by Sam Fowles
Nigel Farage thinks EU law prevents nationalisation. Ironically he seems to have got this from a recent post on Left Futures by Westminster University’s Danny Nicol. Professor Nicol argues that the Treaty on the Functioning of the EU (TFEU) and EU liberalisation directives prohibit renationalisation of energy utilities, as proposed by Jeremy Corbyn.
Professor Nicol raises an important point. The EU probably encroaches on the sovereignty of member states to its most egregious degree when it comes to market liberalisation. Art. 176 TFEU commits member states to the expansion of markets.
I have a lot of respect for Professor Nicol and recommend his excellent book. But I can’t help but feel that, in this instance, he has reduced a complex area of law to a zero sum conclusion. There are many forms of “nationalisation” that would never be touched by the TFEU (such as taking utilities into municipal control, as has happened in Germany). Furthermore, EU law wouldn’t prohibit the sort of nationalisation proposed by Mr Corbyn.
Let’s be clear, the Corbyn plan isn’t for complete nationalisation. Mr Corbyn wants to nationalise the grid (the infrastructure that transports gas and electricity from generator to supplier), the “Big Six” energy companies and the railways.
EU law explicitly protects the right of member states to nationalise industries. Art. 345 TFEU states “The Treaties shall in no way prejudice the rules in Member States (MS) governing the system of property ownership.” In his book Professor Nicol argues that this provision has recently been ignored by the ECJ. This is largely correct but it does not justify the conclusion that it will always be ignored.
Art. 345 remains in the treaty. It is possible to generally promote liberal markets and operate some industries as national monopolies. Arts. 176 and 345 are not mutually exclusive. The ECJ has often been tolerant of member states accused of violating the treaties if their actions are “proportionate“, i.e. for a legitimate aim (which would include one endorsed by the electorate) and effective, but not excessive, in achieving that aim. Assuming that nationalisation was prominent in Mr Corbyn’s manifesto, conducted on a transparent timetable and proper compensation was paid, Mr Corbyn would have a strong case based on Art. 345.
But even without Art. 345 EU law would not prohibit the Corbyn plan. Professor Nicol relies heavily on Art. 106 TFEU. But this provision doesn’t ban nationalised industries. It simply regulates how they can behave in relation to other enterprises. In essence, enterprises with a dominant position in the market due to state action cannot use that position to behave unreasonably. The ECJ will only intervene if Art. 106 is breached.
