Working Paper. Policy Matters But How? Tanja A. Börzel, Tobias Hofmann and Diana Panke. Explaining Non-Compliance Dynamics in the EU - PDF

Working Paper Policy Matters But How? Explaining Non-Compliance Dynamics in the EU Tanja A. Börzel, Tobias Hofmann and Diana Panke No. 24 February KFG Working Paper No. 24 February 2011 KFG Working

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Working Paper Policy Matters But How? Explaining Non-Compliance Dynamics in the EU Tanja A. Börzel, Tobias Hofmann and Diana Panke No. 24 February 2011 2 KFG Working Paper No. 24 February 2011 KFG Working Paper Series Edited by the Kolleg-Forschergruppe The Transformative Power of Europe The KFG Working Paper Series serves to disseminate the research results of the Kolleg-Forschergruppe by making them available to a broader public. It means to enhance academic exchange as well as to strengthen and broaden existing basic research on internal and external diffusion processes in Europe and the European Union. All KFG Working Papers are available on the KFG website at or can be ordered in print via to Copyright for this issue: Tanja A. Börzel, Tobias Hofmann, Diana Panke Editorial assistance and production: Farina Ahäuser, Corinna Blutguth Börzel, Tanja A./Hofmann, Tobias/Panke, Diana 2011: Policy Matters But How? Explaining Non-Compliance Dynamics in the EU, KFG Working Paper Series, No. 24, February 2011, Kolleg-Forschergruppe (KFG) The Transformative Power of Europe Freie Universität Berlin. ISSN (Print) ISSN (Internet) This publication has been funded by the German Research Foundation (DFG). Freie Universität Berlin Kolleg-Forschergruppe The Transformative Power of Europe: The European Union and the Diffusion of Ideas Ihnestr Berlin Germany Phone: +49 (0) Fax: +49 (0) Policy Matters But How? 3 Policy Matters But How? Explaining Non-Compliance Dynamics in the EU Tanja A. Börzel, Tobias Hofmann and Diana Panke Abstract The European Union s infringement procedure is highly legalized. Nevertheless, as in other international institutions, non-compliance occurs on a regular basis and its transformation into compliance varies across EU infringement stages and over time. State of the art compliance literature focuses mainly on countryspecific explanations, such as power, capacity, and legitimacy. In particular power-capacity models explain a good part of whether non-compliance occurs and how quickly it can be resolved. Yet, these approaches leave substantial parts of the empirical variation that we observe unexplained. This paper argues that policy and, in particular, rule-specific variables although often neglected are important for explaining non-compliance. Based on a quantitative analysis, we show that policy matters not only for the frequency with which EU law is violated, but also the persistence of non-compliance over time and over the different stages of the infringement procedure. 4 KFG Working Paper No. 24 February 2011 The Authors Tanja A. Börzel is Professor of Political Science and holds the chair for European Integration at the Otto Suhr Institute of Political Science, Freie Universität Berlin. Her research concentrates on questions of Governance, institutional change as a result of Europeanization as well as on the diffusion of ideas and policies within and outside of the European Union. Since October 2008, she coordinates the Research College The Transformative Power of Europe together with Thomas Risse. Contact: Tobias Hofmann is visiting instructor of government at the College of William & Mary and about to finish his PhD in Political Science at Freie Universität Berlin. His research interests include the political economy of international institutions and regional integration. Before joining the college of William & Mary faculty, he was a fellow at the Niehaus Center of Globalization and Governance and an associate at the Weatherhead Center for International Affairs. Contact: Diana Panke is Lecturer of Political Science at the University College Dublin. Her research interests focus on governance beyond the nation-state, including international negotiations, the creation and degeneration of international norms, Europeanization, comparative European Union politics, EU decision-making processes, modern theories of international relations as well as compliance and legalization. Contact: Policy Matters But How? 5 Contents 1. Introduction 6 2. Non-Compliance and Policy-Variation 7 3. Policy-Explanations Rule-specific Explanations Conclusions 27 Literature 29 Appendix: Operationalization of Power and Capacity 33 6 KFG Working Paper No. 24 February Introduction Non-compliance haunts all international institutions, as even highly legalized compliance monitoring, management, and enforcement settings cannot completely prevent rule violations. 1 The infringement procedure of the European Union (EU) combines centralized compliance monitoring (the European Commission) with an elaborated procedure to resolve violations of EU Law. The European Commission opens infringement procedures for detected cases of suspected non-compliance and starts a managerial dialogue with the respective state. Should settlements fail, the Commission initiates the adjudication stage by referring the case to the European Court of Justice (ECJ), which issues binding rulings. For the rather rare cases of highly persistent non-compliance, the Commission and the ECJ carry the case onwards to the enforcement stage, in which the ECJ can issue financial penalties (cf. Börzel 2001). Despite these institutional provisions, non-compliance occurs on a regular basis and includes all member states. 2 In addition, the transformation of norm violations into compliance varies across the stages of the EU compliance procedure and with respect to the time it takes to resolve infringement cases. Since the institutional design is constant, it cannot explain the empirical variance of member states non-compliance. The state of the art in non-compliance research focuses mainly on country-specific explanations (e.g. Knill 1998; Haverland 2000; for an overview cf. Mitchell 1996; Checkel 2001). In particular, power-capacity models explain a good part of whether non-compliance occurs and how fast or through which compliance instruments it can be resolved (Börzel et al. 2010). Yet, all these approaches leave substantial parts of the observed variation unexplained. We argue that this is due to the compliance literature s neglect of policyrelated explanations. Therefore, this paper focuses on policy-specific variables 3, which we show to be of high importance for the frequency of non-compliance and its persistence over time and the stages of the infringement procedure. In addition, it shows that rule-specific variables, such as high European misfit, a high complexity of rules, as well as the idleness of European law transposition, significantly increase the frequency of norm violations. The paper proceeds in the following steps. Firstly, we empirically assess the variation of non-compliance across policy fields (2). Subsequently, we develop policy-specific hypotheses and quantitatively test them (3). Variation in the frequency of compliance and its settlement dynamics between policy sectors cannot be completely captured by our policy explanations due to the heterogeneity of rules within policy fields. For example, while non-compliance cases from positive, market-correcting policy sectors seem to take longer to be settled both in terms of stages of the infringement procedure and days almost every policy field encompasses market-creating and market-correcting rules. Similarly, almost every regulative policy also encompasses redistributive effects. It can be difficult to aggregate them into distinct policy areas. To overcome these difficulties, we adopt an even more fine-grained approach. Next to policy-based hypotheses, we introduce rule-specific hypotheses and also test them with quantitative methods (4). 1 Cf. Abbott et al. 2000; Abbott/Snidal 2000; Duina 1997; Garrett et al. 1998; Goldstein et al. 2000; Helfer/Slaughter 1997; Hudec 1993; Joerges 2000; Kahler 2000; Keohane et al. 2000; Simmons 2000; Smith 2000; Stone Sweet/ Brunell 1997; Zangl 2001; Zürn/Joerges 2005 among others. 2 Cf. Duina 1997; Falkner et al. 2004; Falkner et al. 2005; Hartlapp 2007; Haverland 2000; Mbaye 2001; Mastenbroek 2003; Steunenberg 2006; Treib 2003 among others. 3 For similar arguments in favor of an approach that does not ignore variation across policies cf. Lampinen/Uusikylä 1998; König et al. 2005; Steunenberg 2007; Steunenberg/Rhinard 2005; Steunenberg/Kaeding 2008; Treutlein 2007; Haverland 2000; Haverland et al Policy Matters But How? 7 This reveals that when new Directives are based on existing European legislation, the misfit for member states is kept to a minimum and the probability of infringements becomes smaller. Likewise, increasing complexity of Directives goes hand in hand with a higher share of non-compliance. Finally, rule-specific idleness makes infringements more common. The paper concludes that policy-, rule-, and countryspecific explanations of non-compliance are not competing, but can be combined. In terms of countryspecific variables, high EU-specific political power and low bureaucratic capacities foster non-compliance (cf. Börzel et al. 2010). European misfit and complexity interact with capacities. High misfit between the new Directive and the European aquis communautaire as well as highly complex Directives require more political, administrative, financial, and cognitive resources than Directives that resemble or adapt already existing ones and Directives that are not as complex. Thus, states that struggle with capacity shortcomings face particularly difficult problems concerning the transposition and implementation of complex and original EU laws. 2. Non-Compliance and Policy-Variation While the European Union has successively expanded its legislative competencies, the implementation and enforcement of European law firmly rests within the responsibility of the member states. The European Commission has the right to bring legal action against member states it suspects to infringe on European law (based on Article 226 ECT). The infringement proceedings consist of several stages. The first two, suspected infringements (complaints, petitions, etc.) and Formal Letters, are informal and treated as confidential. The formal infringement proceedings start when the European Commission issues a Reasoned Opinion. Should non-compliance prevail after managerial dialogue, the European Commission refers cases to the European Court of Justice (ECJ). This initiates the adjudication phase, which ends with a binding judgement. If the member states still refuse to comply, the Commission can open new proceedings (Art. 228 ECT), which may result in a second ECJ judgment linked to financial penalties (cf. Börzel 2001). When we map the frequency of non-compliance across policy fields between 1978 and , we can see that all member states together infringe on European legislation in some policy areas more often than in others. Opened non-compliance cases (DV1) 5 are not randomly distributed across policies. 6 When we graph the annual number of Reasoned Opinions per legal act in a specific policy sector, we can see that in half of the policy sectors there are hardly any infringements (cf. Graph 1). However, in the enterprise (i.e. corporate law) sector, member states violate an average seven percent of the legal acts in force every year. Infringement numbers are also relatively high for environmental policies. 7 4 For more information on the dataset, cf. Börzel et al For more information on the dataset, cf. Börzel et al In this part of the paper, in which we focus on policyspecific explanations of non-compliance, we distinguish between two types of dependent variables DV1 and DV2a/b. The first dependent variable (DV1) measures the frequency at which non-compliance occurs. It is based on Reasoned Opinions, i.e. the first official stage for which the Commission publishes non-compliance data. The second dependent variable (DV2) measures the persistence of non-compliance. It further distinguishes between the duration of non-compliance over time (DV2a) and the number of stages of the infringement procedure it takes to settle specific infringement cases (DV2b). 6 The variance across policies is even larger than that between countries (cf. Börzel et al. 2007). 7 The same holds true for the justice and home affairs policy sector. However, this sector was only introduced 8 KFG Working Paper No. 24 February 2011 Graph 1: DV1 Annual Reasoned Opinions per Legal Act (in %) by Policy, Reasoned Opinions per Legal Act (in %) tra fis tax com agr adm eco edu ten emp sem env ent If we look at the persistence of non-compliance (DV2) instead of the occurrence, we see a very different picture. While European legal acts in the enterprise sector are the ones most prone to be infringed on, the enterprise non-compliance cases are also the ones that are most rapidly settled on average. While non-compliance is usually transformed into compliance in less than two years in the areas of enterprise and education legislation, infringement proceedings in the fisheries policy sector tend to drag on for three years before they are successfully resolved. after the other policy sectors by the Maastricht Treaty in late Moreover, justice and home affairs has only subsequently been communitarized and made subject to Article 226 infringement proceedings. Therefore, we decided to exclude this policy sector from our analyses. 8 adm = Administration, agr = Agriculture, com = Competition, eco = Economic and financial affairs, edu = Education and research, emp = Social affairs, ent = Enterprise, env = Environment, fis = Fisheries, sem = Single market, tax = Tax, ten = Transportation and Energy, and tra = Trade. Policy Matters But How? 9 Graph 2: DV2a Average Duration of Non-compliance (in Days) by Policy, Duration of Infringements Proceedings in Days 0 2,000 4,000 6,000 8,000 ent agr edu ten eco tra com env sem emp tax adm fis As there is a large positive correlation between the duration of non-compliance (DV2a) and the stages individual infringement cases reach (DV2b), it is not surprising that enterprise is the one policy sector that shows substantial variation across the stages of the infringement procedure. It starts out as the policy sector with the second largest number of infringements (not controlling for the number of legal acts in the policy sectors), but ends up in the middle field at the later stages (cf. Graph 3). Most of the other policy sectors stay compliance leaders or laggards across the stages. They might change their ranking within their respective group, but they do not substantially change their position. Agriculture, environment, and single market account for most infringements at all stages. By contrast, trade, economic and financial affairs, education and research, and competition feature very few infringements across the board. Overall, it seems that policy sector-specific non-compliance remains stable across the stages of the infringement procedure (Graph 3). 10 KFG Working Paper No. 24 February 2011 Graph 3: DV2b Non-Compliance across Stages for Selected Policy Sectors, Percentage of Infringements Stages: 1 Reasoned Opinions, 2 ECJ Referrals, 3 Rulings, 4 Referrals, Art. 228 agr emp ent env fis sem tax ten In order to inquire whether there is significant cross-policy variation beyond the graphical evidence, we analyze the effects of binary policy variables on the three variants of our dependent variable, i.e. DV1 and DV2a/b. First, we look at the occurrence of non-compliance in different policy sectors with an OLS regression (Model 1, Table 1). In a second step, we try to answer the question whether the number of stages that individual infringements reach and how long it takes for infringement cases to be settled depends on the policy sectors that the infringed legal acts belong to. In order to provide a statistical answer, we use an ordered probit model (Model 2, Table 1) and a Cox proportional hazard model (Model 3, Table 1). From the models in Table 1 it becomes obvious that there is significant policy variation with respect to the occurrence of non-compliance. Three policy sectors fisheries, tax, and trade have significantly less and five have more Reasoned Opinions per legal act and year on average (in %) than the arbitrary reference category agricultural policy (cf. Model 1, Table 1). With respect to the numbers of stages of the infringement procedure, enterprise cases have the lowest probability of making it from one stage to another, fisheries cases the highest (cf. Model 2, Table 1). Duration-wise, only enterprise cases last significantly shorter than agricultural cases, which form the reference category. Also, disputes over compliance with European 9 All sectors that make up less than 2 percent of the infringement cases across all stages of the EU s official infringement procedure were excluded from this graph in the interest of clarity. In fact, not a single case from the economic and financial affairs, education and research, and trade sectors has made it to the fourth stage (ECJ Referral, Article 228) in the years Policy Matters But How? 11 fisheries legislation have the best chances for a long survival, i.e. to be dragged on for a significantly longer time than all the others (cf. Model 3, Table 1). Table 1: Policy Sectors and Infringements Models: (1) (2) (3) Administration Competition Economic & Financial Affairs DV1 DV2a DV2b Education & Rresearch *** Enterprise *** Environment *** Fisheries * Single Market *** Tax ** Transportation & Energy *** Trade *** Constant *** ** ** *** *** *** *** *** *** *** Cut Point *** Cut Point *** Cut Point *** *** *** *** ** *** *** *** *** Time Dummies yes yes yes Observations 273 5,462 4,591 Adjusted R-squared 0.74 Time at Risk 2,974,371 Regressions with two-tailed t-tests and robust (Hubert/White) standard errors. *** = p 0.01, ** = p 0.05, * = p 0.1. 12 KFG Working Paper No. 24 February Policy-Explanations In order to explain why certain policy fields are more often infringed upon and why cases from some fields, such as enterprise, are settled at the earlier stages of the compliance procedure and more rapidly than from others, this third section develops policy-field hypotheses on the occurrence of non-compliance (DV1) and its persistence (DV2), respectively. This is made somewhat difficult by the International Relations (IR) legacy of the existing compliance and implementation literature, which is strongly state-centered and hardly considers policy variables. However, there are exceptions. At least three prominent approaches highlight differences between regulative and non-regulative policies (Majone 1993), distributive and redistributive policies (Windhoff-Héritier 1980), and market-creating/negative and market-correcting/ positive policies (Zürn 1997). Majone argues that the costs of policy formulation and decision-making in regulatory policy sectors are relatively low at the European level, but often significant in material and political terms when it comes to the implementation of European legislation at the domestic level. Regulative policies are more prone to non-compliance than the non-regulative ones because the former usually come at higher costs, which the implementing authorities might be neither willing nor able to bear (Majone 1993). Windhoff- Héritier (1980) focuses more on how policies differ in the extent to which they redistribute resources. States find it easier to comply with non-redistributive policies than with redistributive ones because their implementation faces less opposition at the domestic level. Unlike distributive policies, redistributive policies typically specify winners and losers (Wilson 1980). Some groups benefit from redistributive policies, while others have to pay for them. The latter groups especially if they are well defined, small, and (therefore) not suffering from collective action problems (Olson 1965) will fiercely try to prevent the implementation and resist the enforcement of redistributive European legislation, thereby increasing non-compliance. Third, legal acts from certain policy
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