Strasbourg, 23 November 2010                                                            LR-IC(2010)13

EUROPEAN COMMITTEE ON LOCAL AND REGIONAL DEMOCRACY

(CDLR)


COMMITTEE OF EXPERTS ON LOCAL AND REGIONAL GOVERNMENT INSTITUTIONS AND COOPERATION

(LR-IC)

PREPARATION OF THE APPENDIX(CES)

TO PROTOCOL No 3 TO THE MADRID OUTLINE CONVENTION

Comparative study of the

European Grouping for Territorial Co-operation (EGTC/GECT)

and the Euroregional Co-operation Grouping (ECG/GEC)

Secretariat Memorandum

prepared by the Directorate General of

Democracy and Political Affairs

Directorate of Democratic Institutions


This document is public. It will not be distributed at the meeting. Please bring this copy.

Ce document est public. Il ne sera pas distribué en réunion. Prière de vous munir de cet exemplaire.


Introduction

This document contains (see Appendix) a detailed assessment by Professor Yves Lejeune, of the Catholic University of Louvain, of the provisions of Protocol No 3 to the Madrid Outline Convention and Regulation (EC) 1082/2006 to identify the similarities and differences between them and any issues not covered by either of the two instruments. Thanks to this analysis, the report should enable the Committee to specify the fields to be covered in the Appendix to Protocol No 3 to the Madrid Outline Convention.

This document is to be considered jointly with documents LR-IC(2010)12 (comparative table of the provisions of Protocol No 3 and Regulation 1082/2006) and LR-IC(2010)14 (detailed proposal concerning the fields to be covered in the Appendix to Protocol No 3 and timetable for implementation).

Action required

The members of the LR-IC are invited to take note of Professor Lejeune’s report and, in the light of this report and documents LR-IC(2010)12 and 14, decide on which subjects to proceed with the drafting of the Appendix to Protocol No 3 and on the timetable for this work.


Appendix

Comparative study of the

European Grouping for Territorial Co-operation (EGTC/GECT)

and the Euroregional Co-operation Grouping (ECG/GEC)

Background

1.       There have been three stages in the Council of Europe’s work on a European Euroregional co-operation instrument:

-        First, the drawing up of a preliminary draft Protocol concerning the establishment of  Euroregional Co-operation Groupings (ECGs)[1], the substantive rules of which would have been self-executing in each State Party.

-        Next, preparation of a draft European Convention containing a uniform law on [transfrontier] territorial co-operation groupings ([T]TCGs)[2], a law which every State Party would have had to incorporate as it stood into its domestic law.

-        Lastly, revision of the draft Protocol on Euroregional Co-operation Groupings (ECGs)[3], identifying a minimum core of basic rules compatible with the Regulation on the EGTC and containing a detailed Appendix on which States Parties that wish to do so could draw in order to supplement their legislation.

2.       During the first two stages[4] the objective was to prepare, in co-operation with the European Union, a legal instrument that would offer future ECGs a polymorphous uniform status based on substantive rules acceptable to all member States of the Council of Europe, supplemented – for matters not regulated by the treaty or the statutes of the proposed grouping – by the national laws of the State in which the headquarters was situated. The idea was, in a sense, to establish a set of substantive legal rules to regulate Euroregions[5] and other transfrontier bodies in the same way in all Council of Europe member States.


With the adoption of Regulation (EC) No. 1082/2006 of 5 July 2006, applicable in principle since 1 August 2007[6], the situation changed completely: Protocol No. 3 now had to contain no solution that was incompatible with the EGTC Regulation as introduced by the European Union. From then on, the content of the provisions of the draft Protocol and the Regulation became more similar, often to the point of being identical. However, the aim of the Council of Europe was still to offer differentiated formats for the establishment of ECGs, among which the EGTC format would be just one of the possibilities. Consequently, in order to retain a minimum degree of flexibility for the status of ECGs, while remaining compatible with the status of EGTCs as defined in Regulation No. 1082/2006, Protocol No. 3 on ECGs drastically limited the basic rules offered to all Council of Europe member States, relegating to an Appendix to be drafted later the additional substantive rules that earlier drafts had sought to formulate.

The Regulation on the EGTC. A brief summary of the spirit and difficulties of implementation

3.       The basic rules of Protocol No. 3 were devised to avoid conflicting with those of Regulation No. 1082/2006. It is therefore useful to consider whether the solutions offered by the two legal instruments are, if not completely identical, at least compatible. Such a comparison should first, however, take into consideration the spirit governing the general organisation of an EGTC as provided for under Regulation No. 1082/2006. The quality of the comparison will also be improved through consideration of the difficulties of implementation encountered by the founders of the first EGTCs.

4.       By introducing this co-operation instrument, the European Union made provision for a form of grouping of which only States, territorial authorities, public bodies, and private bodies controlled, funded or supervised by public authorities could be a part. This structure bringing together exclusively public and quasi-public entities has its own legal personality, but under the regulation it  is subject to operational and supervisory rules that are essentially inspired by company law and private law, rather than public law. This can be illustrated by the distinction drawn between the constituent convention of the grouping and its statutes, which is typical of companies (Articles 8 and 9); the requirement to register those statutes (Article 5); the prohibition on exercising powers conferred by public law (Article 7.4); the joint liability of members for the grouping’s debts to the extent of their contribution, unless a member’s legal status excludes or limits its liability for the debts of a such a grouping (Article 12.2); unsystematic supervision of compliance with public policy, public safety, public health, public morality or even the public interest (Article 13); the possibility of dissolution by a public authority or a court (Article 14).


5.         The results of the consultation conducted by the European Union’s Committee of the Regions on revision of the EGTC Regulation – planned for 2011 – were presented at an Open Days workshop in October 2010[7]. The suggestions gathered by the Committee include the following:

-        simplify and speed up the process of setting up an EGTC, for example by setting a deadline within which a State must give its agreement to a “prospective member” which has notified it of its intention to participate in an EGTC (Article 4);

-        specify the scope of the exclusion of powers conferred by public law (Article 7.4);

-        define the scope of the founding convention and the statutes or eliminate the distinction between the two instruments (Articles 8 and 9);

-        improve publicity of the founding conventions and statutes at European level;

-        allow participation by private law legal persons in EGTCs on certain conditions;

-        formalise the possibility of participation in EGTCs by territorial authorities from outside the European Union;

-        diversify the organs of the EGTC and specify the distribution of votes between nationalities (Article 10); introduce participatory democracy mechanisms;

-        allow exceptions to the principle of application to staff of the law of the State in which the registered office is situated (recruitment, administrative, fiscal and social status) by authorising application of the law of the place in which staff work or by “Europeanising” the status;

-        settle the question of the law applicable to public works contracts executed in a State other than that in which the registered office is located;

-        explain the reason for the liability of a grouping for the acts of its organs where they do not fall within its tasks (Article 10.3);

-        clarify the possibility of prohibiting activities contrary to the public interest (Article 13).

The Commission for Territorial Cohesion Policy (COTER) of the Committee of the Regions even considers that the way in which the regulation is applied by Member States should be defined at European Union level. In other words, the lack of a “substantive common law” on transfrontier or interterritorial co-operation in the European Union makes it difficult to set up truly operational EGTCs.


Comparison of the rules laid down in Protocol No. 3 with those of Regulation No. 1082/2006

6.       The table appended to this report systematically compares the provisions of the Protocol and those of the European Union Regulation. Conclusions will now be drawn from the comparison on each question dealt with by the Protocol and/or the Regulation. Generally speaking, the comparison brings out the added value provided by the Protocol as compared with the Regulation and also demonstrates the usefulness of the work carried out by the Council of Europe.

On the whole, the Protocol is very close to Regulation No. 1082/2006 on very many points. The fact that the basic legal rules governing the ECG are less complete on one question or another than those governing the EGTC obviously does not prevent the Protocol from being compatible with the Regulation. Moreover, the lack of minimal regulation by the Protocol of one question or another dealt with by the Regulation gives national legislators more freedom to adapt the provisions of the Appendix to the particular requirements of their national legislation. It also increases the freedom of “prospective members” of an ECG when drafting the statutes of their future grouping by allowing them not to apply systematically those provisions of Regulation No. 1082/2006 that they do not consider appropriate to their project.

7.         Respective members of the ECG and EGTC. Under Article 3, paragraph 1, of the Protocol, the categories of “prospective members” of an ECG are as follows:

The categories of “prospective members” of an EGTC are as follows:


By “bodies governed by public law”, the Regulation means not only bodies actually regulated by domestic public law, but also any private law body:

“(a) established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;

(b) having legal personality; and

(c) financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law”[9].

In fact, in many cases the EGTCs that have been formed consist only of local authorities. This is true of Ister-Granum, Karst-Bodva, Amphictyonie, Strasbourg-Ortenau, Zas-net (a Spanish-Portuguese EGTC), and UTTS (local authorities of Hungary, Slovakia and Romania). Associations and universities sometimes participate, as in the case of the Duero-Duro EGTC (Spanish-Portuguese).

In the composition of some EGTCs one also finds:

-       several distinct administrative levels: Galicia-Northern Portugal, Grande Région (the only managing authority of a transfrontier programme);

-       the regional level only: Pyrenees-Mediterranean, Archimed (Sicily-Balearics-Larnaka);

-       several administrative levels, including a State and an Autonomous Community: Hospital de la Cerdanya;

-       several administrative levels, including the States concerned: Eurométropole, Flanders-Côte d’Opale.

Most EGTCs that have been formed link partners of the same administrative level and engage in territorial co-operation activities without any financial contribution from the European Union.

The personal scope of the Protocol is a little narrower than that of the Regulation in that it does not allow associations of regional or local authorities to be part of an ECG. In addition, Article 16 of the Protocol requires future States Parties to designate the categories of “prospective members” they intend to exclude from the scope of the Protocol. A State that avails itself of this facility leaves these categories of legal person only one possibility: to become a member of an EGTC.


8.         Respective territorial scope of the legal instruments on the ECG and the EGTC. The territorial scope of Protocol No. 3 corresponds in theory to the territories of all the Council of Europe member States, if all of them ratify the Protocol. An ECG may include territorial communities or authorities of a State that is not a Party to the Protocol, on the following conditions[10]:

An EGTC may be formed only on European Union territory (Regulation, Article 1.1), between “prospective members” (Article 4) “located on the territory of at least two Member States” of the Union (Article 3.2). As the legal basis for Regulation No. 1082 is the provision that has become Article 175, paragraph 3, of the Treaty on the functioning of the European Union, it is not possible to extend its application to entities belonging to non-Member States. However, “where the legislation of a third country or agreements between Member States and third countries so allow” (Preamble, paragraph 16), territorial entities of those countries may take part in the formation of, or join, an EGTC, if the other members of the grouping are within the territory of at least two Member States of the Union and if the future grouping has its registered office within the territory of one of them.

Currently, two EGTCs in the process of formation have “prospective members” under the authority of third States (Croatia and Ukraine).

9.         Respective aims of the ECG and EGTC. The purpose of an EGTC is to facilitate and promote “territorial co-operation”, in other words, transfrontier co-operation, interregional co-operation (called “interterritorial” in the Council of Europe) and transnational co-operation (involving national authorities at the level of vast trans-State areas)[11] among its members “with the exclusive aim of strengthening economic and social cohesion” (Regulation, Article 1.2).

The aim of an ECG is described more broadly: “to promote, support and develop, for the benefit of populations, transfrontier and interterritorial co-operation between its members in their common areas of competence and in keeping with the competences established under the national law of the States concerned” (Protocol, Article 1.2). This encompasses the objective which the Regulation assigns to EGTCs.


10.      Respective legal personality and capacity of the ECG and EGTC.  Both have legal personality. Neither instrument states whether these legal persons are governed by European Union law, international law or the domestic law of the State in which a grouping has its statutory headquarters. However, Article 2, paragraph 1, of the Regulation states: “Where it is necessary under Community or international private law to establish the choice of law which governs an EGTC's acts, an EGTC shall be treated as an entity of the Member State where it has its registered office”.

In each Member State of the Community, an EGTC has the most extensive legal capacity awarded to legal persons under national law (Regulation, Article 1.4). An ECG has only “the most extensive legal capacity accorded to legal persons under that State’s national law” (Protocol, Article 2.2). The legal capacity of an ECG is therefore not automatically the most extensive in each State Party, as is the case with the capacity of an EGTC. The wish to accord the most extensive capacity possible to an ECG therefore requires choosing as the law applicable to the grouping that of the State that accords its legal persons the most extensive legal capacity.

The Protocol (Article 2.5) and the Regulation (Article 1.4) enumerate non-exhaustively elements of the capacity of the grouping whose status they regulate. The contractual capacity of the EGTC is implied by the Regulation.

11.      Law applicable respectively to the ECG and the EGTC. An ECG is governed by the law of the State in which it has its headquarters (Protocol, Article 2.1).

Article 16.2 includes in the scope of the Protocol autonomous public communities or authorities vested with their own legislative power, which implies that the legislation of such entities can be taken into consideration in determining the content of the law applicable to an ECG in the State in which it is established.

The explanatory report states in its commentary on Article 5 that “the law applicable to all issues to be included in the statutes may not always be the law of the state in which the ECG has its headquarters”. It should be added that this is subject to the condition that the Protocol allows this, by derogation from the principle of the law of the headquarters State stated in Article 2, paragraph 1.

Article 2, paragraph 3, states that the law of the headquarters State:


The explanatory report to the Protocol interprets Article 2 as allowing States Parties to derogate from the application of the law of the headquarters State in a number of situations in order to make their national law or that of other States applicable. In fact, provisions adopted by States under Part II of the Protocol cannot derogate from the principle of the law of the headquarters State, but only from the legal rules of that State which are normally applicable to the type or types of corporate entities to which ECGs may belong. The implementing measures which States are required to take should concern only those ECGs that have their headquarters in its territory, except on those points with respect to which the Protocol provides for or permits application of the law of that State to ECGs governed by the law of other States (in which those ECGs have their headquarters).

As for EGTCs, they are regulated (Regulation, Article 2):

The Regulation also states that “where a Member State comprises several territorial entities which have their own rules of applicable law”, the law of the State in which the EGTC has its registered office “include[s] the law of those entities, taking into account the constitutional structure of the Member State concerned” (Article 2.2).

12.      Budgets of an ECG and an EGTC. The Protocol simply states that the ECG “shall have the right to its own budget and the power to implement it” (Article 2.4); and that the statutes must contain rules on “budgets and financing”, bearing in mind that these statutory provisions must be “in conformity with the applicable law” (Article 5.3), in other words, essentially with the law of the headquarters State.

Article 11 of the Regulation is more precise. It provide as follows:

“1. An EGTC shall establish an annual budget which shall be adopted by the assembly, containing, in particular, a component on running costs and, if necessary, an operational component.

2. The preparation of its accounts including, where required, the accompanying annual report, and the auditing and publication of those accounts, shall be governed … by [the laws of the Member State in which the EGTC has its registered office].”

The members of the grouping may state in the statutes “the applicable accounting and budgetary rules, including on financial issues, of each of the members of the EGTC with respect to it” (Article 9.2(e)).


13.      Procedures for establishing an ECG or an EGTC. The Protocol simply requires that “before concluding an agreement to found an ECG or before joining an ECG, the territorial communities or authorities shall, as appropriate, inform, notify or obtain authorisation from their national authorities regarding this intention”, in other words, if national legislation so provides (Articles 4.4)[12]. It adds that “authorisation may be refused if membership of the ECG would violate this Protocol or provisions of national law, including the powers and responsibilities of prospective members, or if membership is not justified for reasons of public interest or of public policy of the Party concerned[13]. In such a case, the Party shall give a statement of its reasons for withholding approval” (Article 4.5).

The Protocol requires prospective members of an ECG to submit to the State to which they are subject proof “that the necessary procedures or formalities required by the national law applicable to them have been respected. This documentation shall be appended to the agreement” establishing the ECG (Article 4.2).

It should also be observed that:

“Decisions and acts of territorial communities or authorities and other public and private law entities [implied: that are part of the ECG] shall be subject to the supervision and administrative and judicial review of the legality of acts of territorial communities or authorities and of other public law entities in the forms required in the States under whose jurisdiction the said authorities fall” (Article 11.3)[14].

The decisions and acts referred to in this provision are in particular those concerning the establishment of an ECG, the joining of an ECG and withdrawal from an ECG.

Article 4 of Regulation 1082/2006 concerns the procedure for establishing an EGTC and, in particular, approval by the State of the decision of a “prospective member” to participate in the establishment of a grouping and the drafting of the statutes. Each prospective member is required to notify the Member State to which it belongs of its intention to participate in an EGTC. It must submit to it a copy of the draft convention and/or statutes. The Member State approves the prospective member's participation in the EGTC unless it considers that such participation is not in conformity with the Regulation or national law, including the prospective member's powers and duties, or that such participation is not justified for reasons of public interest or public policy of that Member State. In this case, the Member State gives reasons for withholding approval. If it approves, it then agrees on the constitution establishing the EGTC and its statutes, “ensuring consistency with the approval of the Member State”. The same procedure is applicable to any amendment of the constitution establishing the grouping and any amendment of the statutes which results in a change to the constituent convention.


14.      Agreement or convention establishing an ECG or an EGTC. An ECG or an EGTC must be established by the conclusion of a contract between all their “prospective members” (Protocol, Article 4.1; Regulation, Article 8.1).The Protocol states that the agreement must be concluded in writing (Article 4.1), in the languages of the members and of the headquarters State (Article 4.9), and must specify “in addition to the list of members, the name of the ECG, the address of its headquarters, the duration, object and tasks of the ECG, as well as its geographical scope”; the name of an ECG whose members have limited liability shall include the word “limited” (Article 4.3).

The Regulation requires the constituent constitution of an EGTC to specify the name of the grouping and its registered office; the specific objective and tasks of the EGTC, its duration and the conditions governing its dissolution; the extent of the territory in which the EGTC may execute its tasks; the list of its members; the law applicable to the interpretation and enforcement of the convention, which is the law of the Member State in which the EGTC has its registered office; appropriate arrangements for mutual recognition[15], including for the purposes of financial control; and the procedures for amending the convention, which must comply with those followed for the conclusion of the initial convention (Article 8.2).

The Protocol is a little less demanding than the Regulation, but it should be emphasised that the statutes of an ECG are an integral part of the agreement establishing it (Protocol 5.1).

15.          Duration of an ECG and an EGTC and conditions governing their dissolution. The Protocol provides that an ECG is established for a limited or unlimited period of time to be specified in the agreement and the statutes; and that it is “wound up ipso facto when the period for which it was established has expired or if the territorial communities or authorities cease to control the majority of voting rights. It may also be wound up by a unanimous decision of its members” (Article 8).

The Regulation is far less precise: it provides that the constituent convention of an EGTC must specify its duration and the conditions governing its dissolution (see 14).

Such dissolution, on the date specified or before that, must not be confused with disciplinary dissolution by a court or another supervisory body (see 30).

16.         Respective organs of an ECG and an EGTC. The Protocol does not list any organs that an ECG is required to have. It simply requires the statutes of the grouping to establish rules on “organs and their tasks” (Article 5.3). National arrangements for implementation of the Protocol could, therefore, make the director of the grouping an organ, acting on behalf of the ECG, or an administrative officer with no capacity to commit the grouping in relation to third parties.


Under Article 10 of the Regulation, an EGTC has at least the following organs: an assembly made up of representatives of its members and a director, who represents the EGTC and acts on its behalf. The statutes may provide for additional organs with clearly defined powers. It will be noticed that the director is considered an organ of the grouping.

Article 3.3 of the Protocol requires that “territorial communities or authorities of the Parties shall have the majority of voting rights in the ECG”. It therefore allows the rights of members in an ECG to be distributed in such a way that the representatives of territorial communities or authorities have the majority of voting rights on the managing bodies of the grouping. The Regulation says nothing on this matter.

For the respective rights of a grouping and its organs, see 23 and 24.

17.         Respective statutes of an ECG and an EGTC. The statutes of an ECG and an EGTC must be unanimously adopted by the members of the grouping (Protocol, Article 5.1, implicitly; Regulation, Article 9.1).

The statutes of an ECG must “be written in the language(s) of the State where the ECG has its headquarters and in the language(s) of the member(s), all versions being equally authentic. They may specify which language or language(s) is(are) to be considered the working language(s)” (Article 5.2). In addition to the mandatory provisions of the constituent agreement – name, members, headquarters, duration, object and tasks, geographical scope – the statutes must contain “rules on membership, withdrawal and dissolution of the ECG, including the legal consequences, as well as on operations, organs and their tasks, staffing, budgets and financing, liability, accountability and transparency of the ECG, without prejudice to the provisions of this Protocol and in conformity with the applicable law[16]” (Article 5.3). This list is not exhaustive.

The statutes of an EGTC must contain, as a minimum, all the provisions of the constituent convention together with the following:

(a) the operating provisions of the EGTC's organs and their competences, as well as the number of representatives of the members in the relevant organs;

(b) the decision-making procedures of the EGTC;

(c) the working language or languages;

(d) the arrangements for its functioning, notably concerning staff management, recruitment procedures and the nature of staff contracts;

(e) the arrangements for members' financial contributions and the applicable accounting and budgetary rules, including on financial issues, of each of the members of the EGTC in relation to it;


(f) the arrangements for members' liability in accordance with Article 12(2);

(g) the authorities responsible for the appointment of independent external auditors; and

(h) the procedures for amending the statute.

18.      Registration and publication of the statutes and constituent agreement. Under Article 4.7 of the Protocol, the constituent agreement of an ECG is registered or published in the State where the grouping has its headquarters, as well as in all States to which its members belong, in accordance with the national law applicable. The statutes are an integral part of the agreement and must therefore be registered or published with it.

Article 5.1 of the Regulation requires the same in relation to the statutes of an EGTC “in accordance with the applicable national law in the Member State where the EGTC concerned has its registered office”; it states that “the EGTC shall acquire legal personality on the day of registration or publication, whichever occurs first” and simply requires the members of the new grouping to “inform the Member States concerned”.

It can be inferred from Articles 12.2 and 16.2 of the Regulation that the constituent convention of an EGTC must also be registered or published.

19.      Respective tasks of an ECG and an EGTC. The members of an ECG assign to it the tasks listed in the constituent agreement and statutes (Protocol, Articles 4.2, 5.3 and 7.1). The members of an EGTC assign to it the tasks set out in the constituent convention (Regulation, Article 7.1).

An EGTC can only perform “territorial co-operation” tasks“ designed to “strengthen economic and social cohesion” (Regulation, Article 7.2).

Four types of task may be assigned to EGTCs:

-       management of European territorial co-operation programmes;

-       management of territorial co-operation projects jointly funded by the European Union in the framework of those projects;

-       specific territorial co-operation actions funded by the EU;

-       specific territorial co-operation actions with no EU funding.

In this case, the States concerned may restrict such tasks to those covering co-operation activities referred to in Article 6 of Regulation No. 1080/2006 of 5 July 2006 on the European Regional Development Fund (ERDF)[17].


However, in principle, an EGTC is not limited to co-operation activities coming under the “territorial co-operation” objective referred to in Article 6 of the Regulation. It may also implement interregional co-operation priorities under the programmes of the “Convergence” and “Competitiveness and Employment” objectives or under European Social Fund programmes. Such programmes can include specific priorities in “interregional” (ERDF/ESF) and “transnational” co-operation”[18].

An ECG, on the other hand, may take on any task “compatible” with the competences of the members under their respective national law (Protocol, Article 7.1). As the explanatory report emphasises, this wording provides for maximum flexibility as regards the reasons for setting up an ECG, including the tasks for which Regulation 1082/2006 established the EGTC .

20.      Harmony of the respective substantive competences of the grouping and its members. The “prospective members” of an EGTC may only take part in the establishment of a grouping, or join it, “within the limits of their [substantive] competences under national law” (Regulation 3.1).The same is true of the prospective members of an ECG, since the transfrontier or interterritorial co-operation pursued by such a grouping must take place within the common areas of competence of its members (Protocol, Article 1.2).

According to Article 7 of the Regulation, however, the tasks of an EGTC must “all fall within the competence of every member under its national law”. Taken literally, this excludes the participation of a prospective member lacking competence for one of the grouping’s tasks. This would preclude the establishment of an EGTC on an “à la carte” basis, grouping together members with specific competences around the same general objective or area of competence[19].

In contrast, the broader formulation of Article 7 of the Protocol (“tasks ... in accordance with the competences of the members under their respective national law”) allows an ECG to be established even if the area of competence of every member does not include all the issues assigned to the grouping.

In this context, it should be noted that the public law members of an ECG do not lose certain of their competences as a result of the establishment of the grouping[20].


21.      Exclusion of certain powers.The tasks assigned to an ECG do not involve the exercise of regulatory powers. An ECG is not “empowered to take measures which might affect the rights and freedoms of individuals, or to impose levies of a fiscal nature” (Protocol Article 7.3), nor may it exercise competences that territorial communities or authorities exercise “as agents of the State to which they belong, except where duly authorised” (Article 7.4).

Article 7.4 of the Regulation prohibits the members of an EGTC from giving the grouping tasks that concern “the exercise of powers conferred by public law or of duties whose object is to safeguard the general interests of the State or of other public authorities, such as police and regulatory powers, justice and foreign policy”.

The very broad wording of the Regulation results in a prohibition on all EGTCs from exercising any public prerogative whatsoever[21]. The result is that an EGTC cannot be a public law legal person since it is deprived of that which fundamentally distinguishes a public law legal person from a private law legal person. Conversely, the more flexible wording of the Protocol does not prohibit the establishment of an ECG as a public law legal person in the various forms provided for by national legislations, but the grouping will have neither regulatory power, nor administrative police power, nor fiscal power.

22.      Possibility of delegating a task to a member of an ECG or an EGTC. The Protocol does not refer to the possibility of an ECG appointing one of its members to act on its behalf. However, “The members of an EGTC may decide by unanimity to empower one of the members to execute its tasks” (Regulation, Article 7.5). What should probably be understood here is ‘to execute one of its tasks”.

23.      Liability of the grouping with regard to its members or third parties. An ECG is liable to its members for any breach of the “law” to which it may be subject (Protocol, Article 9.2). The law to which it is subject is not restricted to the law of the headquarters State, but also includes the Protocol, the statutes of the grouping, and the law of the States to which its members belong, insofar as they are applicable to it. There is no comparable arrangement in the Regulation on EGTCs.

Article 9.1 of the Protocol also sets out the principle according to which the ECG is liable with regard to third parties for its acts, even if those acts do not fall within its tasks; such liability may only be incurred by its organs. Article 10.3 of the Regulation provides that an EGTC is liable for the acts of its organs as regards third parties, with the same conditions applying (Regulation, Article 10.3).


24.      Liability of organs to the grouping. Under Article 9.3 of the Protocol, the organs of the ECG shall be liable to the ECG for any breach of law they have committed in the exercise of their functions[22].

From 23 and 24 above, it appears that the liability rules applying to the grouping are much more detailed and comprehensive in the Protocol than in the Regulation.

25.      Debts of the grouping.      There is some confusion in Article 9.1 of the Protocol between the rules on civil liability and liability for debts. With regard to debts, this provision provides that the ECG is liable for them, whatever their nature. The same is true of the EGTC under Article 12.2 of the Regulation.

“As regards liquidation, insolvency, cessation of payments and similar procedures, an EGTC shall be governed by the laws of the Member State where it has its registered office, unless otherwise provided” (Regulation, Article 12.1), as regards possible funding from the Structural and/or Cohesion Funds allocated to the EGTC (see 26 and 27). As for the Protocol, it simply states generally that an ECG is “governed by the law of the Party …  in which it has its headquarters” (Article 2.1).

26.      Subsidiary pecuniary liability of members of a grouping. The pecuniary liability of an ECG or an EGTC does not exclude that of its members, who retain subsidiary liability in relations with the grouping’s creditors. The members of an ECG are jointly liable for its debts if it defaults, under Article 9.1 of the Protocol; the “joint” nature of the obligation means that each member of the grouping is liable only for its share, this share probably being limited to the amount of each member’s contribution. Members of an EGTC are made explicitly liable for payment of the grouping’s debts in proportion to their contribution, at least in principle (Regulation, Article 12.2, paragraph 2).

It is possible to exclude the liability of members of the grouping or to limit it to less than their contribution, provided that the law of the State to which one of its members belongs restricts the liability of the type of national legal person to which that member belongs. In such cases, the other members of the grouping may also limit their liability in the statutes (Protocol, Article 9.4; Regulation, Article 12.2, paragraph 3).


If such limited liability is provided for in the statutes, there are at least two consequences:

Conversely, the “prospective members” of an EGTC may provide in the statutes that they will be liable, “after they have ceased to be members of an EGTC, for obligations arising out of activities of the EGTC during their membership” (Regulation, Article 12.2, paragraph 4). Prospective members of an ECG have the same possibility, provided there is no contrary provision in the Protocol or in the legislation of the potential headquarters State.

27.      Possible liability of States to which members of the grouping belong. Under Article 12.3 of the Regulation:

“Without prejudice to the financial responsibility of Member States in relation to any funding from the Structural and/or Cohesion Funds provided to an EGTC, no financial liability shall arise for Member States on account of this Regulation in relation to an EGTC of which they are not a member.”

The Protocol contains no equivalent provision, but the rule is self-evident: States that are not members of a grouping are third parties in relation to its activities. Article 1.2 of the 1st Additional Protocol provides in this regard: “A transfrontier co-operation agreement shall entail only the responsibilities of the territorial communities or authorities which have concluded it”.

28.      Settlement of disputes involving an ECG or an EGTC. Article 10 of the Protocol provides as follows:

            “1. In the event of a dispute between the ECG and its members, the competent courts shall be those of the State in which the ECG has its headquarters.

            2. In the event of a dispute between the ECG and a third party, the competent courts shall be those of the State in which the third party effectively resides or, in the case of a legal person, the State in which its seat or headquarters is located, as long as these States are member States of the Council of Europe. “


Conversely, the system put in place by Article 15.2 of the Regulation generally gives jurisdiction to the courts of the State in which an EGTC has its registered office for the resolution of disputes involving the grouping, without prejudice to the application of Community law on jurisdiction[23].

Article 10.2 of the Protocol is not compatible with Article 15.2 of Regulation No. 1082/2006. The fact of the third party being effectively resident or having a seat of activity outside the State in which the ECG has its headquarters automatically precludes that State from having jurisdiction, although that is the rule for the settlement of disputes to which an EGTC is a party. To make this provision compatible with the system of the Regulation, the statutes would have to include a clause on cumulative or alternative jurisdiction, conferring jurisdiction both on the courts of the State in which the grouping has its headquarters and on those of the state in which the third party has his/her effective residence or a seat of activity.

Moreover, there is a gap in Article 10.2 of the Protocol insofar as it provides no means of determining which courts will have jurisdiction when the third party is resident or carries on activities in a State which is not a member of the Council of Europe. This is why the second provision of Article 10.3 of the Protocol is intended to complement Article 10.2 by requiring the prior conclusion of an arbitration agreement where the “third party’s residence, seat or headquarters is not located in the territory of a member State of the Council of Europe”. Article 10.3 of the Protocol allows the ECG, the territorial communities and authorities and legal persons of which it is composed and third parties to conclude an arbitration agreement in advance, notwithstanding the existing judicial remedies[24].

Article 10.4 of the Protocol concerns a possibility that is not mentioned in the Regulation. This is the delegation of tasks or the grant of a specific mandate to the ECG by one or more territorial communities or authorities that are members of it. If a dispute arises from such activities, third parties who consider themselves wronged may apply to the courts of the State having jurisdiction over the communities or authorities on behalf of which the ECG acted.

29.         Review of the lawfulness of implementation of the decisions of a grouping by its members. “The ECG shall adopt decisions and ensure their implementation, in respect and for the benefit of individual persons or legal entities subject to the jurisdiction of the States to which its members belong. Members shall adopt or facilitate all necessary measures falling within their competences in order to ensure that the ECG’s decisions are implemented” (Protocol, Article 7.2). Review of the lawfulness of such executive decisions is provided for by the Protocol in Article 11.2, which, as we have seen, applies equally to decisions to participate in the establishment of a grouping and to decisions to join or withdraw from one (13). With regard to


executive measures taken by the members of the grouping, this provision simply reaffirms the rule contained in Article 6 of the 1st Additional Protocol[25].

As for the Regulation, Article 15.3 guarantees that the establishment of an EGTC will not affect the use of existing legal remedies under the legislation applicable to the third parties who consider themselves wronged. It states more precisely that aggrieved third parties maintain their right to exercise “their national constitutional rights of appeal against public bodies which are members of an EGTC in respect of:

(a)      administrative decisions in respect of activities which are being carried out by the EGTC[26];

(b)      access to services in their own language; and

          (c)      access to information.

In these cases the competent courts shall be those of the Member State under whose constitution the rights of appeal arise” (Article 15.3)

Article 10.5 of the Protocol, which also guarantees citizens access to information and services in their own language, is more general in scope than Article 15.3 of the Regulation: it provides that “In any case the rights of individuals and legal persons shall include the right to appeal before all competent organs and courts ...”. It may therefore be interpreted as safeguarding all rights of appeal, both administrative and judicial, that could be used by third parties against both the ECG and its members under any existing legislation.

It may be concluded from this comparison (28 and 29) that the scope of Article 10.5 of the Protocol implicitly includes that of Article 15.3 of the Regulation and therefore that the Protocol protects the rights of third parties more than the Regulation.

30.      Review of lawfulness of activities of the grouping.    The first two paragraphs of Article 11 of the Protocol, entitled “Supervision, administrative and judicial review”, provide as follows:

     “1.   Decisions and acts of the ECG shall be subject to the same supervision and administrative and judicial review of the legality of acts of territorial communities or authorities as those required in the State in which the ECG has its headquarters.

     2      The ECG shall comply with information requests made by the authorities of the States to which the territorial communities or authorities belong. The supervisory authorities of the Parties shall endeavour to establish means of appropriate co-ordination and information.”


The commentary on these provisions in the explanatory report states that, in fact, the supervision envisaged is of the “same type” as that organised by the legislation of the State in which the ECG is established, not with respect to territorial communities or authorities, but with respect to “legal persons” established under the law of that State.

Whatever the interpretation – all legal persons subject to the law of the headquarters State or only territorial entities – the reference to this type of supervision does not allow us to determine the rules of supervision and review applicable if an ECG includes members from different categories of territorial communities or authorities[27]. It must therefore be considered that the only useful consequence of Article 11.1 is to make the law of the headquarters State the law applicable to supervision of the grouping. Article 6.2 of the 1st Additional Protocol says much the same thing:

Measures taken by a transfrontier co-operation body set up under an agreement shall be subject to the supervision provided for in the law of the State in which the body's headquarters are located, keeping in mind, in addition, the interests of territorial communities or authorities of other States.”[28]

The review of lawfulness referred to here is simply that provided by the legislation of the headquarters State applicable to the type of legal person to which the ECG belongs, in accordance with Article 2.3 of the Protocol, without prejudice to specific provisions of the Protocol and its national implementing arrangements (see 11).

The Protocol contains a derogation provision of this kind concerning review of compliance with the competence assigned to the ECG. This is Article 11.5, which, “at the request of a competent authority with a legitimate interest”, allows the competent court or authority in the State where the ECG has its headquarters to review whether or not the activities of the grouping fall outside the tasks entrusted to it. The competent court or authority may order the ECG to be wound up if it finds that it is no longer complying with these requirements; it may allow the ECG time to rectify the situation. If the ECG fails to do so within the time allowed, it may be declared wound up.

With regard to the activities of an EGTC, Regulation No. 1082/2006 does not  include any of the usual arrangements for administrative review of the acts of decentralised public law entities. This can probably be seen as a further indication of the private law character given to the legal personality of the EGTC (see 21). The European Union lawmakers have only made provision for financial control (see 32). However, Article 14 of the Regulation adds an extremely limited review of lawfulness, concerning exclusively the competence of the EGTC. It makes provision for dissolution of the grouping under a procedure identical to that contained in Article 11.5 of the Protocol, where the grouping exceeds its


competences, “in particular [where] the EGTC is acting outside the confines of the tasks laid down in Article 7”. The competent court or authority is required to inform all the States to which members of the grouping belong of any request for its dissolution.

31.      Review of compliance of a grouping’s activities with public policy and the public interest.Article 11.4 of the Protocol organises a special review in defence of the public interest and public policy. It provides for “the competent authority or body” of any member State to review compliance with:

To put it simply, if roughly, it may be supposed here that the measures to maintain public policy are a form of review of expediency similar to one that would sanction a measure deemed contrary to the public interest.

This review of expediency or compliance with public policy makes it possible to prohibit the activity of the ECG in the territory of the State concerned or to demand the withdrawal of the members of the grouping that belong to that State, “unless [the ECG] ceases the action in question”. However, “Such prohibitions shall not constitute a means of arbitrary or disguised restriction on co-operation between the members. Review of the competent authority’s or body’s decision by a judicial authority shall be possible” (Protocol, Article 11.4).

Article 13 of the Regulation organises an identical review of EGTCs which may result in prohibiting the grouping from acting in national territory or demanding the withdrawal of members falling within the jurisdiction of that State. It is the courts of the Member State whose decision is challenged that are competent to review the lawfulness of the decision of the review body (Article 15.2, paragraph 2).

32.      Financial audit of ECGs and EGTCs. The two audit systems are very similar.

Under Article 12 of the Protocol, “the management and budget implementation of the ECG shall be subject to financial audit in accordance with the national law of the Party in which it has its headquarters. ... Any other State implicated either by its direct participation in the ECG or through the participation of its territorial communities or authorities or other legal persons ... may, only on its territory and in accordance with the national law applicable, carry out a financial audit of the ECG. The ECG and the States of the members shall be informed in advance”.


Auditing of the management of public funds is the main form of review provided for in the case of EGTCs, which is explained by the fact that Regulation No. 1082/2006 was drawn up in the framework of management of the European Union Structural Funds[29]. It is carried out by the competent authorities of the Member State in which the EGTC has its registered office. Where required under the national legislation of the other Member States concerned, the authorities of the Member State where an EGTC has its registered office make arrangements for the appropriate authorities in the other Member States concerned to carry out controls on their territory for those acts of the EGTC which are performed in those Member States and to exchange all appropriate information. All controls are carried out according to internationally accepted audit standards. Furthermore, where the tasks include actions co-financed by the Community, the relevant legislation concerning the control of funds provided by the Community applies.

* * *

General comparison of the Protocol and the Regulation

33.     Protocol No. 3 has a much wider and more varied substantive scope than the Regulation on EGTCs. The object that can be assigned to an ECG is far broader; the same is true of the tasks that can be entrusted to it.

In theory, the territorial scope of the Protocol corresponds to the territories of the forty-seven Council of Europe member states, while the Regulation is applicable only in the territory of the Member States of the European Union. The Protocol therefore enables ECGs to be established without the participation of EU States and/or territorial communities belonging to those States.

34.     Generally speaking, it can be considered that the wording of Protocol No. 3 reflects better than Regulation 1082 the public law nature of the territorial communities or authorities that constitute the great majority of the members of a transfrontier or interterritorial grouping. It also gives greater emphasis to the predominant role that should be accorded to the representatives of those territorial entities by giving them the majority of the votes in the organs of such a grouping. Conversely, the Regulation does not specify the legal situation of the territorial communities that are members of an EGTC in relation to other participants, in particular in relation to a State that is also a member.

35.     The Protocol offers the possibility of establishing an ECG either as a private law legal person or as a public law legal person in the various forms provided for in the domestic implementing legislation. The Regulation does not specify whether or not an EGTC can be a public law legal person, but the prohibition on conferring public powers on it indicates unambiguously that it can only be a private law legal person or a fictitious public law legal person.


36.     Protocol No. 3 can satisfy both States that are seeking to acquire legislation on transfrontier and interterritorial co-operation that is as comprehensive as possible and those that already have a well-developed set of rules applicable to the matter, but nonetheless agree to introduce this additional instrument into their legal system. On the one hand, the Protocol contains the basic rules on the status of ECGs, binding on all contracting States and compatible in every respect with the rules governing EGTCs[30], and therefore also with the national legislation of the Member States of the Union that were involved in drawing up Regulation No. 1082. On the other hand, the Appendix to the Protocol will provide more comprehensive rules which could form, supplement or replace the domestic law applicable to ECGs in the States that wish to have specific laws to regulate such groupings in their territory.

37.     On the whole, the Protocol is extremely close to Regulation 1082. This will certainly facilitate its adoption by Member States of the European Union, but to some extent limits its interest to them. Its interest for other States which are members of the Council of Europe is obvious. The similarity between the system established by the Protocol and the EGTC system offers these other States the twofold advantage of being able to set up ECGs with a status identical to that of the European Union EGTCs and, furthermore, not to be required to place them under the law of a Member State of the European Union, but under one of their own national legal systems.

38.     Territorial communities or authorities that wish to set up a new Euroregion or any other transfrontier or interterritorial body will find the directives needed for drafting the constituent agreement and statutes in Protocol No. 3 and in the rules in the Appendix that the States concerned have incorporated into their national legislation.

When founding members intend to establish an ECG which is or could simultaneously

be an EGTC, they will be able to use Protocol No. 3, which is entirely compatible with the provisions of Regulation No. 1082/2006; they will also be able to use the Appendix to the Protocol, but will also have to comply with the few provisions of the Regulation that are not reflected in the Protocol.

If, on the other hand, the founding members wish to depart from the “EGTC model” – whether to implement territorial co-operation programmes and projects co-financed by the European Union or for any other transfrontier or interterritorial co-operation action – the range of possibilities opened up to them by the Protocol will be wider in proportion to the number of alternatives offered in the appendix which the States they belong to have chosen to introduce into their legal systems.


In both cases, States Parties that already have their own legislative mechanism – or international agreement – on transfrontier and interterritorial co-operation will be able to use the normative basis provided by the Protocol combined with that mechanism.

39.         Advantages of various provisions of the Protocol.

40.         Advantages of the Appendix



[1] Doc. LR-CT (2004)15 of 12 July 2004.

[2] Doc. CDLR (2006)17 of 27 April 2006; text reproduced in Vers un droit commun de la coopération transfrontalière, Brussels, Bruylant, 2006, pp. 213-348.

[3] Doc. LR-CT (2007)8 of 18 June 2007.

[4] For further details on developments during the first two stages, see Y. Lejeune, “L’apport du Conseil de l’Europe à l’élaboration d’un droit commun de la coopération transfrontalière”, in Vers un droit commun de la coopération transfrontalière, pp. 119-146, here pp. 131-140.

[5] Euroregions are structures for co-operation between regional or local authorities or groupings of regional or local authorities which are concerned with all neighbourhood issues falling within the competence of the partners. When they confine themselves to studying these issues and suggesting the adoption of co-ordinated measures, they are simply general consultation bodies, sometimes lacking legal personality. When, on the other hand, they are able to contribute to regional development operationally, they are practising transfrontier co-operation, have their own legal personality and are then required to devise, manage and implement integrated development programmes under the supervision of the States and, possibly, with financial support from the European Union Structural Funds.

[6] See Article 18 of the Regulation.

[7] See the draft conclusions of the Committee of the Regions on the consultation on revision of Regulation No. 1082.

[8] To which Article 3, paragraph 1(d), of Regulation No. 1082/2006 refers. See below.

[9] Directive 2004/18/EC on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts, Article 1, paragraph 9 (2). Such bodies are therefore “contracting authorities” within the meaning of the Directive, just like States, their public authorities and public bodies.

[10] Protocol No. 3, Article 3.2.

[11] “European territorial co-operation” is, at least for the period 2007-2013, one of the three objectives of the European Union cohesion policy, pursued with the help of the Structural Funds and the Cohesion Fund (Council Regulation No. 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (OJEU L210 of 31 July 2006, p. 25), Preamble, paragraphs 4 and 9.

[12] States whose legislation does not contain, or does not contain in every case, one or other of the procedures referred to in this provision may officially declare this under Article 4.6 of the Protocol.

[13] This should be understood to mean “where the Party concerned considers participation to be contrary to public interest or public policy”.

[14] The Madrid Outline Convention had already provided that “Agreements and arrangements shall be concluded with due regard ... to any rules of control or supervision to which territorial communities or authorities may be subject” (Article 3.4).

[15] The “mutual recognition” referred to in Article 8.2(f) of the Regulation is an obscure concept. Does it refer to the legal capacity of the EGTC in States other than the one in which the registered office is situated?

[16] The law applicable to the items that must appear in the statutes is usually the law of the headquarters State. It may be the law of another State to which certain members of the ECG belong, where the Protocol allows or requires this.

[17] OJEU L210 of 31 July 2006, p. 1, here p. 5.

[18] See the proceedings of the information and discussion day on the European Grouping of Territorial Co-operation, Metz, 16 November 2006, p. 19, available on the Mission opérationnelle transfrontalière website <http://www.espaces-transfrontaliers.org>.

[19] Notwithstanding the restrictive wording of Article 7 of the Regulation, some consider that the States to which the prospective members of an EGTC belong could interpret this broadly in order to allow the establishment of a grouping whose members have only “adjacent” competences (Proceedings of the information and discussion day on the European Grouping of Territorial Co-operation, Metz, 16 November 2006, p. 19, available on the Mission opérationnelle transfrontalière website <http://www.espaces-transfrontaliers.org>. Compare N. Levrat (ed.), The European Grouping of Territorial Co-operation — EGTC —, p. 145.

[20] See Article 15, paragraph 2, of the preliminary draft uniform law: doc. CDLR (2006)17 of 27 April 2006.

[21] This is confirmed by paragraph 13 of the Preamble to the Regulation: “the powers exercised by regional and local authorities as public authorities … cannot be the subject of a convention” establishing an EGTC.

[22] Here, too, it must be assumed that this does not only mean the law of the headquarters State combined with the Protocol and the statutes of the grouping, but also the laws of the States to which the members belong insofar as they are applicable.

[23] Rules contained in Chapter II of Regulation No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJEU L12 of 16 January 2001, p.1). It is to enable application of this Regulation No. 44/2001 that Article 2.1, paragraph 2, of Regulation 1082/2006 provides “Where it is necessary under Community or international private law to establish the choice of law which governs an EGTC's acts, an EGTC shall be treated as an entity of the Member State where it has its registered office”.

[24] The Regulation does not provide this possibility.

[25] The 1st Additional Protocol provides that “Measures taken by territorial communities or authorities under a transfrontier co-operation agreement shall be subject to the same supervision as the law of each Contracting Party prescribes in respect of any measure taken by the territorial communities or authorities concluding the agreement” (Article 6.1).

[26] Since the EGTC cannot exercise “powers conferred by public law”, the “administrative decisions in respect of [its] activities” are not its own, but those of each of its members, which ensure implementation of the decisions of its organs.

[27] For example, where an ECG includes communes, départements and inter-communal bodies subject to different rules of supervision and review in the same State Party.

[28] Article 11.2 of Protocol No. 3 is very much inspired by the 2nd sentence of Article 6.2 of the 1st Additional Protocol: “The transfrontier co-operation body shall comply with information requests made by the authorities of the States to which the territorial communities or authorities belong. The supervisory authorities of the Contracting Parties shall endeavour to establish means of appropriate co-ordination and information”.

[29] See N. Levrat (ed.), The European Grouping of Territorial Co-operation: EGTC, — study conducted by the GEPE for the  Committee of the Regions, p. 116.

[30] “Compatible” does not mean “identical”. The norms contained in Part I of the Protocol offer much greater variety of choice than the Regulation, while making it possible to opt for a model virtually identical to that of the EGTC.