Seminar and Workshop on Advanced Issues in Law and Policy of the European Union, nafta and the wto

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Harvard Law School
Jean Monnet Chair

Seminar and Workshop on Advanced Issues in Law and Policy

of the European Union, NAFTA and the WTO
Professor J.H.H. Weiler

Harvard Jean Monnet Working Paper 8/99

János Volkai
The Application of the Europe Agreement

and European Law in Hungary:

The Judgment of an Activist

Constitutional Court on Activist Notions

Harvard Law School Cambridge, MA 02138

All rights reserved.

No part of this paper may be reproduced in any form

Without permission of the author.

ISSN 1087-2221

© János Volkai

Printed in the United States of America in 2000

Harvard Law School

Cambridge, MA 02138



János Volkai

PhD Candidate, European University Institute, Florence


In response to the turbulent changes in the Eastern part of Europe starting at the end of the 1980’s, the European Communities had to show great flexibility in its policy towards the region. Nevertheless, following the adoption of trade agreements1 and the long-awaited establishment of diplomatic relations2 between the European Communities and the countries in the region, the European Communities decided to treat these countries in a uniform way by dividing them into two categories. Accordingly, on the legal level the European Communities developed its relationship with these countries by concluding two types of agreements. Most of the countries emerging on the territory of the former Soviet Union were offered Partnership and Co-operation Agreements, whereas other former soviet bloc countries, known as Central and Eastern European Countries (‘CEECs’) concluded Europe Agreements with the European Communities and its Member States leading to membership of the European Union on the long term.

Hungary is one of the CEECs and, indeed, since the fall of the communist regime she has pursued a policy aiming at ‘euro-atlantic integration’, including the intention of joining the European Communities (‘EC’)/European Union (‘EU’).3 Recent developments of the EU-Hungary relationship show that such an intention might gradually be realised.4 Nevertheless, notwithstanding the various documents issued on the way to Hungary’s EU accession, the primary legal basis of the relationship between the European Union and Hungary remains the Europe Agreement (‘EA’).5

The Europe Agreement with Hungary, which entered into force on 1 February 1994, is mixed and complex. It is mixed in that it was concluded by Hungary, on one part, and by the European Communities and its Member States, on the other part, because its extensive scope covers fields which the European Communities did not have the (exclusive) competence to negotiate and contract.6 Furthermore, it is a complex agreement including various political, economic and social aims. Even economically, the Europe Agreement is not only a simple free trade agreement, but it also intends to create a so-called ‘wider market’ including the market of the European Communities and the Hungarian market.

This ‘wider market’ is based on the model of the Single Market of the European Communities. Accordingly, similar to the EC Treaty, a two-way approach was adopted by the Europe Agreement for the establishment of that market. On the one hand, the Europe Agreement reproduces the four basic freedoms of the Single Market in a limited way in order to combat public barriers to free trade. On the other hand, in order to combat private barriers to free trade, a special competition co-operation regime is established. According to Article 62 EA7 and its Implementing Rules (‘IR’)8, in the case of anti-competitive practices that may affect trade between the parties, the parties’ competition authorities (i.e., the Hungarian Office of Economic Competition (‘OEC’) and the European Commission) are bound to co-operate in the enforcement of the competition regime based on the principles of the application of Articles 85 and 86 EC.

Moreover, in addition to the two-way approach of trade liberalisation, Articles 67 and 68 EA set out that Hungary shall approximate its competition laws to Community law.9

Competition law is a significant issue under the Europe Agreement and it is decisive for the parties’ relationship, in particular from the viewpoint of Hungary’s preparation for her future EU accession.10 Hungary’s extensive and complex competition law obligations not only raise the issue of how the Europe Agreement can work effectively and efficiently; they might not only serve as a tool for the implementation of the ‘wider market.’ Competition law has a special future relevance, inasmuch as it is the field of law where, under the Europe Agreement, the emerging Hungarian democratic legal system has its first historic encounter with Community law.11 In particular, the Hungarian legal system is expected to elaborate its approach towards supranational Community law in the course of meeting its complex competition law obligations under the Europe Agreement. Consequently, the approach of Hungarian law towards Community competition law might serve as a model for other fields of Hungarian law, for the entire Hungarian legal system and possibly for other CEECs, too.12

The latter statements are not mere assumptions or predictions. The above process has already started and the first encounter of the Hungarian and the Community legal systems has already taken place. The fulfilment of competition law obligations under the Europe Agreement has already triggered serious implications for one of the most important fields of the domestic legal system: Hungarian constitutional law.

In 1996 Professor Berke of ELTE University (Budapest) filed a submission13 with the Hungarian Constitutional Court (‘Court’) contesting the constitutionality of certain provisions of the competition co-operation regime established by Article 62 EA and its Implementing Rules. Berke argued, that “[i]n the context of Article 62 (2) EA, as implemented, the fundamental problem is that a Hungarian legislative act is not a precondition for the application of EC law (the criteria of application of articles 85, 86 EC) by national authorities, according to the state of the art at any time in the future. ‘Criteria’ of a foreign law (EC law) must be given effect in the normal practice of the [OEC].”14 In particular, Berke claimed that by accepting to directly apply the law of a foreign sovereign the future formation of which cannot even be influenced by Hungary, the Hungarian Republic unconstitutionally transferred part of her legislative powers to that foreign sovereign.

The submission raised a number of important preliminary issues, including whether the Court is authorised to control the constitutionality of a Hungarian law proclaiming an international treaty in the domestic legal system in accordance with the traditionally dualist nature of Hungarian law.15 More significantly, it involved whether the constitutionality of an international treaty, like the Europe Agreement, which has already been proclaimed in the Hungarian legal system, may be controlled by the Constitutional Court.

Owing to the special significance of the preliminary issues and the eventual unconstitutionality of the co-operation regime, the Court decided to deal with those two questions separately. Accordingly, Judgment 4 of 22 January 1997 addresses the Court’s competence to control the constitutionality of international treaties and their proclaiming laws (‘Preliminary Issues Judgment’/‘PIJ’), whereas Judgment 30 of 25 June 1998 deals with the merits of the submission, i.e., with the constitutionality of the competition co-operation regime (‘Europe Agreement Judgment’/ ‘EAJ’).

Due to the different status of the parties to the Europe Agreement and the mixed nature of the latter, the Europe Agreement and its competition co-operation regime can be analysed and interpreted according to four distinct benchmarks: (i) the law of international treaties between states16 and between states and international organisations17; (ii) the law on the external relations and competences of the European Communities; (iii) the Constitutions and the laws on international law adopted by the Member States; and (iv) the Hungarian Constitution and Hungarian laws concerning international law.18 The present paper elaborates on the Hungarian constitutional issues arising in connection with the competition law duties of Hungary under the co-operation regime of the Europe Agreement, in particular on the way Community competition law is allowed to become effective in the Hungarian legal system by the Europe Agreement Judgment.

The analysis of the Europe Agreement Judgment will focus on two points which make that judgment exceptionally significant. Firstly, it is the first occasion on which the principles and competence established by the Preliminary Issues Judgment19 are applied in practice by the Court with the result of declaring the competition co-operation regime partly unconstitutional. Secondly, the Europe Agreement Judgment is the first judgment in which the Court deals with the law of the European Communities. Further, although Hungary is not a Member State of the European Union, the arguments of the Court might be instructive concerning its future approach towards Community law and the relation between Hungarian domestic law, in particular the Hungarian Constitution, and Community law following Hungary’s EU accession. The constitutional issues analysed by this paper might also have great relevance for those CEECs that are not in a position to join the European Union in the short term and whose relationship with the EU will be determined by similarly worded Europe Agreements for a longer period. Finally, the concerns raised by the Court might also be instructive for the future shaping of the external relations of the European Communities.

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