27th Feb 2020


'Patchwork' penalties - the EU's perennial fines problem

  • A statue of Lady Justice in London. The EU leaves it up to individual member states to determine penalties for infringements of EU law (Photo: James Burke)

It is a logic that most parents will be familiar with: if you set rules, you also need to establish what happens when those rules are broken.

When it comes to setting rules in the EU, however, logic is not the only factor involved.

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  • Protest against the emissions cheating by car companies in Berlin in 2017. The Dieselgate scandal led to higher pan-EU fines, but only in legislation applicable to cars - not tractors or lawn mowers (Photo: Jörg Farys/BUND)

A consistent problem, arising from the way EU legislation is designed, is that penalties for breaking EU rules are not set consistently across the bloc.

In recent years, EUobserver has reported on several examples of EU rules for which violation is punished very differently, depending on the member state concerned.

It was the case for illegally using software that fooled car emissions tests, violating open internet rules, and safety rules for ski lifts.

This is problematic, because the internal market allows companies to set up shop wherever they want. Thus some companies could simply choose the countries with the lowest fines.

Most EU directives and regulations that involve penalties, use a standard clause that leaves it up to the member states to determine the nature of those penalties.

"The penalties provided for shall be effective, proportionate and dissuasive," is what that standard clause says, without any additional definitions to achieve a consistent interpretation across the bloc.

A source with extensive knowledge of the EU revealed to EUobserver the origins of that phrase, on condition of anonymity.

The source remembers when pan-European penalties were first discussed for inclusion into EU law.

"This was a big discussion at the time. This had never been done," the source said, admitting that it left a lot of wiggle room for interpretation.

"At the beginning, only a minority of member states was prepared to accept this. In the course of the discussions fortunately it became a majority. But it was a majority for a text that left a lot of room for manoeuvre to the member states."

The penalties text was a case of compromise to achieve what was politically feasible.

If the provisions of the text had been stricter, then the EU "would not have been able to adopt [it] at that time, that is clear", said the source.

The weak language led to a situation where cheating on emissions tests was not properly punished, when the Dieselgate scandal broke out in 2015.

In response, the European Commission proposed that it should be able to hand out a fine if member states are unable or unwilling to.

A commission paper accompanying the proposal acknowledged that the system for approving cars at that time entailed "the risk that the weakest links in the chain (i.e. the member states with the least stringent approach towards enforcing type-approval) could be targeted by applicants who want to cut corners".

After lengthy discussions, member states agreed in December 2017 that the commission should be able to fine companies up to €30,000 per vehicle if cheating software is detected.

Consumers cheated

The commission publicly acknowledged these challenges in a strategy paper published in April 2018.

"Today, when a company breaks consumer rules, the penalties set out in national law vary widely across the EU and are often quite small. As a result, they do little to discourage unscrupulous traders from cheating consumers," the commission said.

Together with the strategy paper, it proposed to change four consumer-related directives and introduce EU-wide common criteria to determine the level of penalties.

But in the negotiations with commission and EU parliament, member states watered down these legislative changes.

The text of a political deal done between the three EU institutions, agreed behind closed doors in March, includes so many exceptions and caveats that it is unlikely they will lead to more harmonisation.

The EU countries clearly still do not want to give up that part of their sovereignty.

"It should remain a matter for the member states to choose the type of penalties to be imposed and to lay down in their national law the relevant procedures to impose penalties in the event of infringements of the directives amended by this directive," the final text said.

This situation leads to repeat cases where member states are supposed to tell the commission what penalties they have introduced, but fail to do so on time.

New access to documents requests by EUobserver have highlighted this.

Bulldozers and lawn mowers

Take the EU regulation from 2016 which is aimed at reducing emissions from so-called 'non-road mobile machinery', like bulldozers, harvesters, and lawn mowers.

These diesel- or gasoline-powered machines emit dangerous pollutants in the air and the regulation is meant to limit pollution levels.

But the ban on emissions cheating for this regulation is left to the member states - even though the legislation was agreed after the Dieselgate case with cars was revealed.

Member states were supposed to have told the commission by 7 October 2018 what penalties they had put in place.

Only five members states had done so on time, the response to an access to documents request revealed. As late as mid-April 2019, 17 of 28 member states had still not done so.

Even those that did reply on time, did not reveal fines that could be seen as dissuasive.

In Malta, the maximum fine for emissions cheating with non-road mobile machinery was €11,646.87. In Bulgaria, the fine for using such illegal defeat devices was a maximum 5000 BGN for companies (€2,556.46).

Or look at new EU rules about animal breeding. Only six member states notified the commission on time of how violations of that regulation would be punished.

Infringement procedues

Sometimes the commission is fed up with the lax reporting by member states, and it opens a legal procedure known as the infringement procedure.

Last month, it sent so-called letters of formal notice to Italy and Romania for their failure to notify the commission how infringements of EU legislation on fluorinated greenhouse gases ('F-gases') would be punished.

"The availability of appropriate sanctions under national law is a crucial element in ensuring compliance with the regulation, and thereby limiting climate change," the commission said.

Italy and Romania were supposed to have notified the commission on their penalties by 1 January 2017.

This followed a commission decision in March, when it opened infringement procedures for failing to adopt and notify the commission of penalties against 15 of 28 member states, involving three different pieces of EU legislation - all of which were agreed by a majority of member states or even by consensus.

And as long as member states refuse to harmonise their fines, it seems likely that this predicament with penalties will persist.

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