Since Thatcher, privatisation has been the relentless policy of British governments.  Regardless of whether Conservatives, New Labour or Lib Dems have been in office, they have pursued the expansion of the private sector and the diminution of the public sector with messianic zeal.[1] The result has been a sharp rise in inequality, the erosion of the welfare state in favour of a policy of “user pays”, the loss of public service ethos in favour of the pursuit of the profit motive, persistent corner-cutting, precariousness for the workforce, and the unjust enrichment of the tiny economic elite.

 

It might be argued that governmental decisions to pursue privatisation have nonetheless rested on a democratic foundation: the electorate voted in parties which were private-sector-friendly and Parliament deliberated on the privatisation legislation. But for privatisation to be a democratic product it must also be democratically reversible. In fact, it is not. And the reason it is not is EU law.

 

The 1990s witnessed a wave of EU liberalisation directives aimed at opening up key sectors of the Member States’ economies: gas, electricity, rail, postal services and telecommunications.[2] Significantly, these sectors are among those most likely to be in public ownership in many Member States. These EU directives give corporations a supranational right to operate in these sectors as part of a system of competition. This compulsory marketisation prohibits public monopoly. By this means, nationalisation of the sector is entirely ruled out. Any national legislation which purported to bring the sector into public ownership would simply be declared invalid by our own national courts.

 

Consequently, nationalisation of the kind implemented by the 1945-51 Labour government is completely unlawful within these sectors. The only sort of public ownership which is lawful is if a publicly-owned company behaves exactly like a privately-owned company and competes “fairly” (i.e. without receiving favourable treatment from government) within the market system which the directives have ordained. This explains why, as Remainers like to point out, state-owned companies remain in sectors like railways in many EU countries; but what they do not point out (or perhaps even realise) is that these companies are forced to compete on a “level playing field” with private companies. This results in a rising market share for the private sector, while the corporatised public sector is compelled to behave like any other capitalist enterprise. Thus, state-owned enterprises can be present, but the sector is by no means “nationalised” in the sense of being placed under democratic control and directed for public ends. The overriding goal of EU directives is to promote competition; no other objective is permitted.

 

Are these restrictions democratic? Hardly. True, the directives were enacted after deliberation by the European Parliament and the Council of the European Union: no-one forced those institutions to pass the legislation. Yet the Council and the Parliament do not operate in an ideologically impartial constitutional framework. The EU Treaties entrench the “four freedoms” of goods, services, capital and labour, steering decision-making towards liberalisation, not nationalisation. Moreover, as recounted in detail elsewhere on The Full Brexit, the fact that these bodies are elected does not mean that they are popularly accountable (see Analysis #1 – The EU’s Democratic Deficit). The Council has shifted economic policymaking from the open chambers of national parliaments to behind the closed doors of secretive interstate diplomacy. Moreover, they only debate 30 percent of the proposals reaching them from the Commission, rubber-stamping the rest. The Parliament is also drawn into these closed-doors discussions through the “trilogue” system, and usually rubber-stamps decisions, with only three percent being openly debated within the Parliament itself.[3]

 

If nationalisation is illegal within the EU, could a left-wing Labour government successfully change EU law to make it legal? Could it “Remain and Reform”? Not likely. The European Commission has a monopoly on initiating EU legislation, so Britain (or any other member-state) would have to depend on the Commission to propose this change to the Council and Parliament. It is unlikely that it would ever do so, given its steadfast commitment to neoliberalism. And since it is neither elected by nor accountable to the European publics, it cannot be compelled to change course.

 

Even if, by some miracle, the Commission did put a proposal to the Council and Parliament, the legislation would require a convincing “legal base” in the Treaties – a treaty article authorising the creation of such legislation. However, there is no specific article of the EU Treaties which provides a specific legal base for legislation authorising nationalisation. Accordingly, the Commission would have to invoke Article 352 of the Treaty on the Functioning of the European Union, which serves as the Treaties’ residual legal base in situations where action is deemed necessary but “the Treaties have not provided the necessary powers”.[4] However, this article requires the Council to act unanimously. Accordingly, any Member State government could veto the legislation.

 

It would be fanciful to suppose that legislation permitting nationalisation would attract Council unanimity. There would need to be a complete absence of neoliberal governments throughout the EU, something which is simply not going to happen. Quite apart from that, some key markets that Labour might target for nationalisation, such as the energy market, involve the participation of companies largely owned by continental Member States, such as EDF. Even a leftist French government would have no wish to see its own nationalised company kicked out of a foreign market. For good measure, under Article 352 the European Parliament must also consent to the legislation, creating yet another veto point.

 

Even if legislation were somehow to emerge, it would be highly likely to be struck down by the EU’s Court of Justice for its incompatibility with the fundamental freedom to provide services in other Member States, as well as corporate freedom of establishment. If the legislation were invalidated, then only Treaty amendment, requiring the common accord of the Member States, could guarantee the constitutionality of such legislation. And, as Lee Jones has shown, the many veto points in the Treaty amendment process are bound to thwart a left government (see Analysis #23 - The Folly of “Remain and Reform”: Why the EU is Impervious to Change).

 

Tellingly, by contrast, EU legislation to liberalise economic sectors is subject to a far lower hurdle: the approval of a qualified majority in the Council under the EU’s “ordinary legislative procedure”.[5]

 

In sum, the issue of nationalisation underlines the fraudulence of claims that a left government could somehow remain in the EU whilst reforming it in a socialist direction. The chances of repealing the liberalisation directives are precisely nil. Staying in the EU means accepting marketisation – and therefore the Thatcher-Blair-Cameron level of privatisation – as permanent. We would be accepting a neoliberal constitution in place of democracy. That “left” supporters of Remain and Reform have not even bothered to try to concoct a strategy for repealing the liberalisation directives speaks volumes. Reform being impossible, it underlines that these individuals do not really seek reform at all: they really just want to remain (see Analysis #32 - “Remain and Reform” Really Just Means “Remain”).[6]

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References

[1] Simon Jenkin, Thatcher and Sons: A Revolution in Three Acts (London: Penguin, 2007).

[2] See Danny Nicol, The Constitutional Protection of Capitalism (Oxford: Hart, 2010), pp. 111-115.

[3] Chris Bickerton, The European Union: A Citizens’ Guide (London: Pelican), pp. 32, 27.

[4] “If action by the Union should prove necessary within the framework of the policies defined in the Treaties, to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers, the Council, acting unanimously and after obtaining the consent of the European Parliament, shall adopt the appropriate measures”.

[5] Article 114 TFEU. “Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.”

[6] The EU’s defence of private sector dominance is by no means confined to the five economic sectors protected by the liberalisation directives. In all economic sectors, corporations based in EU Member States enjoy the fundamental right of freedom of establishment – the right to set up branches and subsidiaries in any Member State. This fundamental freedom can only be curtailed in very limited circumstances. Freedom to provide services operates for the benefit of corporations in a similar fashion. In addition, the EU’s supervision of governmental state aids to national industry, which are prohibited if they are “incompatible with the single market”, robs public ownership of much of its raison d’être.

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About the author

Danny Nicol is Professor of Public Law at the University of Westminster and author of The Constitutional Protection of Capitalism (Oxford: Hart, 2010).

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This work represents the views of the author only. It is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.