw inspiration from reggae culture, which the information society has come to resemble.

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V. PRIVATE REGULATION AND DELEGATED REGULATION

Private Regulation as a Form of New Governance in the European Union WHAT ROLE DO COURTS PLAY IN ENSURING ITS ACCOUNTABILITY? Paul Verbruggen*

Introduction Private regulation has assumed an important role in academic and political debates on new governance. While it must be stressed that private regulation is not a new phenomenon at all, 1 the novelty seems to be the fact that policy makers increasingly use forms of private regulation as strategic regulatory instruments to achieve policy objectives. 2 Also the European Union (EU) has recognized the potential of private actors and their regulation as a form of ‘new’ governance, which signals a shift away from its hierarchical, rule-based approach to governance. As such, the European legislature has sought to promote private regulation in various forms and across various policy domains, including fair competition and consumer protection, banking and financial services, food safety, media and environmental protection. The chapter addresses the question of what role courts play in holding private actors accountable for regulatory activities. The issue of accountability of such private regulators gains relevance as policy makers and legislatures – at national, regional and global levels – progressively involve private, non-state regulatory capacity in the management and attainment of public policy goals.3 This chapter seeks to answer this question by discussing the case of private regulation in the European advertising industry, which constitutes an extremely rich example of how private regulatory capacity is harnessed and used by the *

P. (Paul) Verbruggen is an Assistant Professor of Private Law, Business and Law Research Centre at Radboud University Nijmegen, The Netherlands. This chapter was written while he was a PhD Candidate at the European University Institute, Florence, Italy (2008-2013). An earlier draft of this chapter was presented at the conference ‘Courts and New Governance’ held at the European University Institute on 16-17 June 2011 organised by the Academy of European Law and Robert Schuman Centre for Advanced Studies. 1 The historical roots of private regulation have been traced back to the medieval guilds and lex mercatoria in Europe. See for insightful examples of early private regulation in various issue areas: J. Braithwaite & P. Drahos, Global Business Regulation, Cambridge University Press, Cambridge, 2000. 2 F. Saurwein, ‘Regulatory Choice for Alternative Modes of Regulation: How Context Matters’, Law and Policy, Vol. 33, No. 3, 2001, p. 337. 3 See on this development in general: B. Kingsbury, N. Krisch & R. Stewart, ‘The Emergence of Global Administrative Law’, Law and Contemporary Problems, Vol. 68 (Summer), 2005, pp. 15-61; and K. Abbott & D. Snidal, ‘The Governance Triangle: Regulatory Standards Institutions and the Shadow of the State’, in W. Mattli & N. Woods (Eds.), The Politics of Global Regulation, Princeton University Press, Princeton, 2009, pp. 44-88.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS EU and its member states for the attainment of public policy goals such as fair competition and consumer protection.4 It should be stressed that the paper does not endeavour in a comprehensive evaluation of the degree of accountability of the private regulatory regime designed by the European advertising industry. Rather, the objective is to locate and discuss what role – if any – courts play in the landscape of public and private accountability mechanisms that exist in this context. The paper argues that while courts are vital to rendering private regulatory activities that affect third parties – both non-affiliated firms and potential beneficiaries – acceptable, they are but one mechanism of holding regulators to account. Furthermore, their role is often one of last resort. Private mechanisms assume a vital complementary role in holding private regulators to account for their regulatory activities. Accordingly, the paper sheds more light on the assumption that is common to (most) lawyers that courts constitute a principal forum for holding regulators accountable for their activities. The paper proceeds as follows. First, it discusses how private regulation fits the debate on new governance in the EU (Section 1). Next, it tackles the questions of why it is relevant that private regulators render account for their activities (Section 2) and how private regulators can indeed be held to account (Section 3). Subsequently, the paper presents the case of private regulation in the European advertising industry and discusses the role courts can play in holding private regulators in this industry accountable (Section 4). Finally, brief conclusions follow (Section 5).

1. Private Regulation as Part of European Regulatory Governance Debate How does private regulation fit the new governance debate in the EU? Let us start by defining the concept of private regulation. The concept can be defined as comprising sustained activities undertaken by private, non-state actors to change the conduct of themselves or other actors following a set of pre-defined norms and objectives.5 These activities involve standard-setting, monitoring and enforcement, and may be administered not only by firms, company consortia or

4

Here the paper draws on an earlier empirical study conducted within the framework of the research project ‘Transnational Private Regulation: Constitutional Foundations and Governance Design’ funded by the Hague Institute for the Internationalisation of Law (HiiL). See: P. Verbruggen, ‘Transnational Private Regulation in the Advertising Industry (Case Study Report HiiL, Florence/The Hague 2011), available at: . 5 Adopting J. Black, ‘Critical Reflection on Regulation’, Australian Journal of Legal Philosophy, Vol. 27, No. 1, 2002, p. 26.

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU industry associations, but also by consumer groups, non-governmental organisations and other public interest groups.6 Private regulation is therefore a wider concept than ‘self-regulation’, which essentially concerns normative rules adopted to guide the conduct of oneself. The ‘private’ in private regulation thus principally refers to a sense of ownership; the regulatory regime is private when it is primarily created and administered by non-state, private actors. This does not exclude the possibility that public actors can rely on, endorse or can be otherwise involved in the operation of the private regulatory regimes. Furthermore, the object of private regulation does not necessarily have to be private entities. Also public actors, such as government and public agencies, can be subject to private regulation.7 In Europe, private regulation features prominently in the longstanding debate on how to improve and diversify regulatory governance in the EU, which was initially sparked by the Conclusions of the European Council of Edinburgh in December 1992 on the principles of subsidiarity and proportionality.8 Centrepiece of this debate is the 2001 White Paper on European Governance, in which the European Commission advocated that the European legislature ‘must renew the Community method by following a less top-down approach and complementing its policy tools more effectively with non-legislative instruments’.9 Scott and Trubek have famously argued that the distinctive feature of these new modes of governance is that they do not fully conform to the so-called ‘Classical Community Method’ of law-making, which they explain as being the adoption of a legislative instrument by the Council of Ministers or the European Parliament following the exercise by the Commission of its exclusive right of initiative, resulting in a uniform binding rule of EU law which is subject to the jurisdiction of the Court of Justice of the EU.10 The White Paper suggests that the EU should combine formal rules with private regulatory capacities in its legislative policies by using self-regulation and, under certain circumstances, frameworks of ‘co-regulation’.11 This intention represents a shift away from the image of a hierarchical, centralised, and legalistic method of European lawmaking by insisting on the involvement of non-state, private actors (e.g. NGOs,

F. Cafaggi, ‘New Foundations in Transnational Private Regulation’, Journal of Legal Studies, Vol. 38, No. 1, 2011, pp. 20-49. See on this topic: C. Scott, ‘Private Regulation of the Public Sector: A Neglected Facet of Contemporary Governance’, Journal of Law and Society, Vol. 29, No. 1, 2002, pp. 56-76. 8 Conclusions of the Edinburgh European Council, Bull. EC 12-1992. See for a discussion and its impact on EU regulatory policy: L. Senden, Soft Law in European Community Law, Hart Publishing, Oxford, 2004, pp. 16-22. 9 Commission Communication of 25 July 2001, COM (2001) 428 final, p. 4. 10 J. Scott & D.M. Trubek, ‘Mind the Gap: Law and New Approaches to Governance in the European Union’, European Law Journal, Vol. 8, No. 1, 2002, p. 1. 11 COM (2001) 428 final, pp. 20-21. 6

7

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS trade bodies, and consumer representatives) and different levels of formality and enforceability in policy-making and regulation.12 Building on to the responses on the Commission’s White Paper and the findings of several expert reports,13 the Commission launched a ‘Better Regulation’ initiative in 2002.14 This programme set out to enhance the EU’s regulatory policies by, inter alia, introducing regulatory impact assessments (RIA), programmes for the simplification of regulatory environments, ex post reviews of legislation, and alternative regulatory instruments.15 To clarify the intentions of the Better Regulation agenda and ensure uniformity among the European legislative institutions the European Parliament, Council, and Commission adopted the Inter-institutional Agreement on better lawmaking in 2003.16 One section concerns the use of ‘alternative methods of regulation’, which are taken to be ‘coregulation’ and ‘self-regulation’. Co-regulation is defined as a: ‘mechanism whereby a Community legislative act entrusts the attainment of the objectives defined by the legislative authority to parties which are recognised in the field (such as economic operators, the social partners, non-governmental organisations, or associations)’.17 Defined in these terms, the strategy seems to presuppose the prior involvement of a European legislative authority, which identifies the objectives that should be implemented and secured by relevant private actors in the field concerned.18 This particular conception of co-regulation, which is arguably still rather hierarchical, is modelled after the so-called ‘New Approach’ to harmonization, which the Commission launched in the 1980s as a strategy to boost the development of the B. Eberlein & D. Kerwer, ‘New Governance in the European Union: A Theoretical Perspective’ Journal of Common Market Studies, Vol. 42, No. 1, 2004, pp. 121-142; C. Knill & A. Lenschow, ‘Modes of Regulation in the Governance of the European Union: Towards a Comprehensive Evaluation’, in J. Jacint & D. Levi-Faur (Eds.), The Politics of Regulation: Institutions and Regulatory Reforms for the Age of Governance, Edward Elgar, Cheltenham, 2004, pp. 218-244; and A. Héritier, ‘New Modes of Governance in Europe. Policy Making without Legislating?’, in A. Héritier (Ed.), Common Goods. Reinventing European and International Governance, Rowan & Littlefield, Oxford, 2002. 13 Moliter Report COM(95) 288 final and Mandelkern Group on Better Regulation, ‘Final Report’ (Brussels, 2001), available at: . 14 Commission Communication of 5 June 2002, COM(2002) 278 final. 15 Commission Communication of 16 March 2005, COM(2005) 95 final, Commission Communication of 25 October 2005, COM(2005) 535 final. See for crucial discussions of the initiative: J.B. Wiener, ‘Better Regulation in Europe’, Current Legal Problems, Vol. 59, 2006, pp. 447-518; C. Radaelli, ‘Whither Better Regulation for the Lisbon Agenda?’, Journal of European Public Policy, Vol. 14, No. 2, 2007, pp. 190-207; and C. Radaelli & A. Meuwese, ‘Better Regulation in Europe: Between Public Management and Regulatory Reform’, Public Administration, Vol. 87, No. 3, 2009, pp. 639-654. 16 Inter-institutional Agreement on better law-making [2003] OJ C 321/4. 17 Ibid., Para. 18. 18 P. Verbruggen, ‘Does Co-Regulation Strengthen EU Legitimacy?’, European Law Journal, Vol. 15, No. 4, 2009, p. 429. 12

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU internal market.19 The New Approach promoted the use of standards in order to remove ‘technical barriers to trade’, and as a result, the legislator only stipulated the ‘essential requirements’ in its legislation while leaving the implementation of these requirements to private standard-setting bodies. The second alternative method to EU regulation, ‘self-regulation’, is defined as: ‘the possibility for economic operators, the social partners, non-governmental organisations or associations to adopt amongst themselves and for themselves common guidelines at European level (particularly codes of practice or sectoral agreements)’.20 It is further clarified that this does not generally imply that the EU institutions have taken a particular position, in particular if primary EU law does not cover the area at issue or if the EU has not yet taken up legislative action in such area. Self-regulation is thus perceived as a voluntary initiative that operates at the European level, is adopted by industry itself and for itself, and is not preceded by a particular stance of the EU Institutions. While this gives rise to the question whether there is any form of EU governance at stake at all then,21 self-regulation understood in these terms does not rule out an active role for the EU. As the Inter-institutional Agreement explains, the Commission monitors pan-European self-regulatory processes and assesses their compatibility with EU law – in particular competition law. 22 Where self-regulation is undertaken in an area that is subject to EU competences, the Commission will also report to the Parliament and Council on the contribution the initiative can have for the attainment of general EU objectives, the level of representativeness of the parties concerned, the sectoral and geographical coverage of the initiative, and, lastly, the general added value of the commitments made by industry under the initiative.23 Although the Commission initially tried to advance such a co-regulatory approach in the area of environmental protection,24 no arrangement has been designed at the European level so far.25 While self-regulation is more common, the 19

Technical harmonisation and standardisation: a new approach, COM (1985) 19 (not published in the Official Journal). 20 Inter-institutional Agreement on better law-making, Para. 22. 21 Cf. P. Craig & G. de Búrca, EU Law: Text, Cases and Materials, Oxford University Press, Oxford, 2008, p. 159. 22 Inter-institutional Agreement on better law-making, Paras. 22 and 17. 23 Ibid., Para. 23. 24 Commission Communication of 17 July 2002, COM (2002) 412 final. 25 In seeking to explain why EU co-regulation fails to materialise, Best has noted that EU competition law is a relevant factor. He holds that while co-regulation is more likely to occur in a homogeneous sector with a relatively small number of private actors, this also raises concerns for tacit collusion. See: E. Best, ‘Alternative Methods and EU Policy-Making: What Does “Co-Regulation” Really Mean?’, Eipascope, Vol. 2, 2008, pp. 11-16.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS political climate in the EU now appears to be rather hostile to private regulation. In the aftermath of the financial crisis some have drawn attention to the failures of private regimes in the banking sector and this has had spill-over effects in other policy areas.26 An examination of the ex ante RIA of legislative proposals in the EU shows that self- and co-regulation are increasingly being considered as alternative options for legislation, but are in fact rarely opted for as the final regulatory instrument.27 In the EU impact assessment guidelines the option is either private regulation or legislation, but no explicit consideration is given to the use of private regulation in EU legislation.28 In this integrated form, private regulation remains important in many policy fields.29

2. The Need for Accountability of Private Regulators A preliminary question in assessing the role of courts in holding private regulators accountable is the issue of why it is relevant for private regulators to render account for their activities. In other words, do private regulators need to be accountable for their own conduct, and if so, why? Accountability has been considered a key determinant of democratic legitimacy of regulatory regimes and bodies, regardless of whether they are public or private in nature, or national or transnational in their scope and application.30 In this view, accountability is seen as a virtue, as a necessary ingredient that regulators must possess in order to motivate the behavioural response intended by the regulatory norms. At the core of this fundamentally normative conception of accountability lays the In September 2008, the French President Sarkozy noted in a speech that: ‘Self-regulation, to fix all problems, is over. Laissez-faire is over.’ See: S. Erlanger, ‘Sarkozy Stresses Global Financial Overhaul’, New York Times, 25 September 2005, available at: . Van den Hoogen and Nowak have presented limited empirical evidence that suggests that the decrease of the number of self- and co-regulatory initiatives in Europe coincides with the mounting political resistance against these initiatives in the wake of the financial crisis. See: Th. Van den Hoogen & T. Nowak, ‘The Emergence and Use of Self-regulation in the European Decision-making Process: Does it Make a Difference?’, Legisprudence, Vol. 4, No. 3, 2010, p. 359. 27 A. Renda, ‘Effectiveness of Public and Private Regulation’ (Presentation at the European University Institute, Florence, Italy 2010), p. 10, available at: . 28 European Commission, Impact Assessment Guidelines (Brussels, January 2009), SEC(2009) 92, pp. 29-31 and Annex 7. See also: A. Meuwese & L. Senden, ‘European Impact Assessment and the Choice of Alternative Regulatory Instruments’ in J. Verschuuren (Ed.), The Impact of Legislation. A Critical Analysis of Ex Ante Evaluation, Martinus Nijhoff Publishers, Leiden, 2009, pp. 173-174. 29 EU legislation promoting the integration of private regulatory activities in public regulation concern for example accounting standards (Regulation 1606/2002/EC), unfair commercial practices (Directive 2005/29/EC), food safety (Regulation 852/2004/EC), media (Directive 2010/13/EU), payment services (Directive 2007/64/EC) and timber imports (Regulation 995/2010/EU). 30 J. Black, ‘Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes’, Regulation & Governance, Vol. 2, No. 2, 2008, pp. 137-164; and D. Curtin & L. Senden, ‘Public Accountability of Transnational Private Regulation: Chimera or Reality?’, Journal of Legal Studies, Vol. 38, No. 1, 2011, pp. 163-188. 26

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU premise that a regulator, in the exercise of its regulatory powers, should be accountable to those affected by its regulatory activities.31 The demand for the regulator’s accountability is then not merely based of the formal authorization and political or financial support granted to the regime, but also on the impact it has on the rights and obligations of individuals. Being accountable has been said to be particularly valuable to private regulatory regimes because they require that those parties affected by their authority accept these regimes and modify their behaviour in accordance to the regulatory norms or goals they set.32 Private regulatory bodies cannot, unlike public regulators, readily rely on the authority of law to change people’s conduct and they are thus likely to bolster their capacity to ensure compliance or behavioural change in other ways. Rendering account for regulatory activities is a vital strategy for private regulators to gain acceptance and legitimacy among those that are affected by their activities. However, the individuals that are affected by regulatory activities of private regulators are not homogeneous. A firm may, for example, be affiliated to a private regulatory regime and have accepted the rules and activities of this regime as a constituent member. However, due to the importance it has in market transactions the effects of a regime may also extend to non-member firms, who may see their business activities compromised if they do not comply with the regime without having explicitly consented to it. Another set of third parties that has been identified are the beneficiaries of private regulation, that is, those who are supposed to benefit from the regulatory activities of private regulators and are harmed by non-compliance with these activities.33 Accordingly, different groups of stakeholders can be affected in very diverse ways and therefore accountability may be rendered in relation to different types of stakeholders. To identify the specific accountability relationships between private regulators and those affected by their conduct it is useful to distinguish between an internal and external dimension of accountability of private regulators.34 The first dimen31

Accountability may also be conceptualised in more descriptive terms, namely as an institutional relation, arrangement or process through which an actor can be held to account for its actions by a forum. Accountability is then viewed as a mechanism (see Section 3). See on both conceptions of accountability: M. Bovens, ‘Two Concepts of Accountability: Accountability as a Virtue and as a Mechanism’, West European Politics, Vol. 33, No. 5, 2010, pp. 946-967. 32 Black, supra n. 30, p. 148. 33 Cafaggi, supra n. 6, p. 32. 34 See on this distinction in the public domain: R.O. Keohane, ‘Global Governance and Democratic Accountability’, in D. Held & M. Koenig-Archibugi (Eds.), Taming Globalization. Frontiers of Governance, Polity Press, Cambridge, 2003, pp. 130-159.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS sion concerns the relationship between the private regulator and its constituents or members, while the second comprises the relationship between the private regulator and third parties. Where the impact of the activities of a private regulator remains confined to its constituents, such as elections or budgetary decisions, accountability demands will be limited to those stemming from the private membership. Accountability can then be rendered internally, for example through reporting or voting procedures in the board or general assembly. However, should the effects of private regulation transcend the community that established it and have a noticeable impact on the rights and obligations of third parties, accountability – when seen as a virtue – must also be rendered externally. More specifically, it is suggested that the need of being externally accountable, grows proportionate to the degree to which the regime resorts effects beyond the regulated entities.35 In other words, the more spill-over effects on third parties, the more pertinent the necessity is for a regime to be accountable also to them. Private regulation may indeed have strong implications for third parties. If, for example, a public actor devolves regulatory competences to a private regulator, which might occur under a co-regulatory regime as defined by the European legislature,36 it may unilaterally determine the rights and obligetions of individuals. Third-party effects can also manifest if a private regulator, such as a trade association, assumes such an important role in the industry or sector that its authority becomes de facto compulsory. For third parties that are supposed to benefit from the activities of the private regulator, such as consumers, workers or minorities, it is equally important that the private regulator gives account of how it has exercised its authority and whether it has delivered on its promised outcomes if it is to gain acceptance and legitimacy among this group.

3. Holding Private Regulators to Account A subsequent question that emerges when discussing accountability issues of private regulators is the question: how and via which means can they be called to account? Accountability is then conceptualised as a mechanism, an institutional relationship between an actor that needs to account for its conduct (i.e. the accountor) and the forum to which account is given (i.e. the accountee).37 Here, accountability is not viewed as a virtue or quality that can be actively managed, but rather as a passive reality that an external forum can assess ex post facto. 35

Curtin & Senden, supra n. 30, p. 174. See text at supra n. 17. 37 Bovens, supra n. 31, pp. 950-954; and Curtin & Senden, supra n. 30, p. 181. 36

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Key questions in this more narrow and descriptive sense of accountability are: who is called to account; to whom should account be rendered; for what activity; and by which means? The means through which private regulators can be held accountable can either be private, internal or public, external in nature. For example, the adoption of particular regulatory norms by the private regulator may be subject to internal mechanisms of reporting and voting, while its enforcement activities are subject to administrative control. This suggests that the accountability mechanisms available can also vary according to the activity pursued by the regulator, namely norm-setting, monitoring or enforcement. Courts constitute an important mechanism via which private regulators can be held to public, external account for their regulatory activities. Instruments as judicial review can mitigate concerns of third-party effects and can secure injunctive or compensatory relief against illegal or otherwise wrongful regulatory activities.38 However, it should be stressed that courts are but one mechanism of establishing public accountability. Other commonly observed mechanisms in the public domain include reporting obligations to Parliament, ministers and commissions of inquiry, and administrative control via audit offices, ombudsmen and independent inspectors.39 The question is, however, whether these public instruments will be of any relevance to private regulation. Their application generally requires some form of public mandate or function, which is often absent in the private domain. Arguably, internal, private accountability mechanisms may therefore assume a vital complementary role in holding private regulators accountable. Internal voting and approval procedures, reporting obligations and budget allocation enable the private regulators to be accountable to the members of the regulatory regime, while account to third parties might be given by organising public consultations in drafting processes for new regulatory norms. However, there are significant practical and theoretical obstacles, in particular for third parties, to holding private regulators to account. One issue is accessibility. Internal, private mechanisms may only be available to membership and therefore third parties are precluded from accessing these instruments. However, also public mechanisms may raise difficulties in terms of access. For example, locus standi in judicial review proceedings may be limited to those individuals J. Black, ‘Reviewing Regulatory Rules: Responsibility and Hybridisation’, in J. Black, P. Muchlinski & P. Walker (Eds.), Commercial Regulation and Judicial Review, Hart Publishing, Oxford, 1998, pp. 123-157. 39 C. Harlow, Accountability in the European Union, Oxford University Press, Oxford, 2002. 38

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS that have a direct and individual concern in relation to private regulatory activities. As a result, third parties (including public interest groups) cannot secure judicial accountability.40 Another obstacle concerns transparency.41 Accountability is indeed closely linked to the dimension of transparency: openness allows a regulator to be accountable to its constituencies and third parties, whilst the disclosure of information on decision-making and enforcement processes at the same time empowers individuals to hold the regulator to account. Therefore, the EU legislature requires that co- and self-regulation in the European context always meet criteria of transparency, such as the publicising of agreements.42 However, private regulatory activities, in particular if they happen at a transnational level, have been said to often happen in relative secrecy, barring the potential for high standards of accountability.43 A further complicating factor in holding private regulators accountable is the issue of ‘many hands’.44 This problem points to the dispersal of functions and powers within a regulatory regime, making it difficult to trace back the actors responsible for the outcomes.45 This problem is amplified in the context of transnational private regulatory regimes where functions of norm-setting and enforcement are often dispersed amongst various actors operating on multiple levels of governance (global, regional and local).46 Indeed, it is difficult to hold to account the rule-maker for the ways in which others enforce its rules, just like it is difficult to hold to account the enforcer of rules it did not write.47

40

Conditions for judicial review in European legislative and administrative acts, for example, are known to be particularly restrictive. See: A. Türk, Judicial Review in EU Law, Edward Elgar Publishing, Cheltenham, 2009. 41 See for example: T.N. Hale, ‘Transparency, Accountability and Global Governance’, Global Governance, Vol. 14, No. 1, 2008, pp. 73-94. 42 Inter-institutional Agreement on better law-making, Para. 17. 43 See for example: E. Meidinger, ‘The Administrative Law of Global Private-Public Regulation: The Case of Forestry’, European Journal of International Law, Vol. 17, No. 1, 2006, pp. 47-87. 44 Black, supra n. 30, p. 143; and Curtin & Senden, supra n. 30, p. 182. 45 D.F. Thompson, ‘Moral Responsibility of Public Officials: The Problem of Many Hands’, American Political Science Review, Vol. 74 (December), 1980, pp. 905-915; M. Bovens, ‘Analysing and Assessing Accountability: A Conceptual Framework’, European Law Journal, Vol. 13, No. 4, 2007, p. 457; and Y. Papadopoulos, ‘Problems of Democratic Accountability in Network and Multi-level Governance’, European Law Journal, Vol. 13, No. 4, 2007, pp. 469-486. 46 Cafaggi, supra n. 6. 47 Cf. Black, supra n. 30, p. 143.

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU 4. The Case of Private Regulation in the European Advertising Industry To illustrate the roles that courts and other public and private instruments play in holding private regulators to account, either to members of the private regulatory regime (private, internally) or to third parties (public, externally), this chapter now turns to the case of private regulation in the European advertising industry. A. Private Regulation of Advertising Practices in Europe Across Europe, national advertising industries have developed elaborate regimes for the control of advertising practices, often termed as systems of ‘advertising self-regulation’. These national regimes are constituted by trade or business associations representing the three segments of the advertising industry: the advertisers that pay for the advertising, the advertising agencies responsible for the form and content of the advertising, and the media owners that carry the advertising to its intended audience. The general aim of the regimes is to ensure that advertising is legal, fair, not misleading, in good taste, and socially responsible. Accordingly, they also claim to contribute to the attainment of certain public policy objectives, such as fair competition, consumer protection and human rights protection. The private regulatory regimes in Europe typically comprise two basic elements: (i) a code of conduct or set of guiding principles governing advertising practices; and (ii) a system for the establishment, review and application of the code or principles.48 While these codes are primarily applied and enforced at the national level, they frequently have origins in international codes of conduct. The International Chamber of Commerce has traditionally been the central institutional player here as it has adopted codes of advertising practices since the mid1930s. More recently, however, various European trade federations have set codes specific to their own sectors, including the Confederation of the Food and Drink Industries of the EU (CIAA) for food products and non-alcoholic drinks,49 Brewers of Europe for beer advertising,50 and the Interactive Advertising Bureau (IAB) for digital and online advertising.51 48

European Advertising Standards Alliance, Advertising Self-Regulation in Europe and Beyond: A Reference Guide to Self-Regulatory Systems and Codes of Advertising Practice, 6th edn, Poot Printers (Brussels, 2010), p. 19. 49 CIAA, ‘The CIAA Principles of Food and Beverage Product Advertising’ (Brussels, 2004), available at: . 50 Brewers of Europe, ‘Responsible Commercial Communications. Guidelines for the Brewing Industry’ (Brussels, 2003), available at: . 51 IAB Europe, ‘IAB Europe EU Framework for Online Behavioural Advertising’ (Brussels, 2013), available at: .

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS To administer the code, its review and enforcement, advertising industries have generally established a centralised private body, a self-regulatory organisation (SRO). This organisation generally comprises three bodies: (i) a board that adopts and revises codes of advertising conduct; (ii) an adjudicative council – often called ‘jury’ – that decides on complaints on publicised advertisements submitted by concerned stakeholders (e.g. consumers, competitors, public agencies, NGOs) and determines whether the advertising complies with or violates the applicable code(s) of conduct; and (iii) a secretariat for administrative support for the board and jury. While the SRO board typically consists of only industry stakeholders (i.e. advertiser, agency and media trade associations), juries progressively include non-industry representatives, such as consumer and NGO representatives, laymen, experts and academics, in their membership.52 In Europe there are 26 national SROs (24 EU and 2 non-EU SROs), which together deal with some 50.000 complaints on publicised advertisements annually. 53 All these SROs are united in a network called the European Advertising Standards Alliance (EASA), which was established in the early 1990s after pressures by the European Commission to adopt new and more restrictive legislation on advertising practices. 54 Since 2002, EASA does not only include SROs in its membership, but also some 15 European trade federations that represent the interests of the European advertising industry. With the mandate of both the SROs and representatives of the entire European advertising, EASA sets best practice recommendations that guide SROs in their regulatory activities. By doing so, its shares best practices and enhances the regulatory capacity of the industry. Key in this respect is EASA’s best practice model, which was developed in 2004 and has been influential in triggering institutional changes among European SRO members. The model: ‘[…] describes the various component parts of the model self-regulatory systems which the EASA wishes to see in place in all existing EU member states and in Accession countries. It is designed to help the EASA and its members to evaluate, initiate and develop effective and efficient systems across Europe. It will also help identify areas where investment is needed to develop existing

EASA, ‘Best Practice Implementation by European Advertising Watchdogs. EASA Charter Validation Progress Report 2005-2011’ (Brussels, 2011), available at: , pp. 24-27. 53 EASA, ‘European Trends in Advertising Complaints, Copy Advice and Pre-clearance’, Brussels, 2011, p. 11, available at: . 54 A. Cunningham, ‘Advertising Self-regulation in a Broader Context: An Examination of the European Union's Regulatory Environment’, Journal of Promotion Management, Vol. 5, No. 2, 2000, pp. 61-83. 52

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU national arrangements in order to improve the provision and operation of selfregulation […].’55

The best practice model lays down operational standards for SROs as regards, inter alia, the practice of code drafting, adjudication of disputes and monitoring activities and, as such, provides a common roadmap for the organisation and functioning of SROs in Europe. This need for improvement and coordination of SRO activity was felt in the context of two concurrent processes crucial to the regulation of the European advertising industry, namely the drafting of the Unfair Commercial Practices Directive 56 and the Audiovisual Media Services Directive,57 and the accession of ten countries from Central and Eastern Europe to the EU in May 2004. Since these Directives would promote and at times require the use of private regulation as a form to regulate advertising practices,58 and since only in very few acceding Member States centralised regimes of private regulation were in place, guidance on what private regulation was to achieve was considered essential. To take on this project EASA actively engaged with the European Commission. DG Health and Consumer Protection (DG SANCO), which had some concerns of its own in relation to private regulation in the advertising sector,59 recognised the chance this presented to drive the development of private regulation, in particular in the new accession states, and saw to it that the Best Practice SelfRegulatory Model was discussed in a wider forum. To that end, the Commission established in 2005 a ‘Round Table on Advertising Self-Regulation’, including staff of the Commission, interested NGOs and representatives from the industry. The concluding report of the roundtable identified a number of factors that should be used to enhance the impact of SRO activity and increase their effectiveness. 60 The factors strongly overlap with what EASA’s best practice model suggests. The Commission’s report thus implicitly recognises and endorses the approach taken by EASA. This confirmation has offered a firm degree of political credibility to EASA in the advertising industry as well as in relation to the Commission. As a result, EASA sits prominently in the EASA, ‘Best Practice Self-Regulatory Model’ (Brussels, 2004), available at . 56 Directive 2005/29/EC of the European Parliament and of the Council (Unfair Commercial Practices Directive), OJ 2005 L 149/22. 57 Directive 2010/13/EU of the European Parliament and of the Council (Audiovisual Media Services Directive), OJ 2010 L 95/1. 58 See n.65, 66 and 67 infra. 59 Commission Communication of 2 October 2001, COM(2002) final 531, pp. 5 and 7. 60 Directorate-General Health & Consumer Protection, 'Self-Regulation and the Advertising Sector: A Report of Some Discussion among Interested Parties (Madelin Report)' (Brussels, 2006), available at: . 55

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Commission-led discussion forums for private regulation of advertising for alcoholic beverages 61 and food products, 62 and for online behavioural advertising,63 in which the Commission tries to bring the industry and civil society groups together to tackle important regulatory issues that arise in these domains. How does this sketch of private regulation in the European advertising industry align with the definitions of self- and co-regulation as the EU has formulated them in the European debate on new governance and better regulation? For sure, it does not meet the narrow definition of co-regulation in the Inter-institutional Agreement on better lawmaking since a specific legal framework in which the advertising industry is commanded to implement public policy goals is absent.64 Private regulation in this field is more likely to be seen as self-regulation because it is adopted by the industry and for the industry primarily. Nonetheless, there is a wider sense of co-regulation here in that key European Directives on advertising suggest, encourage or even require the adoption of codes of conduct to discipline the advertising industry and tackle particular advertising practices. The Unfair Commercial Practices Directive, for example, holds that the control exercised by SROs should be encouraged as it may eliminate unfair and misleading commercial practices and thus avoid the need for recourse to public enforcement. 65 Furthermore, the Audiovisual Media Services Directive stipulates that ‘Member States shall encourage co- and/or self-regulatory regimes at national level’66 for audiovisual media services and that Member States and the Commission shall encourage the development of codes of conduct concerning the advertising of fatty and sugars-rich foods to children.67 This shows the diversity of forms in which private regulation may manifest in the European context, something that is not sufficiently recognised in the official policy documents on new governance, the Inter-institutional Agreement on better lawmaking and impact assessment guidelines of the European Commission. Moreover, the agreement does not recognise the multi-level dimension that European private regulation is likely to imply. As the case of advertising shows, European organisations are often composed of national member organisations, which on the one hand provide input for pan-European activities and on the other hand implement these activities at the national level following 61

EU Alcohol and Health Forum, . EU Platform on Diet, Physical Activity and Health, available at: . 63 European Advertising Standards Alliance, ‘New Standards for Online Behavioural Advertising’, available at: . 64 See cit. op. supra n. 17. 65 Recital 20 and Articles 10 and 11 of Directive 2005/29/EC. 66 Article 3(7) of Directive 89/552/EEC. See also recital 36 of the Directive. 67 Article 3e(2) of Directive 89/522/EEC. 62

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU their own industry structures, cultures and traditions. More specifically, while rule-making activities may thus occur at both the European and national level, the monitoring and enforcement of those rules is primarily carried out at the national level by the SROs. Given the interdependence of the European and national levels of governance, it is thus rather difficult to qualify initiatives of private regulation such as those in the field of advertising as ‘European’ or ‘national’. The Inter-institutional Agreement on better lawmaking, by contrast, only talks of self-regulation ‘at European level’.68 B. The Need to Be Accountable The need for accountability follows the impact that regulatory activities of private regulators have on the rights and obligations of individuals.69 By adopting private codes of conduct that go beyond legal standards, private regulators in the European advertising industry (i.e. the national SROs, EASA and European trade federations) can effectively limit the use of particular advertisements and advertising techniques that are otherwise seen as legal and fair. More specifically, the decision of an SRO that an advertising campaign violates a code of conduct may restrict the exercise by the firm of its constitutional rights, such as the freedom of (commercial) expression and of religion, or of its contractual rights that follow from the private arrangement underpinning the advertising campaign.70 Importantly, the regulatory function of codes of advertising conduct is not limited to SRO membership and may extend to firms that have not subscribed to the regime. Third-party firms may see their rights impaired and therefore account must not only be rendered internally among members, but also externally in relation to those non-affiliated firms. These firms may be affected by the regulatory activities of SROs as a result of the role that media owners play in the private regimes. Media owners enforce the sanctions that SROs impose after the jury has found an advertisement to violate the applicable code. Given the intermediary role media owners have in the advertising industry, they can act as a gatekeeper and effectively block most of the non-compliant ads. When enrolled in the SRO structures, the media thus allow the SROs to prevent or stop the use of non-compliant advertising in a relatively fast and inexpensive way.

68

Inter-institutional Agreement on better law-making, Para. 22. See cit. op. supra n. 31. 70 The limitations exist only if the private codes of conduct go beyond legal standards applicable to advertising practices. For example, legal prohibitions of misleading advertising, children’s advertising and tobacco advertising, have been considered constitutional in the US, Canada and Europe. See: R. Shiner, Freedom of Commercial Expression, Oxford University Press, Oxford, 2003, p. 110. 69

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS However, this enrolment also offers the SROs the chance to extend their potential influence to advertisers that are not affiliated with the private regime. Broadcasting laws may hold media owners liable for publication of noncompliant advertising and therefore media are unlikely to distinguish between firms that are associated with the SRO and those that are not when enforcing the SRO decisions. Non-members may thus see their ads being halted or boycotted much against their will. Given that blocking ads may imply that the freedom of commercial expression is curtailed and the underlying contractual obligations to print, broadcast or otherwise diffuse advertisement in point are not complied with – often having substantive financial repercussions – SRO activities can thus seriously affect the disposition of third-party firms. Another, yet more exceptional way in which SROs can influence the behaviour of third-party firms is when it is delegated public regulatory powers. In this case, the SRO is formally mandated to exert unilateral influence on the exercise of the rights of individuals who did not consent to the private codes and procedures it applies. A rare example of such delegation is found in the United Kingdom, where the regulator for media and telecommunications, the Office of Communications (OFCOM), has formally contracted out its statutory powers to adopt and enforce codes of conduct for television and radio advertising under the Control of Misleading Advertising Regulations 1988 and the Communications Act 2003 to the British SRO concerned with broadcast advertising. 71 The practical and legal implications of such delegation for the regulatory capacity of the SRO are significant. The rules and decisions adopted by the private delegatee do not only bind those firms that have voluntarily signed up to them, but become legally binding to all concerned. This effect could not be achieved without a public law mandate as fundamental principles of private law (i.e. private autonomy, privity and freedom of contract) and the rule of law principle would object to it. Since the potential impact of regulatory activities on third parties thus grows significantly, the need to publicly account for these activities increases proportionately. Arguably, the necessity for SROs to be accountable for their regulatory activities also emerges in relation to the third parties that are supposed to benefit from the activities of the SROs. In the case of misleading and comparative advertising these beneficiaries are mostly notably consumers, while in the case of sexist, violent and otherwise socially irresponsible advertising they are likely to concern civil society organisations and the general public. SROs and the ad71

Authorisation of the Contracting Out (Functions relating to Broadcasting Advertising) and Specification of Relevant Functions Order, SI 1975/2004 (hereinafter: Authorisation of the Contracting Out 2004).

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU vertising industry at large generally claim that by administrating an effective private regime, they contribute to higher levels of consumer protection and benefit the cause of NGOs in the fields of food and drink products (food and alcohol), women empowerment, the environment and privacy rights. By making public the extent to which they have indeed succeeded in delivering on promised outcomes, SROs can render account for their activities to the potential beneficiaries of private regulation. C. Accountability of Private Regulators and the Role of Courts Various instruments can be deployed to manage the accountability of private regulatory bodies in the European advertising industry or to hold them to account for their respective regulatory activities ex post facto. To disentangle the various accountability relationships it is useful to differentiate between the activities for which account is given (rule-making v enforcement), the forum to which account is rendered (internal v external) and the nature of the instruments via which this is done (public v private). Table 1 offers an overview of these variables to the various accountability relationships for the regulatory activities of the private regulators in the European advertising industry. Table 1. Variables for accountability relationships72 Forums Instruments Activity Actors Internal External Private

Rulemaking

EASA, European trade federations, National SROs

General assembly board.

European Commission, public authorities, NGOs.

Voting, approval, consultation, budgetary decisions, reporting

Public Discussion panels, reporting

Publication of decisions, EnforceNational None* reporting, ment SROs judicial review (*) SRO juries are supposed to remain independent from the rule-makers and therefore there is no accountability relationship between the rule-maker and enforcers in the private regimes. Public authorities, courts, the general public

72

Complaint handling procedures

Source: own elaboration.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Rulemaking Private regulators may account for their rulemaking activities in the private domain through internal reporting obligations. Voting and approval procedures also ensure accountability to those affected by the private regulatory activities. Account is then primarily given to the regulator’s membership or constituencies. Internal rules of association and decision-making structures ensure that members have the final say in the adoption of national or European codes of conduct or EASA best practice guidance, and can hold the committees drafting these rules to account. Such mechanisms are typically closed to third parties. However, private regulators are increasingly organising public consultations procedures via which interested (third) parties can participate in code drafting processes.73 However, the final decision to adopt a code remains with the industry itself and outsiders are not awarded formal voting rights. EASA and European trade federations have also sought to account for their respective rule-making activities to third parties by participating in the various European Commission-led discussion forums on private regulation in advertising.74 In these discussion panels, the strengths and weaknesses of (proposed) private codes are addressed between the industry, NGOs and public officials, thus allowing for information sharing and greater transparency. On these occasions, private regulators have made public commitments to improve the status quo and make progress on the implementation of private regulatory regimes. Progress is monitored under the auspices of the private regulators themselves and should be reported back to the participants of the forum.75 A public agency is likely to hold an SRO to account for its rulemaking activities if it has delegated (a part of) its regulatory powers to the SRO. The example of OFCOM and the British regime for broadcast advertising has been mentioned already.76 The contract that delegates a share of the statutory competences of OFCOM to the SRO leaves the public agency with a right to veto the adoption of new codes of conduct and requires the SRO to consult the public agency in the drafting process preceding the adoption of new codes of conduct. 77 In 73

EASA 2011, p. 24. The forums are the Roundtable on Self-Regulation (see supra n .60), the Alcohol and Health Forum (see supra n. 61), the EU Platform for Action on Diet, Physical Activity and Health (see supra n. 62), and the Roundtable on Interest Based Advertising (see supra n. 63). 75 An example is the report of the Brewers of Europe, a European trade association for beer brewers, on the implementation on its commitment made to the EU Alcohol and Health Forum to develop responsible beer commercials. See: Brewers of Europe, ‘Responsible Beer Advertising through Selfregulation. 7 Operational Standards: A Commitment by The Brewers of Europe’ (Brussels, 2010), available at . 76 See cit. op. supra n. 71. 77 Article 4(b) Authorisation of the Contracting Out 2004. 74

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU addition, the SRO has an annual reporting duty to OFCOM on its rulemaking and enforcement activities. 78 These instruments provide OFCOM with a very strong grip on the SRO activities. Courts do not appear to play a significant role in holding private regulators in the advertising industry to public account for their rulemaking activities. In the case of private regulation in the European advertising industry, courts – both at the EU and Member State levels, have not been sought to challenge the rulemaking activities of SROs, EASA and other trade associations. One possible explanation for this is the fact that the right to freedom of association may block a potential role for courts. This constitutional right warrants that individuals can establish and join associations at free will, and offers a strong guarantee for firms to create a trade association and set their own normative rules to regulate membership and membership conduct. As long as these rules do not conflict with public law norms, in particular with rules of competition law and human rights obligations, courts have very little legal bases to overthrow the rules of private regulators. Enforcement An important strategy through which national SROs seek to ensure accountability and gain acceptance for the enforcement activities carried out by their juries is by incorporating ‘outsiders’ in the composition of their juries that oversee the procedures for handling complaints about publicised advertising. As noted, SROs are progressively including non-industry representatives as members of their juries.79 This is not only an important strategy to prevent risks of regulatory capture and strengthen claims of credibility and independence, but is also valuable in rendering account to outsiders for SRO decisions. By making its enforcement activities dependent on a jury of which the (majority of) members do not represent industry interests, the SRO aims to make its enforcement activities and the impact it has more acceptable to both members and outsiders. The publication of these decisions increases transparency and further contributes to the aim of acceptance. There are, however, no internal mechanisms in place in SROs to hold the juries accountable for decisions to, for example, the SRO board or its wider membership. From the perspective of the independence of the juries, this is indeed desirable. Nonetheless, the SRO juries can be held to account for their enforcement action by public authorities and courts. As held above, the private regime for broadcast advertising in the United Kingdom, for example, must report annually to 78 79

Article 5 Authorisation of the Contracting Out 2004. See cit. op. supra n. 52.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS OFCOM on its enforcement activities.80 Individuals that have been negatively affected by an SRO jury decision can initiate court proceedings to challenge this decision. If the court validates the decision and the challenges brought against it are refuted, it renders the influence exerted by the SRO on the individuals legitimate and acceptable. Accordingly, courts can thus be viewed as important mechanisms through which private regulators can be held to account for their enforcement activities. Two procedures appear relevant in holding SROs accountable in court for their enforcement activities, namely judicial review and tort law procedures. The first is a particular type of procedure that can be described as the process by which a court of law reassesses the legality and validity of the regulatory activities of a public body or of a private body performing public functions.81 This implies a limited review of the activity in point: a court will not reassess the merits of the case, but instead evaluates whether or not the activity is reasonable and proportionate taking into consideration all of the facts to the case. The court may for example assess whether a decision meets general principles of procedural fairness, such as notice, hearings, productions of reasons and impartiality in decision-making, and whether other public law standards, including human rights obligations, have not been impaired. Only in a limited set of countries judicial review has been available to challenge enforcement action taken by SROs. In jurisdictions such as New Zealand82 and the United Kingdom,83 decisions of the local SROs have been considered susceptible to judicial review on the basis of the ‘public law function’ that these private bodies exercise.84 In New Zealand, courts have been able to assess SRO decisions in relation to human rights infringements.85 In the United Kingdom, where the case law is more developed, the grounds most commonly relied upon to challenge a decision of the local SRO in judicial review proceedings concern those of excess of powers,86 proportionality of a human rights challenge,87 and procedural unfairness.88

80

See cit. op. supra n. 77. See in general: C. Lewis, Judicial Remedies in Public Law, 4th edn, Sweet & Maxwell, London, 2009, p. 11 82 Electoral Commission v Cameron, 2 NZLR 421 (1997). 83 Advertising Standards Authority Ltd. v The Insurance Service Plc, ALR 77 (1989). 84 See for a discussion: P.P. Craig, Administrative Law, 6th edn, Sweet & Maxwell, London, 2008, pp. 880-894; and A. Butler, ‘Is This a Public Case?’, Victoria University of Wellington Law Review, Vol. 31, No. 4, 2000, pp. 747-780. 85 See for example: Easton v Human Rights Commission and Advertising Standards Authority, NZHC 47 (2010). 86 See for example: Advertising Standards Authority Ltd. v Charles Robertson (Developments) Ltd. WL 1019598 (1999). 81

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PRIVATE REGULATION AS A FORM OF NEW GOVERNANCE IN THE EU In other jurisdictions, however, judicial review has remained limited to decisions taken by regulatory bodies endowed with public law competences by statutory acts or executive decisions. Since SROs have not usually been attributed such public law powers, judicial review is not a viable route to challenge the decisions of the SROs in these countries. Here, civil tort claims, such as negligence and libel, have been used as an alternative legal vehicle to challenge allegedly wrongful SRO decisions in court. In these cases, claimants typically seek to establish that the SRO decision that found their advertising to infringe the applicable code of conduct was unlawful or slanderous and led them to sustain to damages. They therefore petition the judge to either prevent the SRO from enforcing its decision or to allow them to seek redress for the damages they incurred due to the SRO decision.89 This provides third parties with an ultimate course of legal action to address and dispute the decisions of SROs and the external effects these decisions have.

5. Conclusions Private regulation seen as part of the new governance debate in the EU throws up significant challenges in terms of legitimacy and accountability. This chapter has addressed the specific question of what role courts may potentially play in holding private regulators accountable for their regulatory activities and has sought to answer this question in the light of the case of private regulation in the European advertising industry, which presents a wide variety of forms of industry-driven private regulation that are not adequately captured by the EU policy documents on new governance and better regulation. By conceptualising accountability as both a virtue and mechanism, and by differentiating between the internal and external dimensions of accountability, the analysis developed in this paper has highlighted both the complexity and variety of the accountability relationships existing between private regulators and the individuals affected by their regulatory activities. Courts, it was established, are but one mechanism via which private regulators can be held to account. Their role is first and foremost based upon a conception of centralised responsibility, which is contested by the

87

See for example: Matthias Rath B.V. and Matthias Rath Ltd. v The Advertising Standards Authority Ltd. and The Independent Reviewer of the Advertising Standards Authority Ltd, EWHC Admin 428 (2000); and Kirk Session of Sandown Free Presbyterian Church v Advertising Standards Authority, NIQB 26 (2011). 88 See for example: Stephen Buxton (Trading as the Jewelry Vault) v Advertising Standards Authority, EWHC Admin 2433 (2002) and SmithKline Beecham PLC v Advertising Standards Authority, EWHC Admin 442 (2000). 89 See for a comprehensive analysis: P. Verbruggen, ‘Advertising’, in F. Cafaggi (Ed.), Enforcement of Transnational Private Regulation: A Case Book, Edward Elgar, Cheltenham, forthcoming.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS reality of today’s regulatory policies, both at the national and European level.90 Contemporary approaches to regulation often involve the delegation – both formal and informal – of regulatory tasks and powers from governmental to private actors that may operate on different levels of governance. Centralised accountability via courts does not sit easily with this decentralised, multi-level reality of regulation and regulatory policy.91 The case of private regulation in the European advertising industry that has been discussed in this chapter clearly represents a shift away from the hierarchical and centralised approach to regulatory governance in the EU. It was also found that the private regulators in this issue area may be held accountable for their respective rule-making and enforcement activities through a variety of public and private instruments. Private regulators may at the same time proactively manage their accountability in relation to those affected by their regulatory activities – both non-affiliated firms and potential beneficiaries – by way of publicly reporting on their achievements, organising public consultations on code drafting and securing independent and credible complaint handling procedures. While courts remain vital to rendering the regulatory activities that affect third parties acceptable, their role is often one of last resort. Private mechanisms thus assume a crucial complementary role in holding private regulators to account for their regulatory activities.

Cf. C. Scott, ‘Accountability in the Regulatory State’, Journal of Law and Society, Vol. 27, No. 1, 2000, pp. 38-60. 91 Black, supra n. 30, p. 143. 90

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Governance of Government Undertakings in the Netherlands: Ensuring Public Interests ADAPTING THE OBJECTIVE IN THE ARTICLES OF ASSOCIATION OF A PUBLIC LIMITED LIABILITY COMPANY TO BETTER SUIT THE PROTECTION OF PUBLIC INTERESTS Jelle Nijland*

Introduction Government authorities can entrust the exploitation of economic activities that are of public interest to certain private actors, for example companies in private law legal bodies. 1 This can be the result of the privatization of former state owned companies. Such privatization can be motivated by the wish to reduce the apparatus of the government and to remove accompanying costs on the budget of the state.2 In the EU for example, the wish to privatize has been reinforced due to (the coming into operation of) the Economic and Monetary Union and the subsequent wish to fulfill the stipulated conditions concerning budget deficits and public debts.3 There are more reasons to entrust the care for a certain public interest to private actors. One of these is the belief that these actors can be more efficient in the exploitation of the activities than government authorities. But are such private actors, from a legal point of view, equipped to safeguard public interests? To answer this question, this chapter will focus on a specific group of legal entities entrusted with economic activities of public interest, namely government undertakings – for example the Dutch railways (Nederlandse Spoorwegen NV) or Schiphol Airport (NV Luchthaven Schiphol).4 These public limited liability companies qualify as ‘government undertakings’. I will elaborate on the definition of a government undertaking in the preceding section. When providing a service of public interest, these companies have operational final responsibility. A certain amount of (in)direct government influence on these companies may however be desirable when ultimately the government *

Mr. dr. J. (Jelle) Nijland is a lecturer specialized in company law and civil notary law at Leiden University. If these activities are economic, these entities may be regarded as undertakings. 2 See for example ‘Flexibiliteitsonderzoek gemeentelijke en provinciale uitgaven’, Parliamentary Papers II 1982/83, 17 983, No. 1, p. 3, and Parliamentary Papers II 1981/82, 17 474, Nos. 1-2; and H.J. de Ru, Staat, markt en recht. De gevolgen van privatisering voor het publiekrecht, W.E.J. Tjeenk Willink, Zwolle, 1987, p. 15. 3 See E.R. Manunza, ‘De zig-zag koers van de EG op het terrein van verzelfstandigen’, in H.J. de Ru & J.A.F. Peters (Eds.), Verzelfstandiging en marktwerking. Stand van zaken en perspectieven, Sdu Uitgevers, The Hague, 2002, p. 112. 4 I will define government undertakings in Section 1 below. 1

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS remains politically accountable for (the services provided by) these companies.5 Methods are sought after to permanently provide government authorities – e.g. the Minister of Finance – with a special position in government undertakings allowing them to exercise influence so to be able to safeguard the relevant public interests. It is doubtful whether or not private law instruments outside the general framework of Dutch company law like agreements or public law instruments such as the Dutch ‘Interventiewet’ (Financial Institutions Special Measures Act, comparable to the British Banking Act 2009) can adequately provide for this special position.6 In principle, Dutch company law offers government authorities with no other possibilities to influence the policy of government undertakings than the possibilities that private parties have. In other words, there are no specific provisions that offer government authorities a better position than interested private parties. The Dutch government however has expressed the wish to make finer use of private law instruments available in the general framework of Dutch company law to better serve public interests. This has inspired a significant change in policy regarding the involvement of government authorities as a shareholder in companies with a public interest. 7 The change is significant enough to be called a shift in paradigm. 8 Prior to this policy change, the emphasis was on the retreat of government authorities as a shareholder in companies with a public interest. However, recent government policy emphasizes the potential value of the ownership of shares by government authorities.9 The Dutch government now has a policy to act as an active shareholder to safeguard the relevant public interests in public limited liability companies.10 Thus, questions arise whether or not Dutch company law provides a governance framework for these corporate bodies to sufficiently ensure public interests and to adequately balance conflicting individual (private) interests and communal (public) interests. This chapter will specifically focus on the question of whether 5

See J. Nijland, De overheidsonderneming (Dissertation Leiden), Kluwer, Deventer, 2013, p. 44. See the letter from the minister of Economic Affairs of 29 September 2009 with regard to the agreement on public interests in the nuclear power plant Borssele, Parliamentary Papers II 2009/10, 28 982, No. 78. According to the minister, an agreement was the maximal attainable instrument since the minister lacked other means to ensure government influence in the private law construction. Implicitly this gives the idea that the minister would have liked other, better instruments, but these were simply not available. 7 See Pitlo/Raaijmakers, Vennootschaps- en rechtspersonenrecht, Deventer: Gouda Quint, 2000, No. 5.98. 8 See R.J.N. Schlössels & S.E. Zijlstra, Bestuursrecht in de sociale rechtsstaat, Kluwer, Deventer, 2010, p. 654. 9 See p. 7 of the Annual Report on State Participations (Jaarverslag Beheer Staatsdeelnemingen) 2011 (revised version), supplement to Parliamentary Papers II 2012/13, 28 165, No. 145. 10 See the Annual Report on State Participations 2011 (revised version), Supplement 1 to Parliamentary Papers II 2012/13, 28 165, No. 145. 6

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or not the governance of private actors serving public interests could be improved and if so, how? I will argue that the purpose (objective) of public limited liability companies that house government undertakings should be formulated in a way that incorporates the public interest (better) and affords the public interest a more prominent place amongst the other existing interests of the company. This would make the whole company aim more towards the protection of public interests and therefore make the whole governance framework more effective. To argue this, this chapter will first define (in Section 1) the entities wherein public interests and government influence should have a more dominant position: i.e. government undertakings. Also, the dynamic character of ‘public interests’ is discussed therein. In Section 2, the reasons for the use of private law legal bodies to safeguard public interests will be clarified. The reason why government authorities would want influence within the private law legal entities for the sake of the public interest is further explained in Section 3. The reasons why the adaption of the objective of the company are deemed necessary to make government influence more effective will be set out in Section 4. Then, it will be explained how the insertion of the promotion of public interests would affect the relationships of the involved actors in a company, before concluding with a few final remarks in Section 5.

1. Definition of Government Undertakings 1.1. ‘Public’ Interests as Opposed to ‘General’ and ‘Social’ Interests Before defining ‘government undertakings’, I would like to distinguish between the terms ‘public’, ‘general’ and ‘social’ interest. The term ‘general interest’ is very broad and usually used as a synonym for the term ‘public interest’. However, I wish to distinguish between private actors that contribute to the prosperity of society in general and private actors that can be deemed to have a special task because of the public interests involved. For this purpose, ‘public’ interests may be seen as a species of the genus ‘general’ interest. The relationship between general, public and social interests is as I see it, as follows. ‘General interests’ are interests that are to the benefit of (groups within) society. When such interests are taken care of by a government authority because the protection of these interests is part of its mandate, I would call these interests ‘public’. Thus ‘public interests’ are those interests politically decided upon to belong to the responsibility of the state or another government authority. This does not mean that public interests cannot be entrusted to private actors. This

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS label merely indicates that government authorities have a political responsibility to see to it that these interests are safeguarded. This is a formal approach towards the definition of public interests. Which interests are of public interest can in principle be deduced from regulation or parliamentary proceedings. ‘Social interests’ are those interests that are to the benefit of (groups within) society but have not been labeled as interests that government authorities should ensure. The private parties taking responsibility for the promotion of these social values do this of their own volition. The Wetenschappelijke Raad voor het Regeringsbeleid (an advisory organ to the Dutch government) defines ‘social interests’ as those interests that are desirable because they are beneficial for society as a whole but where government intervention is not deemed necessary.11 In Dutch company law, such interests are for example idealistic values. For this chapter, I focus on the possible adaptation of the governance framework of private actors in the form of a public limited liability company that serve (primarily) ‘public interests’.12 1.2. Appointing Public Interests and the Role for Government Authorities: A Pendulum A formal approach towards the definition of public interests based on political consensus helps demarcate the group of interests that government authorities may want to safeguard through government undertakings. However, appointing interests as public interests and deciding what type of government intervention would suit best, remains the result of a dynamic process open to social developments.13 The role for the government in private entities that affect a public interest depends on the spirit of the times. This can be illustrated by the history of Dutch government intervention into certain Dutch financial institutions. The ‘Rijkspostspaarbank’ and the ‘Postcheque- en Girodienst’ were set up as banking services to the government in the end of the 18th century. Privatization took place on the basis of the ‘Postbankwet’ in the 1980s.14 to create an institution

11

See the report of the Wetenschappelijke Raad voor het Regeringsbeleid (an advisory organ to the Dutch government) on safeguarding public interests, Het borgen van publiek belang, Sdu Uitgevers, The Hague, 2000, p. 20. 12 Some legal systems also distinguish between public and social interests. See Nijland, supra n. 5, pp. 17-21 for more literature on this subject. In Chapter 7, I describe the Belgium framework for company law. In Belgian company law companies with a social aim (met sociaal oogmerk) are distinguishable from companies of public interest (overheidsbedrijf), 13 The interests connected with government tasks such as the defense of the country are universally recognized as public interests although these too are liable to changing insights, Parliamentary Papers II 2000/01, 27 771, No. 1, p. 11. 14 See the ‘Postbankwet’, Bulletin of Acts 1985, No. 510.

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that would operate in line with the prevailing market. 15 The abovementioned entities were incorporated in the ‘Postbank NV’ and are now absorbed in ING NV.16 Although ING was in principle an autonomous private law legal body, the Dutch government came to the rescue of ING NV when it ran into difficulties caused by the financial crisis because the stability of the (Dutch) financial market was at stake and it was deemed to be of public interest. This rescue was accompanied by a right for the Dutch government to appoint two supervisory board members on behalf of the State. 17 The ING NV case also shows that private actors (in this case a financial institution) can serve public interests and government intervention in the organization of these private actors to better serve these public interests is nothing new. 1.3. Distinguishing State Owned Companies, Government Companies and Government Undertakings Not all companies providing a service of public interest are state or government owned. The term ‘state owned company’ implies that the state owns (the majority of) the issued share capital in a relevant undertaking. I would deem a larger group of companies relevant to the question of whether or not government entities can use instruments provided for in Dutch company law to influence the decision-making process in companies for the sake of securing public interests. This chapter therefore concerns a wider group consisting of private limited liability companies and public limited liability companies in which government bodies have the possibility to influence the management of these companies in the public interest. Another reason why I will not use the term ‘state owned companies’ – a generally accepted term for companies in which the state retains a certain amount of influence – is because this chapter also concerns companies in which the state is not involved, but other government authorities. The relevant companies are better described with the term ‘government undertakings’. For the sake of this chapter, government undertakings are defined as (1) undertakings18 (2) that serve a public interest and (3) in which government authorities can exert a decisive level of influence on policy decisions to protect the relevant public interest through instruments provided for in the general framework of Dutch company law (this third element is further summarized as ‘policymaking influence’, although I will sometimes also refer to this in short with the term ‘influence’).

15

See Parliamentary Papers II 1984/85, 18 346, No. 5, p. 1. About the history of this bank, see the website . 17 See Parliamentary Papers II 2008/09, 31 371, No. 23, p. 4. 18 This concept is based on the functional approach of the notion of an undertaking in the case law of the Court of Justice of the European Union (CJEU). 16

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS This description of ‘government undertakings’ is somewhat based on the notion of ‘overheidsbedrijven’ (government companies)19 in the Wet Markt en Overheid (Market and Government Act), 20 however the group of government undertakings is not necessarily the same group of entities as the group of ‘overheidsbedrijven’. Indeed, ‘government companies’ are companies in private law legal bodies as are ‘government undertakings’. However the group of government undertakings can be wider since it also includes companies wherein government authorities hold a decisive policymaking influence via for example contracts.21 This method of influence was not included in the legal definition of ‘government companies’ in Article 25(g) Dutch Competition Act. In this chapter, a specific definition of ‘policymaking influence’ is utilized, which attaches particular importance to Dutch company law as an instrument of government authority.22 Government authorities can exert influence in multiple ways through the legal instruments provided for in Dutch company law. Of distinct interest here, are these legal instruments that – from a company law perspective – limit the autonomy of the undertaking in the sense that a focus mainly on profitmaking is no longer possible because of the overriding public interest: competences generally accorded to the company for the goal of making profit are no longer entirely to the discretion of the company. So an undertaking, for the purposes of this chapter, is ‘governmental’ if a public legal entity uses Dutch company law to gain policymaking influence and thus limits the autonomy of this undertaking for the sake of a public interest.23

2. The Use of Private Law Legal Bodies to Serve Public Interests In practice, allowing private law legal bodies to serve the public interest holds great attraction for government authorities.24 As mentioned, from a state’s perspective the choice to privatize and have a legal body outside government authorities looking after a (former) service of public interest may be strongly motivated by the desire to remove the costs for the relevant service of public

19

Article 25(g) Dutch Competition Act (Mededingingswet). See Bulletin of Acts 2012, No. 254. 21 See Nijland, supra n. 5, p. 29. 22 Dutch company law can be regarded as a policy instrument. Compare the interpretation of Staal with the advice of the Sociaal-Economische Raad on the relationship between government and market in Advice 10/01 of 10 March 2010, H.W.M.A. Staal, ‘Markt en politiek’, TRA 2010/10, pp. 3-4. 23 See Nijland, supra n. 5, p. 7. 24 Report Privaatrechtelijke taakbehartiging door decentrale overheden. Oprichten van en deelnemen in privaatrechtelijke rechtspersonen door provincies, gemeenten en waterschappen (Report for the Ministry of Justice), The Hague, December 2006, p. 8. 20

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interest from the national budget.25 Dutch company law has a limited system of private law legal forms. 26 Within these different private law legal forms, the private limited liability company and public limited liability company seem most appropriate when the concerned public interest involves the exploitation of an undertaking. The preference for private entities in practice and public limited liability companies in particular is understandable when legal independence from the government (authorities) is intended and the activities of public interest are primarily economic in nature. But even for an institution with public authority, sometimes a private law legal body is preferred over the use of a public law legal body. For example when the Dutch central bank (De Nederlandsche Bank) was established, it was established as a public limited liability company to emphasize the independence of the institution.27 Another argument for the use of private legal bodies is the presumed efficiency that is coupled with these legal forms. Additionally, the public limited liability company is, or was sometimes, chosen because of or with future plans in mind that would involve the selling of (all) government shares to private shareholders. Also the choice for private legal bodies may be historically motivated. 28 Furthermore, the attraction for local authorities to entrust private law legal bodies with economic activities of public interest stems from the fact that local authorities are – under Dutch law – not competent to autonomously establish public law legal bodies by regulation. Apart from the preference of government authorities, the management of a government undertaking itself may be inclined to prefer private law legal bodies over public law legal bodies.29 Overall, the reasons may be (non exhaustively) summed up as follows: the swiftness and ease with which private law bodies can be established, the flexibility that the legal form provides, a reduction of the number of public servants, the delegation of operational responsibility for the economic activities that decrease the necessity of detailed interference of government authorities with regard to the realization of the public service, and a certain amount of independence from the responsible ministry.30

See on privatization H.J. de Ru & R Wettenhall, ‘Progress, Benefits and Costs of Privatization: An Introduction’, International Review of Administrative Sciences, Vol. 56, No. 1, 1990, pp. 7-14. 26 Article 2:3 Dutch Civil Code (BW). 27 D. Simons, ‘De rechtsvormen van de overheidsonderneming’, WPNR, No. 5067, 1970, p. 72. 28 For example, the above-mentioned Dutch central bank and the Dutch railways were set up as private entities respectively because this would allow a more independent position and confirm the character as an undertaking. 29 See for example Cerfontaine – former president-director of NV Luchthaven Schiphol – in Schiphol Group Annual Report 2007, p. 7. 30 Compare the criteria for establishing a government foundation in the report of the Dutch Court of Audit (Algemene Rekenkamer) on government foundations, ‘Zicht op overheidsstichtingen 2011’, Parliamentary Papers II 2010/11, 31 887, No. 4, p. 12 and the literature cited therein. 25

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS Government authorities are allowed to make use of private law instruments for public interests, albeit that they are restricted by the ‘the thwarting doctrine’ (doorkruisingsleer). Private law may lack safeguards that public law offers to protect citizens in their vertical relation to government authorities and it would be undesirable if government authorities could easily circumvent these safeguards by using private law constructions instead of public law instruments. 31 The ‘doorkruisingsleer’ elaborated by the Supreme Court of the Netherlands (Hoge Raad der Nederlanden) provides for criteria that determine whether or not government authorities may use private law instruments.32 Whether or not the use of such bodies is allowed in a particular case, depends on the specific circumstances of the case. For the purpose of this chapter, I will not go deeper into this topic. It suffices to say that private actors in private law legal bodies are being used and – in specific cases – can be used to serve public interests.33

3. The Desirability of Government Intervention in Companies of Public Interest If government authorities choose to have a private company provide for certain services of public interest for the abovementioned reasons in Section 2, government influence might be deemed desirable because the government authority concerned may still have political final responsibility. In addition, government influence might be regarded as indispensable since the private company might not always be relied upon to act in the public interest. For example, after and partly because of the nuclear disaster in Fukushima 34 the transfer of shares in the nuclear powerplant Borssele to private parties was found undesirable by a majority of the Dutch House of Representatives (Tweede Kamer der Staten-Generaal).35

31

See B. de Goede & M. Troostwijk, Het gebruik maken van burgerrechtelijke vormen bij de behartiging van openbare belangen (Preadviezen algemene vergadering 18 mei 1956, Geschriften van de Vereniging voor administratief recht), H.D. Tjeenk Willink, Haarlem, 1956, p. 7. 32 P. de Haan, Publiek- en Privaatrecht; overheidsbeleid en recht, Kluwer, Deventer 2002; and P. de Haan, Recente ontwikkelingen in de verhouding publiek-/privaatrecht, Koninklijke Nederlandse Akademie van Wetenschappen, Amsterdam, 1999, p. 19. For the use of private law legal bodies in particular see e.g. Dutch Supreme Court ruling of 28 February 1997, AB 1997, 314, annotated by ThGD, JB 1997/82, annotated by M. Lugt & R. de Lange (annotation 1), HJS (annotation 2) (SKV/Buijs); Dutch Supreme Court ruling of 10 December 1999, JB 2000/20, annotated by F.A.M. S. (SKV/Van den Brink); and Dutch Supreme Court ruling of 20 December 2002, AB 2003, 344, annotated by FvO, JB 2003/32, annotated by H. Peters (Van der Walle/SKV). 33 See C.A. Schreuder, Publiekrechtelijke taken, private rechtspersonen. Verzelfstandiging en privatisering in de vorm van vennootschappen en stichtingen (Dissertation Groningen), Kluwer, Deventer, 1994, pp. 406-411 and the case law mentioned in supra n. 31. 34 See Second breach at Fukushima nuclear plant leaks toxic water into sea, available at: . 35 See Parliamentary Papers II 2009/10, 28 982, No. 78.

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Private shareholders cannot always be expected to act in the public interest because their primary concern will be their own interests, for example the maximization of profit. Different conflicting interests can be at stake in a government undertaking, but this is not exclusively true for government undertakings. Short-term interests may also conflict with long-term interests in companies without a public interest. It is just that public interests add to the list of long-term goals (such as continuity of the relevant undertaking) in a government undertaking. An example that shareholders may be lead by private, shortterm interests that contrast with the interest of the company as a whole is the split-up of the major bank, operating from The Netherlands, ABN Amro in 2007 in the TCI case.36 The majority of shareholders were unsatisfied by the results of the management board37 and voted for splitting up ABN Amro on the 26 of April 2007 although this meant the end of ABN Amro as a large, general bank and diminished the importance of the bank tremendously. 38 This can thus be seen as contradictory to the interest of the company.39 In general, there is no strict hierarchy between different existing interests. The interest of the company is the result of the addition of all existing interests in a company.40 This is of utmost importance for deciding upon an effective governance framework in Dutch company law for government undertakings. Because the interest of the company is the guiding principle for actors in a company, it means that it is not so evident that the public interest should prevail in company policy and the acts of the company (organs). The government undertaking is thus presented with a dilemma. It should pursue public interests and the government authority charged with the political responsibility will in principle hold the protection of the relevant public interests dearly since the government should in principle always act in the public interest. But the government undertaking is aimed at the interest of the company and does not solely have the protection of public interests in mind. This would be one of the main reasons to deem it desirable for government authorities to be able to participate in the governance of a government undertaking. There may well be a divergence 36

See for an overview: . NRC Handelsblad 16 April 2007, ‘ABN Amro: strijd tussen beleggers en managers’. 38 See about the public interest and the position of (large) banks, M. Haentjens, De autonomie van de alchemist: een beginsel van burgerlijk recht in het bankwezen (inaugural lecture Leiden), 2013. 39 Such a decision also changes the character of the identity of an undertaking significantly. See Dutch Supreme Court 13 July 2007, JOR 2007, 178 (ABN Amro). 40 See on the corporate interest M.M. Mendel, Het vennootschappelijk belang mede in concernverband beschouwd (inaugural lecture in Leiden 1989), Kluwer, Deventer, 1989, in particular p. 3; and P. van Schilfgaarde, Van de NV en de BV (edited by J. Winter & J.B. Wezeman), Kluwer, Deventer, 2013, pp. 27-28. The authors are of the opinion – and rightly so – that the interest of the company is a dynamic notion. See P. Van Schilfgaarde, ‘De opbouw van het vennootschapsrecht’, WPNR, No. 6822, 2009, pp. 961-968. 37

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS between the interest of the company and the public interest. Indeed, to what extent can the government undertaking, as a private actor, legally be expected to safeguard or promote the public interest over other relevant interests? To solve this dilemma, a heavier weight should be given to the public interest. This could be done by adapting the objective of the company in the articles of association. This will be elaborated on in the next section.

4. Proposal: Adapting the Objective of Public Limited Liability Companies in the Articles of Association to Better Accommodate the Promotion of Public Interests In short, the proposal to make the governance framework for government undertakings more effective in protecting public interests is as follows. The acts of a public limited liability company, as well as the relationships between the relevant actors in this company, are predominantly determined by the interest of the company and the objective(s) of the company as formulated in the articles of association. Therefore, making the public interest more dominant in determining what the interest of the company is when balancing all the relevant interests, could help government undertakings to be better equipped to deal with conflicts of interests in favor of the public interest. The public interest should be more dominantly present in the interest of the company and this is made possible by introducing the relevant public interest into the articles of association. This will be clarified by explaining the directional value of the articles of association, particularly in regard to the objective of a public limited liability company, as demonstrated in the following sections. In Section 4.1, the importance of the objective of a company is described. In Section 4.2, the possible value of the objective as an instrument for effective government influence is explained. The inclusion of public interests further supports the legitimation for government influence, as will be argued in Section 4.3. How the inclusion of public interests in the objective influences the relationships between actors in the company is then discussed in Section 4.4. 4.1. The Importance of the Formulation of the Objective The objective must be stated in the articles of association. Slagter sees the objective (the purpose) of a private law legal body (in this case a public limited liability company) as vital to the company’s image.41 The objective should be directional for the acts of the relevant private law legal body. In general, the articles of association briefly describe the sphere(s) of activities of the company 41

W.J. Slagter, Compendium van het Ondernemingsrecht, Kluwer, Deventer, 2005, p. 33.

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and the nature of the activities to be undertaken. The scope of the objective should be determined by all relevant circumstances.42 In addition, it is possible to interpret the formal objective as described in the articles of association more extensively than its mere phrasing. In practice, this objective may be formulated so widely that hardly any actions of the company would fall outside the scope of the description. An exact delineation of the objective is therefore not simple. An effort should nonetheless be made to carefully formulate an accurate objective so that it may be directional. An objective in which the relevant public interest is incorporated should be particularly directional for government undertakings. The public interest could, and in my opinion should, be the framework that forms part of the context in which all the other relevant circumstances are to be interpreted. The government undertaking has a particular purpose that regular undertakings do not have, namely the objective to serve the public interest with its economic activities. This goes further than the objective of just trying not to clash with the public interest. In practice, however, the objective of a public enterprise rarely refers to the public interest it intends to uphold, safeguard and/or serve.43 The Minister of Finance, which is responsible for a lot of the state participations in companies, is of the opinion that the relevant public interests in state-owned companies are usually well defined, but this is not done by including the public interest in the corporate purpose. For an explanation of what interests are public and what the content of these interests is, the Minister refers to the details as laid down in sectoral laws or establishing acts.44 A reason for this omission could be that a reference to the public task is seen as being too restrictive to the commercial exploitation of the public task.45 Considering that the choice for a public limited company over a government institution may be primarily based on the wish to efficiently and commercially exploit activities of public interest 42

See the ruling of the Dutch Supreme Court 20 September 1996, NJ 1997, No. 149 (Playland). In this case, the Supreme Court agreed with the Court of Appeal that not only the wording of the objective in the articles of association, but all circumstances, should be taken into account when determining the interest of the company. The fact that the company has benefitted from the disputed act is of importance. 43 See for example Article 3.1 of the articles of association of NV Schiphol Airport, where the public interest is not mentioned. See the articles of association (as applicable on 14 October 2013), available at: . 44 See Parliamentary Papers II 2008/09, 28 165, No. 97, p. 4 and Supplement 1 of Parliamentary Papers II 2008/09, 28 165, No. 97, pp. 13-20. 45 The objective was seen as restrictive in the following case. A foundation with the objective of preserving objects with historical and archaeological value had objected to the grant of the demolition of a historic building. However, with regard to the admissibility of the application of this foundation, the court ruled that such an action of the foundation in this case would be exceeding its statutory objective and therefore was not permitted. See the President of the Court of Almelo 29 March 2000, ECLI:NL:RBALM:2000:AA5716.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS in an environment of market competition, such a restriction would be deemed undesirable. However, I do not believe that these fears are merited. The inclusion would indeed entail a certain restriction of the commercial exploitation of the public task. Nonetheless, these restrictions are necessary and desirable to safeguard the public interest and furthermore, these would not hamper efficiency or the commercial exploitation as such, only curtail a particular exploitation, for example profitmaking. Before explaining the impact of incorporating the public interest in the objective as stated in the articles of association, I should elaborate on how the objective is directional for the company and its organs. I will do this with regards to the obligations of the company board. The board must perform its duty properly and satisfactory according to the obligation formulated in Article 2:9 Dutch Civil Code. This obligation includes abiding Article 2:7 Dutch Civil Code, which states: ‘A juridical act performed by a legal person is voidable if, due to this act, the purpose (objective) of the legal person, as described in its articles of incorporation, has been exceeded […].’

Therefore, the board always has to fulfill its task in accordance with the objective of the company as its guideline. So all acts must be in conformity with the objective of the company as stated in the articles of association. If a party is of the opinion that a certain act is not in accordance with the objective as stipulated in the articles of association, legal action is possible by invoking Article 2:7 Dutch Civil Code. All acts that are contrary to the objective are voidable on the basis of Article 7 of Book 2 of the Dutch Civil Code.46 Thus, this Article could be an instrument for government control within a private enterprise owned by the government because of the prohibition to exceed the purpose of the company.47 According to case law, an act is in conformity with the objective, if it is in line with the interest of the company. So the interest of the company is directional for (the actions of) company organs. For example, the board and its members are always obliged to act in the interest of the company, and thus in accordance with the objective of the company. 48 There is both an internal dimension and an

46

This Book concerns the regulation of private legal entities. The Articles must include the purpose (objective). See for the association, the limited liability company, the private company and the foundation respectively Article 2:27(4)(b), Article 2:66(1), Article 2:177(1) and Article 2:286(4b) Dutch Civil Code. 48 This is referred to as the internal function of the statutory purpose, in contrast to the so-called external function as laid down in Article 2:7 BW. See Th. Groenewald, Doeloverschrijding bij NV en BV. Een 47

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external dimension to this obligation. The internal dimension refers to the relation between the company and its board. If the board should fail to comply with their obligation to act in the companies’ interest, the board is liable on the basis of Article 9 of Book 2 of the Dutch Civil Code. The external dimension concerns the consequences for third parties and is laid down in the already mentioned prohibition in Article 7 of Book 2 of the Dutch Civil Code, declaring acts voidable if not in accordance with the objective.49 I do realize that in addition to difficulties of describing the public interest concerned, identifying the exact demarcation of an objective of a company is in general not an easy task. The difficulties with the delineation of these concepts may well be part of the reason why Article 2:7 Dutch Civil Code is not invoked regularly. However, since a government undertaking undertakes economic activities that are of public interest, the objective should always specify the public interest in the objective as detailed as possible, so that it has distinguishing qualities and can help determine what acts do fall within the objective of the company and what acts do not. 50 Although an act is not easily regarded as exceeding the objective under current case law, 51 the inclusion of an explicit, detailed description of a public interest that the undertaking wishes to serve with its economic activities, should and would make the objective a more defining feature. I thus think that a more precise formulation of the objective would help increase the importance of the prohibition of Article 2:7 Dutch Civil Code and make an appeal more viable. The point of departure, regardless of any difficulties in the exact wording of the objective, is that the objective is rechtsvergelijkend onderzoek naar de uitvoering van de bepalingen omtrent doeloverschrijding in artikel 9 eerste EG-richtlijn inzake het vennootschapsrecht, Kluwer, Deventer, 2001, p. 139. 49 An appeal to Article 2:7 Dutch Civil Code can have repercussions for others than the company itself. The article has an external dimension which means that the opposing party of the company, in for example an agreement that is not in line with the interest of the company, can thus be faced with an appeal to Article 2:7 Dutch Civil Code and the invalidity of the agreement. This appeal can only be invoked by the company itself according to the last sentence in Article 2:7 Dutch Civil Code. 50 A situation in which the objective lacks distinguishing qualities should be avoided. In the following case, the statutory objective of the foundation (which inter alia states that it seeks to ensure a healthy and sustainable environment) was deemed so broad by the Administrative Jurisdiction Division of the Council of State, that it was insufficiently distinctive and therefore did not allow the foundation to be admissible in court because it lacked sufficient interest to participate in such proceedings. See Administrative Jurisdiction Division of the Council of State 1 October 2008, ECLI:NL:RVS:2008:BF3911. 51 If the interest of the legal person is (also) served, it will not be easily considered that the objective is exceeded. Even when an act harms the interest of the legal person, it does not necessarily mean that this is conflicting with the objective. See P. van Schilfgaarde, Van de NV en de BV (edited by J. Winter & J.B. Wezeman), Kluwer Deventer, 2013, pp. 210-211. See J.B. Huizink (Rechtspersonen), Article 2:7 Dutch Civil Code, comment 6 and the literature cited therein; and Dutch Supreme Court ruling of 20 September 1996, NJ 1997, No. 149 (Playland).

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS important and its wording deserves attention. Also, I would like to stress that it is possible to describe public interests in detail. This is done in sectoral regulation all the time, for example in the regulation of the Dutch electricity company TenneT controlling the electricity network, the Electricity Act (Elektriciteitswet 1998).52 4.2. Effective Government Intervention: Actions Based on the Violation of the Objective of the Company More of an issue is that according to Article 7 of Book 2 Dutch Civil Code, only the company can invoke the invalidity of a juridical act in violation with the objective. Generally, the board members represent the company. And the same board members that have acted in violation of the objective are unlikely to start an action. This can of course be remedied by the dismissal of the board, which in general is the competence of the general shareholders’ meeting. 53 In some cases, the board members can be discharged by the government, for example if the government has a majority of the shares. The newly appointed board could then try to annul an agreement or other acts that the previous board took contrary to the objective of the company. Under the current situation, this can only be done on the basis of Article 2:7 Dutch Civil Code if ‘the counterparty was aware or ought to have been aware of this without any research of his own’. The more precise the wording of the objective, the more directional value it has, also against third parties such as the counterparty of a company since they should in principle take notice of the articles of association.54 This procedure (dismissal of the old board, appointment of the new board and action to annul acts by the old board that are contrary to the objective of the company) with which the government tries to reverse the acts of the board that are contrary to the objective might be time consuming. If the public interest is at stake, swift action might be needed. Instead of having to remove the board and to appoint a new board that invokes Article 2:7 Dutch Civil Code, it would be helpful if government authorities could invoke Article 2:7 Dutch Civil Code and start an action based on the violation of the objective of the company when the public interest is concerned, autonomously and directly. The current wording does not allow for another party than the company to invoke Article 2:7 Dutch Civil Code. But if the wording could and would be changed to accommodate an appeal to Article 2:7 Dutch Civil Code by other parties than the company itself (e.g. the government or a lobby/pressure group) when public interests are at stake, the government would gain an instrument to intervene. The external effect 52

See also Parliamentary Papers II 2008/09, 28 165, No. 97, p. 4 and Supplement 1 to the Parliamentary Papers II 2008/09, 28 165, No. 97, pp. 13-20. See Article 2:133 Dutch Civil Code for the right of dismissal. 54 See e.g. Dutch Supreme Court ruling of 20 September 1996, NJ 1997, No. 149 (Playland). 53

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however is only justifiable if third parties that may be confronted with an Article 2:7 Dutch Civil Code action by government authorities are, or should be, aware of the special weight attached to the public interests when dealing with the government undertaking in question. So for the objective to have this desired external effect, it should include or mention the public interest in the articles of association that are accessible to all. It would then be apparent that the private law legal body clearly accommodates a government undertaking so that all should be aware of the special position of the public interest and the possibility of government intervention when acts of the company are contrary to the public interest in the objective of the company. 4.3. Legitimation of Government Involvement: The Public Interest in the Objective of the Company If the objective incorporates the public interest, the government could thus be more effective in safeguarding the public interest involved, so that the effectiveness of government intervention is improved. But there are more reasons for adapting the objective by including the public interest. If the public interest is explicitly mentioned in the objective of the government undertaking, it would at the same time legitimize government involvement to intervene on behalf of the public interest, because the special character of the government undertaking is clearly recognizable. 4.4. Determining Internal Company Relations through the Public Interest in the Objective Another reason to include the public interest in the objective is that the public interest would thus also determine the internal relationships between the organs of the company. So the inclusion of the public interest in the objective of the company would influence the way that the organs of the company should behave against each other as prescribed by Article 2:8 Dutch Civil Code. 55 Article 2:8 Dutch Civil Code reads as follows: ‘the legal person and those who pursuant to law and the articles of incorporation are involved in its organization, must behave towards each other in accordance with what is required by standards of reasonableness and fairness.’ The public interest would thus seep through the institutional fabric of the company. Furthermore the legal (private) framework of norms (of Book 2) is more infused with public principles because of the dominant position of the public interest so that the interpretation of private open norms will lean more towards the safeguarding of the public interest. 55

This would be in addition to the prescription of how the organs of the company have to fulfill their tasks. It would allow for an external dimension of the public interest in the relationship between the company and third parties via a possible voidability action on the basis of Article 2:7 Dutch Civil Code.

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WHEN PRIVATE ACTORS CONTRIBUTE TO PUBLIC INTERESTS 5. Concluding Remarks Private actors in private law legal bodies can contribute to public interests, but this contribution could be improved if their general framework, as laid down by Dutch company law, would be directed more towards protecting public interests. The legal relationships between the organs in a government undertaking are primarily determined by the interest of the company. The insertion of the relevant public interests in the aim or objective of the company as stated in the articles of association of a government undertaking would make government influence more effective, because public interests would weigh heavier in balancing conflicting interests. The insertion would also legitimize the priority given to the public interest over other existing interests in the company. The special character of the undertaking concerned is after all clearly discernible by looking at the articles of association and therefore recognizable for interested parties. However, to allow such an insertion to be even more effective, it would be helpful to change the wording of Article 2:7 Dutch Civil Code so that other parties than the company itself would be able to invoke the invalidity of acts of the company that are contrary to the public interest.

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Previously Published in the Governance & Recht Series Volume 1 Volume 2

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Volume 10

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