Title: Why lower courts refer to the ECJ?
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National courts and the European Court of Justice:
A public choice analysis of the preliminary reference procedure
										
					by

	George Tridimas		and		Takis Tridimas
	Reader in Public Policy			Professor of European Law
	School of Public Policy			Faculty of Law
	University of Ulster				University of Southampton
	e-mail: GTridimas@talk21.com		e-mail: ptt@soton.ac.uk

Abstract

The paper analyses the growth of references for preliminary rulings of the European Court of Justice as the equilibrium outcome of the optimising behaviour of litigants, who demand preliminary rulings, national courts, which are the gatekeepers of the process, and the European Court of Justice, which supplies the rulings. The observed pattern is attributed to economic and political factors, including intra-EC trade, the absence of a service charge in using the preliminary references system, the terms by which private litigants access the national courts, and the empowerment of national judges against their own national authorities brought about by the mechanism.

Key words: 	European Court of Justice, national courts, preliminary rulings, rational 		choice, principal-agent relation, judicial empowerment, spatial model

Journal of Economic Literature classification:
D72:	Economic models of political processes
D78:	Positive analysis of policy making and implementation
K33:	International law
K41:	Litigation process

Corresponding author:
George Tridimas, 
138 Hilmanton, 
Reading, 
RG6 4HJ, UK.
tel.: +44(0)1189868068

This Draft: 29 May 2002 

National courts and the European Court of Justice:
A public choice analysis of the preliminary reference procedure

I	Introduction

Legal integration in the European Community, the process of establishing a binding supranational legal system across the member states, has been the result of interactions between three sets of decision-makers, namely, litigants, national courts, and the European Court of Justice (ECJ). The evolution of Community law represents an extraordinary transformation of international treaties into a system of supra-national constitutional governance within which the member states have surrendered a substantial part of their sovereignty. What factors explain this historically unprecedented  development? What accounts for the success of the European Court of Justice in imposing this new legal order? Why have national courts accepted and enforce the rulings of the European Court of Justice as the “law of the land” often against opposition by the governments of the member states? What factors, if any, limit the ability of the ECJ to determine public policy in practice?

A fast-growing interdisciplinary literature has developed seeking to answer these questions. Legal scholarship typically focuses on the constitutional doctrine developed by the ECJ . It examines the relationship between members states and EC institutions and the effect of ECJ jurisprudence on the national legal orders, see Weiler (1999) and T. Tridimas (1999). Political science focuses on judicial behaviour and the relationship between the ECJ and national policy makers. Two opposing views have dominated this line of research. Intergovernmentalism (or neorationalism) emphasises the pre-eminent role of member states in the integration process. Broadly speaking, it views the ECJ as lacking the autonomy to act against the interests of its creators, particularly, those of the most powerful member states (Garrett, 1992 and 1995, Garrett and Weingast, 1993, Keohane and Hoffmann, 1991, Moravcsik, 1991, 1993 and 1995). On the contrary, neofunctionalism (or supranationalism) considers, arguably more persuasively, that the ECJ represents the interests of a developing transnational polity and has significant autonomous power which can be used to pursue a pro-integration agenda and rule against powerful national interests (Burley and Mattli, 1993, Stone Sweet and Sandholtz, 1997 and Stone Sweet and Brunell, 1997 and 1998a). Perspectives of rational behaviour have been hugely influential on both sides of this debate. Research has focused on the conflicting interests of the main players in the political-legal game, maximisation of benefits and choice under constraints.

Note, however, that the latter paper concedes that the ECJ may enjoy more autonomy than other writings in the intergovernmental tradition are prepared to accept.

For additional influential contributions using the calculus of political benefits and costs see Weiler (1991) and (1994), Burley and Mattli (1993), Mattli and Slaughter (1995) and (1998), Alter (1996), (1998) and (2000), Garrett et al. (1998) and Golub (1996).

F^ew ^contributions, however, ^have ^come ^from ^the ^public ^choice ^tradition, ^even ^though ^the ^application ^of ^the ^principles ^of ^optimising ^behaviour ^and ^equilibrium ^on ^political ^outcomes ^can ^offer ^many ^useful ^insights ^into ^this ^line ^of ^inquiry. The aim ^of ^this ^paper ^is ^to ^provide ^a ^systematic ^public ^choice ^perspective ^of ^the ^preliminary ^reference ^procedure. ^For ^this ^purpose, ^the ^process ^of ^legal ^integration ^is ^analysed ^as ^the ^equilibrium ^outcome ^of ^demand ^and ^supply ^factors ^originating ^from ^the ^interactions ^between ^private ^litigants, ^national ^courts, ^and ^the ^European ^Court ^of ^Justice, ^while ^each ^decision ^maker ^is ^modelled ^as ^pursuing ^its ^own ^interests ^subject ^to ^the ^relevant ^sets ^of ^constraints. ^The ^economic ^and ^political ^factors ^which ^emerge ^as ^the ^main ^determinants ^of ^the ^observed ^outcome ^are ^the ^level ^of ^economic ^activity ^affected ^by ^EC ^legislation, ^the ^cost ^incurred ^by ^private ^litigants ^in ^accessing ^and ^using ^the ^national ^legal ^system, ^the ^preferences ^of ^national ^courts ^and ^their ^ability ^to ^act ^upon ^those ^preferences, ^and ^the ^ability ^of ^the ^ECJ ^to ^act ^as ^an ^independent ^agent. ^After ^describing ^the ^functions ^of ^the ^European ^Court ^of ^Justice, ^Section ^II ^records ^the ^evolution ^of ^the ^preliminary ^reference ^system ^into ^a ^mechanism ^of ^legal ^integration. ^Section ^III ^applies ^the ^framework ^of ^rational ^choice ^to ^examine ^systematically ^the ^role ^of ^the ^private ^litigants, ^the ^national ^courts, ^and ^the ^ECJ ^in ^forming ^the ^demand ^and ^supply ^for ^supranational ^legal ^adjudication. ^Section ^IV ^employs ^spatial ^theory ^to ^investigate ^the ^range ^of ^discretionary ^powers ^of ^the ^ECJ ^upon ^the ^request ^of ^a ^national ^court ^for ^a ^ruling, ^a ^topic ^left ^unexplored ^by ^the ^existing ^literature. ^Section ^V ^contains ^concluding ^observations.

Vaubel (1995), who offers a short public choice account of the ECJ, is a partial exemption.

^II.	^The ^functions ^of ^the ^ECJ ^and ^the ^growth ^of ^preliminary ^rulings

^The ^Treaty ^of ^Rome ^did ^not ^provide ^for ^the ^establishment ^of ^a ^Supreme ^Court ^similar, ^for ^example, ^to ^that ^of ^the ^United ^States,  ^which ^would ^be ^competent ^to ^hear ^appeals ^against ^decisions ^of ^national ^courts. ^This ^is ^hardly ^surprising ^since ^the ^Community ^was ^not ^born ^as ^a ^federation ^but ^rather ^as ^a ^sui ^generis ^supra-national ^entity ^with ^an ^open-ended ^integrative ^potential. ^The ^authors ^of ^the ^Treaty, ^however, ^considered ^it ^imperative ^that ^there ^should ^be ^some ^mechanism ^to ^ensure ^the ^uniform ^application ^of ^Community ^law ^throughout ^the ^Member ^States. ^This ^is ^not ^only ^necessary ^to ^secure ^the ^rule ^of ^law ^and ^promote ^equal ^treatment ^among ^citizens ^but ^also ^makes good ^economic ^sense. ^Uniform ^interpretation ^of ^law ^reduces ^distortions ^of ^competition ^and ^promotes ^economic ^efficiency. 

This is illustrated by the following example given by Mancini and Keeling (1991). ^Suppose ^that ^there ^was ^no ^unifying ^jurisdiction ^having ^the ^final ^say ^on ^the ^interpretation ^of ^Community ^law. ^It ^might ^then ^be ^that ^the ^German ^courts ^decided ^that ^Article ^141 ^[ex.^119] ^EC, ^which ^prohibits ^discrimination ^on ^pay ^on ^grounds ^of ^sex, ^had ^direct ^effect ^and ^gave ^rise ^to ^rights ^for ^citizens ^but ^the ^courts ^of ^all ^other ^Member ^States ^decided ^that ^it ^did ^not. ^That ^would ^lead ^not ^only ^to ^unequal ^treatment ^of ^Community ^nationals ^but ^also ^put ^German ^employers ^in ^a ^unique ^competitive ^disadvantage.

^Such ^unifying ^jurisdiction ^is ^given ^to ^the ^ECJ ^by ^Article ^234 of the EU ^[previously ^177]. ^This ^article ^enables ^the ^ECJ, ^on ^the ^request ^of ^national ^courts, ^to ^provide ^rulings ^on ^the ^interpretation ^and ^validity ^of ^Community ^law. ^Article ^234(2) ^states ^that, ^where ^a ^question ^of ^Community ^law ^is ^raised ^before ^a ^national ^court ^or ^tribunal, ^that ^court ^or ^tribunal ^may, ^if ^it ^considers ^that ^a ^decision ^on ^the ^question ^is ^necessary ^to ^enable ^it ^to ^give ^judgment, ^request ^the ^ECJ ^to ^provide ^a ^ruling. ^Article ^234(3) ^provides ^that, ^where ^a ^question ^of ^Community ^law ^is ^raised ^before ^a ^national ^court ^against ^whose ^decision ^there ^is ^no ^judicial ^remedy, ^that ^court ^must ^bring ^the ^matter ^before ^the ^ECJ. ^Thus, ^Article ^234 ^draws ^a ^distinction ^between ^lower ^national ^courts, ^which ^have ^a ^discretion ^to ^make ^a ^reference, ^and ^national ^courts ^of ^final ^instance, ^which ^are ^under ^an ^obligation ^to ^refer. 

For an analysis of the preliminary reference procedure, see Hartley (1998), Craig and De Burca (1998) and Slaughter, Stone Sweet and Weiler (1998). Note that apart from Article 234 EC, Article 68 EC provides for a special preliminary reference procedure in relation to Title IV of Part Three of the Treaty concerning visas, asylum and immigration, which is concerned to courts of final instance.  Also, Article 35(1) TEU provides for a somewhat different procedure in relation to matters falling within the Third Pillar (Police and Judicial Co-operation in Criminal Matters). These procedures are beyond the scope of this paper.

^Article ^234 ^is ^the ^most ^important ^procedural ^rule ^of ^the ^Treaty. ^It ^facilitates ^dialogue ^between ^the ^national ^courts ^and ^the ^ECJ ^and ^provides ^the ^meeting ^point ^between ^Community ^and ^national ^law. ^It ^can ^be ^said ^that ^it ^serves ^three ^inter-related ^functions. ^First, ^it ^ensures ^the ^uniform ^interpretation ^of ^Community ^law. ^Secondly, ^by ^entrusting ^to ^the ^ECJ ^the ^power ^to ^rule ^on ^the ^validity ^of ^Community ^acts ^where ^such ^validity ^is ^in ^dispute ^in ^national ^proceedings, ^it ^ensures ^the ^unity ^of ^the ^Community ^legal ^order ^and ^the ^coherence ^of ^the ^system ^of ^judicial ^remedies ^established ^by ^the ^Treaty. Thirdly^, ^it ^facilitates ^access ^to ^justice: ^it ^makes ^it ^clear ^that ^Community ^law ^is ^to ^be ^applied ^not ^only ^by ^the ^ECJ ^but ^also ^by ^national ^courts, ^thus ^enabling ^citizens ^to ^enforce ^their ^Community ^rights ^in ^the ^national ^jurisdictions. 

National courts do not have the power to declare a Community act invalid: see Case 314/85 Foto-Frost v Hauptzollamt Lübeck-ost [1987] ECR 4199. The ECJ may annul Community acts but does not have jurisdiction to rule on the validity of the founding Treaties from which the ECJ itself derives its powers.

^Given ^that ^Article ^234 ^puts ^the ^ECJ ^in ^a ^weaker ^position ^that ^a ^supreme ^court ^in ^a ^federation, ^it ^is ^perhaps ^an ^irony ^that ^the ^preliminary ^reference ^procedure ^has ^proved ^to ^be ^the ^main ^procedural ^route ^through ^which ^the ^process ^of ^the ^constitutionalisation ^of ^the ^Community ^has ^taken ^place. ^In ^a ^number ^of ^leading ^preliminary ^reference rulings^, ^the ^ECJ ^has ^had ^the ^opportunity ^to ^establish ^the ^principles ^of ^primacy, direct effect and state liability in damages and to l^ay ^down ^the ^fundamentals ^of ^the ^internal ^market. ^In ^practice, ^legal ^integration ^became ^possible ^upon ^establishing ^the ^doctrines ^of ^direct ^effect ^and ^supremacy ^of ^EC ^law, ^proclaimed ^and ^refined ^by ^the ^ECJ ^in ^the ^1960s ^and ^the ^1970s. ^Direct ^effect ^signals ^the ^capacity ^of ^Community ^law ^to ^grant ^enforceable ^rights ^to ^individuals ^directly, ^i.e. ^without ^the ^need ^to ^be ^implemented ^by ^national ^law. ^Primacy ^or ^supremacy ^means ^that, ^in ^case ^of ^conflict, ^Community ^law ^takes ^precedence ^over ^national ^law. ^The ^Court ^itself ^has ^referred ^to ^those ^principles ^as ^the ^“essential ^characteristics” ^of ^the ^Community ^legal ^order. Combinin^g ^the ^mechanism ^of ^preliminary ^references ^with ^the ^doctrines ^of ^primacy ^and ^direct ^effect ^enables ^individuals ^and ^companies ^to ^assert ^Community ^rights ^in ^national ^courts. ^Thus, ^individuals ^may ^use ^Community ^law ^both ^as ^a ^”shield”, ^i.e. ^to ^defend ^themselves ^from ^action ^by ^the ^national ^authorities ^which ^infringes ^Community ^rights ^and ^as ^a ^“sword”, ^i.e. ^to ^challenge ^national ^measures ^on ^grounds ^of ^incompatibility ^with ^Community ^laws. Consequently^, ^the ^preliminary ^reference ^procedure ^provides ^an ^opportunity ^for ^individuals ^and, ^indeed, ^national ^courts ^to ^question ^governmental ^action. ^The ^ability ^of ^a ^national ^government ^to ^control ^which ^cases ^are ^sent ^to ^the ^ECJ ^is ^thus ^undermined. Areas ^of ^policy ^that ^were ^thought ^under ^the ^exclusive remit ^of the Member States ^can ^now ^be ^considered, ^and ^indeed ^influenced, ^by ^the ^ECJ, ^bringing ^about ^a distinct ^loss ^of ^national ^sovereignty. ^In ^this ^manner, ^the ^system ^of ^preliminary ^ruling ^has ^been ^transformed ^into ^a ^mechanism ^of ^enforcing ^EC ^law ^and ^implementing ^legal ^integration. ^The ^preliminary ^reference ^system ^has ^led, ^in ^effect, ^to ^transfer ^of ^powers ^at ^three ^levels, ^namely, ^(a) ^from ^the ^governments ^of ^the ^Member ^States ^to ^the ^institutions ^of ^the ^Community; ^(b) ^from ^the ^executive ^and ^the ^legislature ^to ^the ^judiciary, ^and ^(c ^) ^from ^higher ^national ^courts ^to ^lower ^national ^courts. 

Case 6/64 Costa v ENEL [1964] ECR 585; Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125; Case 106/77 Simmenthal [1978] ECR 629; Case C-213/89 Factortame [1990] ECR I-2433.

Case 26/62 Van Gend en Loos [1963] ECR 1.

Joined Cases C-6 and C-9/90 Francovich and others [1991] ECR I-5357.

Opinion 1/91 Draft Agreement relating to the creation of the European Economic Area [1991] ECR I-6079, para 21.

^Where ^a ^national ^court ^makes ^a ^reference ^to ^the ^ECJ, ^the ^order ^for ^reference ^is ^circulated ^to ^all ^Member ^States, ^the ^Commission, ^and ^any ^other ^Community ^institutions ^affected, ^who ^may ^submit ^written ^and ^oral ^observations ^to ^the ^ECJ. ^The ^ruling ^delivered ^by ^the ^ECJ ^is ^binding ^on ^the ^national ^court ^but ^it ^is ^upon ^the ^latter ^to ^apply it on ^facts of the case^. ^“What ^is ^important ^in ^the ^procedure, ^indeed ^crucial, ^is ^the ^fact ^that ^it ^is ^the ^national ^court ^which ^renders ^the ^final ^judgment” ^(Weiler, ^1994, ^p.515). ^Also, ^although ^the ^judgment ^does ^not ^form ^binding ^precedent ^in ^the ^way ^understood ^in ^the ^Anglo-saxon ^legal ^systems, ^it ^has ^normative ^value ^in ^that ^it ^settles ^a ^point ^of ^interpretation ^or ^validity. ^A ^national ^court ^before ^which ^the ^same ^point ^of ^Community ^law ^arises ^in ^the ^future ^may ^follow ^the ^Court’s ^ruling ^or ^make ^another ^reference ^to ^the ^ECJ ^but ^it ^may ^not ^ignore ^the ^ruling.

^Figure ^1 ^presents ^the ^growth ^pattern ^of ^references ^for ^preliminary ^rulings ^(RPR) ^brought ^in ^the ^ECJ ^during ^the ^period ^1961-98. Although ^fluctuating ^somewhat ^from ^year ^to ^year, ^the ^annual ^average ^growth ^rate ^has ^been ^an ^impressive ^16.3%.  ^Figure ^2 ^charts ^the ^share ^of ^preliminary ^references ^in ^the ^total ^number ^of ^cases ^brought ^before ^the ^ECJ. ^This ^share ^has ^increased ^enormously ^from ^below ^4% ^in ^1961 ^to ^more ^than ^64% ^in ^1998. Notably, i^n ^order ^to ^lighten ^the ^ECJ’s ^workload, ^the ^Court ^of ^First ^Instance ^(CFI) ^was ^set ^up ^in ^1989 ^with ^jurisdiction ^to ^hear ^certain ^direct ^actions. ^The ^rationale ^behind ^the ^establishment ^of ^the ^CFI ^was ^to ^set ^up ^a ^court ^which ^would ^be ^better ^placed ^to ^hear ^complicated ^cases ^in ^technical ^areas ^of ^law, ^such ^as ^competition ^and ^anti-dumping, ^thus ^enabling ^the ^ECJ ^to ^concentrate ^in ^exercising ^its ^unifying ^jurisdiction ^under ^the ^preliminary ^reference ^procedure. 

The data have been taken from the paper of Turner and Munoz (1999/2000). 
Precise data about the annual number of cases brought to and deliberated by the ECJ are not always easy to obtain. Two reasons account for this. First, some cases do not proceed to full judgement, but are disposed by “order”. Second, groups of similar cases are often joined together and a single ruling is delivered. Such practices explain why there is a difference between the number of “gross” and “net” cases brought before the ECJ. In drawing the graphs in Figures 1 and 2 below, two-year averages have been used in order to smooth year to year fluctuations.

^The ^broad ^trends ^outlined ^above ^mask ^significant ^cross ^country ^and ^subject ^matter ^variations ^in ^the ^pattern ^of ^references, ^which ^themselves ^also ^vary ^from ^sub-period ^to ^sub-period. ^The ^figures ^presented ^in ^the ^two ^panels ^of ^Table ^1 ^(taken ^from ^Stone ^Sweet ^and ^Brunell, ^1999) ^are ^quite ^revealing ^on ^this ^issue. ^The ^classification ^of ^references ^by ^member ^state ^(Table ^1A), ^shows ^that ^Germany ^has ^made ^the ^largest ^number ^of ^references ^per ^year, ^almost ^twice ^as ^many ^as ^the ^next ^country ^(France), ^while ^Ireland ^and ^Luxembourg ^have ^made ^the ^smallest. ^With ^regard ^to ^subject-matter ^(Table ^1B), ^agriculture ^and ^free ^movements ^of ^goods ^have ^jointly ^generated ^40 ^% ^of ^all ^cases ^brought ^before ^the ^ECJ ^for ^preliminary ^ruling.

^The ^ECJ ^has ^not ^kept ^up ^with ^the ^growth ^of ^applications ^for ^preliminary ^rulings. ^Not ^only ^has ^the ^number ^of ^judgments ^given ^by ^the ^ECJ ^increased ^slower ^than ^the ^number ^of ^references ^made ^by ^national ^courts, ^but ^the ^length ^of ^proceedings ^has ^also ^increased. ^For ^example, ^in ^1992 ^the ^difference ^between ^the ^number ^of ^new ^cases ^brought ^and ^the ^number ^of ^cases ^decided ^was ^32, ^a ^figure ^which ^in ^1998 ^climbed ^to ^62. ^More ^generally, ^during ^the ^sub-period ^1990-98 ^(for ^which ^comparable ^statistics have been published^), ^the ^annual ^rate ^of ^growth ^of ^preliminary ^rulings ^decided ^by ^the ^ECJ ^was ^7.94%, ^while ^the ^annual ^growth ^rate ^of ^references ^for ^preliminary ^rulings ^made ^was ^8.48%. ^Similarly, ^in ^1998 ^the ^average ^length ^of ^proceedings ^for ^preliminary ^rulings ^was ^21.4 ^months, ^almost ^double ^its ^size ^in ^1983 ^when ^it ^was ^12 ^months. A systematic explanation of the observed pattern of behaviour must then account for the multitude of the trends recorded^, ^notably, ^the ^growth ^of ^the ^total ^number ^of ^references, ^their ^composition ^by ^state ^of ^origin ^and ^subject ^matter, ^and ^the ^growing ^lag ^in ^the ^response ^of ^the ^ECJ. 

^III.	^Public ^choice ^modelling ^of ^the ^growth ^of ^the ^preliminary ^rulings

^An ^investigation ^of ^the ^process ^of ^legal ^integration ^in ^the ^light ^of ^economic ^analysis ^involves ^enquiries ^in ^two ^areas. ^First, ^it ^calls ^for ^a ^systematic ^examination ^of ^the ^factors ^which ^affect ^the ^demand ^for ^preliminary ^rulings ^as ^instruments ^for ^resolving ^disputes; ^Secondly, ^it ^requires ^a ^careful ^examination ^of ^the ^behaviour ^of ^the ^actors ^which ^determine ^directly ^or ^indirectly ^the ^supply ^of ^rulings, ^their ^motives, ^and ^the ^constraints ^on ^their ^behaviour. ^It ^will ^be ^noted ^that ^the ^preliminary ^reference ^procedure ^differs ^from ^the ^standard ^market ^paradigm. ^It ^is ^not ^a ^direct ^interaction ^between ^consumers ^and ^producers, ^since ^demand ^and ^supply ^for ^rulings ^are ^channelled ^through ^the ^intermediation ^of ^the ^national ^courts. ^The ^“market” ^for ^rulings ^therefore ^can ^best ^be ^understood ^as ^involving ^interaction ^among ^three ^sets ^of ^decision ^makers, ^namely ^litigants, ^national ^courts, ^and ^the ^ECJ, ^as ^shown ^graphically ^on ^Figure ^3. 

^As ^the ^ultimate ^recipients ^of ^the ^benefits ^of ^economic ^exchanges, ^and ^therefore ^the ^law ^which ^enforces ^them, ^private ^transactors ^may ^initiate ^proceedings, ^that ^is, ^“demand” ^judgments ^from ^national ^courts ^in ^areas ^to ^which ^EC ^law ^may ^be ^applicable. ^The ^final ^authority ^for ^the ^interpretation ^of ^the ^law ^rests ^with ^the ^ECJ, ^which, ^as ^a ^judicial ^body, ^acts ^independently ^of ^the ^national ^governments ^and ^“supplies” ^the ^rulings. ^In ^between ^those ^groups ^of ^decision ^makers ^stand ^the ^national ^judges, ^who ^act ^as ^gatekeepers. ^Their ^intervention ^is ^crucial ^because ^the ^authority ^to ^make ^a ^reference ^is ^vested ^with ^them. ^That ^is, ^demand ^for ^a ^ruling ^becomes ^operative ^not ^when ^economic ^transactors ^ask ^for ^it, ^but ^upon ^the ^national ^court ^requesting ^a ^ruling. It is the^refore ^necessary ^to ^investigate ^the ^objectives ^and ^constraints ^of ^the ^three ^sets ^of ^players ^in ^using ^the ^preliminary ^reference ^mechanism. 

Notably, the ECJ itself vehemently safeguards the independence of the national courts vis-à-vis the parties to the dispute. Thus, it is for the national court to decide whether to make a reference, what questions to refer, and at what stage in the proceedings to make the reference. A national court may make a reference on its own motion i.e. even if none of the parties to the proceedings wishes to do so.  See e.g. Case 126/80 Salonia [1981] ECR 1563; Case 166/73 Rheinmuhlen [1974] ECR 33, 146/73 [1974] ECR 139; Case 14/86 Pretore di Salo v Persons Unknown [1989] 1 CMLR 71: In practice, however, the parties will usually play a significant role by presenting argument as to whether a reference should or should not be made.

^(i^) ^Private ^litigants

P^rivate ^litigants ^will ^resort ^to ^the ^legal ^system ^and ^invoke ^EC ^law ^if ^they ^expect ^a ^net ^gain, financial or otherwise, ^from ^doing ^so. The net gain depends on ^the ^probability ^of ^winning ^the court ^case ^and varies positively with the size of ^the ^monetary ^benefit ^generated ^when ^the ^court ^awards ^the ^litigant ^the ^right ^to ^engage ^in ^the ^disputed ^economic ^activity ^(e.g., ^gaining ^access ^to ^a ^market, ^or ^receiving ^equal ^pay)^. ^On ^the ^other ^hand, ^the ^net ^gain ^is negatively ^related ^to ^the ^price ^of ^litigation, ^that ^is, ^the ^cost ^of ^using ^the ^preliminary ^ruling ^mechanism. These fundamentals suggest that the number of references for preliminary rulings would depend positively on the following factors: the size of economic activity subject to EC legislation, the i^ncrease ^in ^Community ^competence ^and ^legislation, ^the expansion of t^he ^case ^law ^of ^the ^ECJ and the ^increase ^in ^awareness ^of ^Community ^law. ^By ^contrast, ^it w^ould depend negatively on the burden of  the legal expenses required to pursue a case. These factors will now be examined in turn.

	The growth in the size of economic activity subject to EC legislation
One may reasonably expect that as the size of economic activity covered by any given EC legislation increases so does the recourse to the formal procedure of the law to resolve disputes. ^In ^a ^series ^of ^seminal ^and ^pathbreaking ^contributions, ^Stone ^Sweet ^and ^Brunell ^(1998a ^and ^1998b) argued along this line ^attributing ^the ^growth ^of ^preliminary ^references ^to ^demand ^by ^private ^litigants, ^and ^offered ^empirical ^tests ^in ^support ^of ^their ^model. ^The essence of their ^argument is ^the ^following. ^Like ^any ^contractual ^relationship, ^transnational ^exchanges ^generate ^demand ^for ^dispute ^resolution. ^National ^laws ^were ^not ^designed ^to ^resolve ^disputes ^arising ^from ^transnational ^transactions. ^This ^void ^is ^filled ^by ^Community ^legislation. ^National ^courts ^recognise ^the ^relevance ^of ^Community ^law ^in ^facilitating ^transnational ^economic ^activity ^and ^accept ^the ^competence ^of ^the ^ECJ ^in ^interpreting ^the ^law. ^Hence, ^as ^the ^volume ^of ^economic ^transactions ^among ^the ^EC ^countries ^grows, ^conflicts ^between ^national ^law ^and ^EC ^law ^will ^increase ^and ^the ^demand ^for ^a ^system ^of ^dispute ^resolution ^to ^cover ^the ^transnational ^exchanges ^will ^do ^likewise.

^Based ^on ^regression ^analysis, ^which ^uses ^the ^size ^of ^intra-EC ^trade ^at ^current ^prices ^as the ^explanatory ^variable ^and ^the ^number ^of ^references ^for ^preliminary ^rulings ^as ^the dependent ^variable, ^Stone ^Sweet ^and ^Brunell ^obtain ^statistical ^support ^for ^the ^posited ^relationship. ^Moreover, ^their ^hypothesis ^accounts ^for ^the ^cross-country ^and ^cross-subject ^variation ^in ^references. ^Since ^the ^level ^of ^intra-EC ^economic ^activity ^varies ^across ^different ^member ^states, ^the ^number ^of ^references ^for ^preliminary ^rulings ^will ^differ ^from ^state ^to ^state, ^being ^higher ^for ^those ^characterised ^by ^larger ^volumes ^of ^intra ^EC-trade. ^Similarly, ^since ^various ^sectors ^of ^economic ^activity ^are ^characterised ^by ^diverse ^levels ^of ^intra-EC ^trade, ^the ^number ^of ^references ^for ^preliminary ^rulings ^will ^also ^vary ^across ^sectors ^of ^activity. ^These ^results ^accord ^well ^with ^economic ^intuition. ^After ^all, ^a ^necessary ^condition ^to ^realise ^the ^benefits ^deriving ^from ^economic ^exchanges ^is ^the ^existence ^of ^a ^legal ^order ^to ^resolve ^disputes ^and ^enforce ^contracts.

One could suggest the following refinements to the pioneering study of Stone Sweet and Brunell. First, s^trict ^adherence ^to ^economic ^reasoning ^requires ^the ^use ^of ^the ^real ^volume ^of ^trade ^as ^the ^relevant ^independent ^variable rather than trade at current prices^. T^his ^is ^because ^demand ^is ^determined ^by ^the ^increase ^in ^trade in real terms and not ^the ^nominal ^value ^of ^transnational ^transactions. ^Further, ^the ^growth ^of ^preliminary ^references ^may ^not ^be ^attributed ^solely ^to ^the ^pull ^force ^of ^trade. I^t ^is ^noted ^that ^not ^all ^references ^for ^preliminary ^rulings ^relate ^directly ^to ^intra-EU ^trade, ^that ^is, ^only ^a ^proportion ^of ^the ^preliminary ^references ^actually ^made ^to ^the ^ECJ ^arises ^as ^a ^result ^of ^factual ^disputes ^involving ^inter-state ^trade. ^A ^substantial ^proportion ^of ^references ^is ^made ^in ^disputes ^which ^have ^no ^direct ^inter-state ^element. Indeed, that proportion has increased steadily overtime (see Schepel and Blankemburg, p.32, in De Burca and Weiler 2001). ^For ^example, ^referring ^back ^to ^Table ^1B, ^agriculture ^and ^free ^movement ^of ^goods, ^which ^Stone ^Sweet ^and ^Brunell ^themselves ^use ^as ^an ^approximation ^of ^the ^direct ^exchange ^of ^goods, ^account ^for ^less ^than ^half ^of ^the ^total ^of ^references ^during ^the ^1958-98 ^period ^(and ^it ^has ^been ^declining ^over ^time).

	The i^ncrease ^in ^Community ^competence ^and ^legislation. 
^Successive ^Treaty ^amendments ^have ^expanded ^the ^competence ^of ^the ^Community ^bringing ^more ^and ^more ^areas ^of ^regulation ^within ^the ^scope ^of ^Community ^law ^(e.g., ^environmental ^protection). In parallel, the volume of ^Community ^legislation has increased considerably. These developments have in turn led ^to a substantial growth in ^demand ^for ^rulings.
 
	The expansion of t^he ^case ^law ^of ^the ^ECJ. 
^The ^case ^law ^of ^the ^Court ^is ^in ^itself ^an ^indirect  ^source ^of ^demand. ^The ^emergence ^of ^new ^sets ^of ^facts ^requires ^the ^constant ^refinement ^and ^elaboration ^of ^legal ^principles. ^In ^some ^cases, ^a ^Court ^ruling ^may ^pronounce on ^the ^application ^of ^an ^existing ^principle ^in ^a ^new ^area ^which ^subsequently ^gives ^rise ^to ^a ^host ^of ^references ^on ^similar ^points. This is ^exacerbated ^by ^the ^fact ^that ^the ^ECJ ^tends ^to ^interpret ^Community ^legislation ^as ^being ^directly ^effective, ^namely ^as ^giving ^rise ^to ^rights ^which ^individuals ^may ^enforce ^before ^national ^courts. 

See e.g. the recent case law on the application of the four freedoms on direct taxation, which until recently was perceived as a bastion of national sovereignty.

See for example, Case C-443/98 Unilever Italia SpA v Central Food SpA, 26 September 2000.

	The burden of  the legal expenses
^Fees ^for ^legal ^services ^will ^depend ^on ^the ^terms ^of ^access ^to ^the ^domestic ^courts, ^such ^as, ^for ^example, ^the ^formal ^procedures ^involved, ^the ^length ^of ^proceedings, ^the ^level ^of ^the ^national ^court ^before ^which ^the ^litigation ^is ^conducted, ^etc. ^Those ^expenses ^vary ^from ^country ^to ^country ^and ^subject-matter ^to ^subject-matter. ^The ^deterring ^influence ^of ^costs ^might ^suggest ^that ^private ^litigants ^who ^have ^access ^to ^the ^required ^financial ^resources, ^like ^wealthy ^corporations, ^or ^richly ^endowed ^interest ^groups, ^or ^those ^fortunate ^enough ^to ^qualify ^for ^legal ^aid ^from ^the ^state, ^will ^be ^privileged ^in ^making ^use ^of ^the ^preliminary ^reference ^mechanism.

Similar perspectives are also found in the paper of Mattli and Slaughter (1998), which examines the role of individual litigants and the strategies that they may follow before the ECJ, and the paper of Alter (2000) which discusses the factors that influence private domestic litigants to resort to the EC legal machinery.

	^The ^increase ^in ^awareness ^of ^Community ^law. 
^The ^days ^when ^Community ^law ^was ^perceived ^as ^a ^specialised, ^and ^somewhat ^marginal, ^field ^of ^legal ^practice ^have ^long ^gone. ^Nowadays, ^legal ^advisors ^and, ^increasingly, ^citizens ^themselves ^are ^aware ^of ^the ^Community ^law ^dimension ^of ^their ^claims ^and ^keen ^to ^exploit ^EC ^rules ^to ^their ^advantage. ^We ^are ^experiencing ^the ^emergence ^of ^a ^new ^European ^legal ^culture ^where ^the ^influence ^of ^Community ^law ^on ^national ^laws ^becomes ^pervasive. ^Also, ^a ^new ^generation ^of ^judges ^is ^gradually ^emerging ^at ^the ^national ^level, ^who ^perceive ^Community ^not ^as ^a ^challenge ^to ^the ^entrenched ^methodology ^of ^national ^law ^but ^as ^an ^integral ^part ^of ^the ^national ^legal ^system. ^In ^this ^context, ^Community ^rights ^are ^perceived ^as ^part ^of ^the ^national ^legal ^heritage ^of ^the ^individual ^and ^the ^making ^of ^a ^reference ^to ^the ^ECJ ^seems ^a ^natural ^option.

Note that the factors listed as determinants of demand also account for the accession of new member states. Entry of a new member increases the volume of economic transactions and may give rise to new conflicts of EC law with domestic legislation precipitating an increase in references.

Demand, however, ^is ^only ^part ^of ^the ^explanation ^of ^legal ^integration. ^As ^careful ^examination ^of ^the ^process ^described ^in ^Figure ^3 ^will ^reveal, ^linking ^the ^set ^of  ^explanatory ^variables ^of ^the ^growth ^of ^preliminary ^rulings ^only ^with ^the ^volume ^of ^economic ^activity ^is ^unnecessarily ^restrictive. ^In ^effect, ^that ^would ^be ^equivalent ^to ^subscribing ^to ^an ^“organic” ^view ^of ^the ^process, ^where ^growth ^in ^economic ^activity ^is ^almost ^inevitably ^followed ^by ^growth ^in ^applications ^for ^preliminary ^rulings. ^The ^important ^factor ^which ^is ^missing ^from ^this ^account ^is ^what ^has ^been ^termed ^“judicial ^politics”, ^that ^is, ^the ^behaviour ^of ^the ^actors ^engaged ^in ^the ^supply ^of ^the ^legal ^order, ^notably, ^the ^ECJ ^and ^the ^national ^courts, ^their ^motives ^and ^opportunities ^in ^applying ^EC ^law.

^(ii) ^The ^national ^courts

^As ^stated ^above, ^the ^preliminary ^reference ^mechanism ^grants ^to ^national ^courts ^the ^authority ^to ^make ^a ^reference ^and ^ascribes ^to ^them ^the ^role ^of ^gatekeepers. ^It ^is ^important ^to ^emphasise ^that, ^in ^making ^a ^decision ^whether ^to ^refer, ^the ^national ^courts ^intervene ^not ^as ^mechanical ^conduits ^but ^as ^eclectic ^agents. ^Lower ^national ^courts, ^from ^which ^the ^overwhelming ^majority ^of ^references ^originates, ^enjoy ^discretion ^whether ^to ^make ^a ^reference. ^Also, ^even ^courts ^of ^last ^instance ^which ^are ^in ^principle ^under ^an ^obligation ^to ^refer, ^in ^fact ^enjoy ^some ^discretion ^since ^there ^are ^certain ^exceptions ^from ^this ^obligation. In shor^t, ^the ^co-operation ^of ^national ^courts ^is ^a ^sine ^qua ^non ^for ^the ^success ^of ^the ^preliminary ^reference ^procedure ^and, ^consequently, ^the ^very ^development ^of ^the ^Community ^legal ^order. ^Legal ^integration ^and ^the ^implementation ^of ^ECJ ^jurisprudence ^has relied ^on ^the ^willingness ^of ^national ^courts ^to ^refer ^cases ^to ^the ^Court. 

A national court of last instance need not make a reference in the following cases: (a) When it considers that a decision of the ECJ is not necessary to enable it to give judgment; (b) When the ECJ has already ruled on the point of Community law in question; (c ) when the issue is "acte clair", i.e. the correct application of Community law is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved. See Case 283/81 CILFIT v Ministry of Health [1982] ECR 3415; The last exception, in particular, leaves considerable margin of appreciation to the national courts.

^According ^to ^the public ^choice ^theory, ^courts ^like ^other ^organs ^of ^government ^are ^assumed ^to ^have ^their ^own ^set ^of ^preferences ^over ^policy ^outcomes. ^Judicial ^preferences ^may, ^but ^do ^not ^need ^to ^be, ^substantive; ^they ^reflect ^neither ^calculations ^of ^private ^benefit ^(like ^profit ^maximising ^firms), ^nor ^electoral ^considerations ^(like ^vote ^maximising ^politicians). ^Rather, ^as ^legal ^scholars ^would ^argue, ^judicial ^preferences ^are ^based ^on ^notions ^of ^justice ^and ^the ^rule ^of ^law. Crucially, ^the ^preferences ^of ^lower ^national ^courts ^regarding ^policy ^outcomes ^may ^differ ^from ^those ^of ^higher ^national ^courts ^and ^/ ^or ^the ^national ^political ^authorities, ^leading ^them ^to ^seek ^opportunities ^for ^pursuing ^their ^own ^most ^preferred ^policies. ^The ^utility ^of ^the ^court ^is ^higher, ^the ^closer ^is ^the ^actual ^policy ^implemented ^to ^its ^most ^preferred ^(ideal) ^policy ^point. ^Courts ^will ^therefore ^use ^their ^judgments ^to ^pursue ^policies ^which ^maximise ^their ^utility ^subject ^to ^the ^relevant restrictions^, ^which constrain ^their ^freedom ^of ^action. ^A ^court ^suffers ^a ^twofold ^loss ^in ^utility ^when ^its ^judgment ^is ^reversed ^by ^a ^higher ^national ^authority ^(appellate, ^or ^supreme ^court, ^or ^the ^legislature ^as ^the ^case ^may ^be). ^First, ^because ^a ^less ^preferred ^policy ^is ^pursued ^in ^practice ^(that ^is, ^one ^which ^serves ^less ^well ^the ^court’s ^notion ^of ^justice). ^Second, ^because ^the ^failure ^to ^uphold ^a ^judgment ^may ^affect ^adversely ^the ^professional ^reputation ^of ^judges ^and ^even, p^erhaps, ^jeopardise ^their ^future ^career ^prospects. ^National ^courts ^will ^refer ^to ^the ^ECJ ^and ^consequently ^apply ^its ^ruling ^when ^the ^expected ^net ^utility ^gains ^(benefits ^minus ^costs) ^from ^doing ^so ^exceed ^the ^utility ^gains ^from ^not ^referring.

^Reference ^to ^the ^ECJ ^brings ^two ^complementary ^benefits. ^The ^first ^comes ^from ^the ^involvement ^of ^the ^court ^in ^decision ^making, ^while ^the ^second ^relates ^to ^the ^benefits ^from ^having ^its ^decision ^accepted. The ref^erence ^for ^preliminary ^ruling ^confers ^to ^the ^national ^courts ^the ^right ^to ^influence ^public ^policy, ^described ^by ^the ^term ^“judicial ^empowerment”. ^That ^is, ^“Lower ^courts ^and ^their ^judges ^were ^given ^the ^facility ^to ^engage ^with ^the ^highest ^jurisdiction ^in ^the ^Community ^and ^thus ^to ^have ^de ^facto ^judicial ^review ^of ^legislation” ^(Weiler, ^1991, ^p.2426). This is ^a ^privilege that ^they ^hardly ^enjoyed ^in ^the ^domestic ^domain. ^If ^the ^judgment ^of ^the ^ECJ leads to a policy outcome closer to that ^preferred ^by ^the ^national ^court ^that ^makes ^the ^reference, ^the ^national ^court ^will ^exercise ^its ^judicial powe^r ^and ^stamp ^its ^authority. ^Viewed ^in ^terms ^of ^the ^distribution ^of ^power ^of ^decision ^making, ^the ^empowerment ^that ^reference ^to ^the ^ECJ ^confers ^is ^analogous ^to ^extending ^the ^right ^to ^determine ^policy ^to ^a ^wider ^group ^of ^concerned ^players ^than ^before. ^These ^players ^can ^now ^challenge ^the ^dominant ^position ^of ^other ^branches ^of ^government ^and ^implement ^policies ^closer ^to ^their ^own ^ideal ^poin^ts.

Accounts of the motives of the national courts to use the preliminary reference mechanism and the interactions between national courts and the ECJ can be found in Burley and Mattli (1993), Mattli and Slaughter (1998), Weiler (1994), Alter (1996) and (1998) and Golub (1996).

^The ^second ^benefit ^arises ^from ^the ^protection ^that ^a ^judgment ^based ^on ^the ^ECJ ^ruling ^enjoys ^against ^reversal. ^A ^lower ^national ^court ^runs ^the ^risk ^of ^having ^its ^ruling ^overturned ^by ^a ^higher ^national ^court. ^Similarly, ^the judgment ^of ^a ^higher ^court, which runs counter to the wishes of the government, ^may ^be ^overridden ^by ^new ^legislation ^passed ^by ^the ^national ^political ^authorities ^in ^response ^to ^a ^judicial ^ruling ^that ^the ^government ^which ^controls ^the ^legislature ^did ^not ^like. ^However, ^in ^view ^of ^the ^considerable ^difficulties ^that ^national ^authorities ^encounter in ^reversing ^the ^decision ^of ^the ^ECJ, ^the ^use ^of ^the ^preliminary ^reference ^system ^offers ^national ^courts ^a ^strategy ^to ^minimise ^the ^risk ^of ^having ^their ^decisions ^reversed. ^Thus, ^by ^referring ^to ^the ^ECJ, ^national ^courts ^can ^put ^in ^practice ^their ^most ^preferred ^policies ^without ^the ^risk ^of ^reversal.

^The ^use ^of ^the ^reference ^mechanism ^is ^not ^costless, ^since ^the ^delivery ^of ^a ^preliminary ^ruling ^by ^the ^ECJ ^requires ^resources, ^including ^the ^time, ^effort ^and ^materials ^used ^by ^the ^ECJ ^judges ^and ^other ^officials,  ^whose ^quantity ^and ^intensity ^may ^vary ^from ^case ^to ^case. ^However, ^national ^courts ^do ^not ^bear ^the ^resource ^cost ^of ^using ^the ^preliminary ^reference ^system, ^since ^they ^do ^not ^pay ^the ^relevant ^price ^to ^the ^ECJ. ^Effectively, ^as ^far ^as ^national ^courts ^are ^concerned, ^the ^use ^of ^the ^mechanism ^is ^not ^constrained ^by ^the ^resources ^needed ^to ^operate ^it. ^Hence, ^the ^number ^of ^applications ^for ^preliminary ^reference ^is ^boosted ^not ^only ^by ^the ^volumes ^of ^relevant ^economic ^activity, ^but ^also ^by ^the ^absence ^of  ^the ^price ^constraint ^that ^national ^courts ^would ^have ^to ^pay ^when ^sending ^a ^request ^to ^the ^ECJ. ^But ^when ^the ^consumers ^of ^a ^service ^face ^a ^zero ^price, demand w^ill ^exceed ^supply. ^Excess ^demand ^is ^manifested ^in ^practice ^by ^a ^very ^rapid ^increase ^in ^the ^number ^of ^applications ^for ^preliminary ^references ^without ^a ^commensurate ^increase ^in ^the ^number ^of ^cases ^decided. ^When ^use ^of ^the ^price ^mechanism ^is ^ruled ^out ^to ^eliminate ^excess ^demand ^other ^methods ^of ^allocation ^of ^resources ^emerge ^to ^fill ^the ^void. ^One ^such ^familiar ^response ^is ^queuing, ^or ^equivalently, ^a ^waiting ^list, ^which ^in ^the ^present ^case ^of ^excess ^demand ^for ^preliminary ^rulings ^takes ^the ^form ^of ^an ^increasing ^backlog ^of ^pending ^cases ^and ^a ^lengthening ^of ^the ^time ^period ^it ^takes ^to ^decide ^a ^case. ^As ^already ^detailed ^in ^the ^previous ^section, ^both ^these ^theoretical ^predictions ^are ^corroborated ^in ^the ^picture ^that ^the ^ECJ ^itself ^paints ^about ^its ^increasing ^workload. 

In practice, even though the national court does not pay a pecuniary price for applying for a preliminary ruling, demand the effective price is above zero since the opportunity cost of the national judges making the application is positive.

^The ^structure ^of ^the ^decision ^of ^the ^national ^court ^whether ^to ^refer ^or ^not ^to ^refer ^to ^the ^ECJ ^is ^shown ^in ^Figure ^4. ^Let ^C, ^G ^and ^E ^denote the ^policy ^levels ^most ^preferred ^by ^the ^national ^court, ^the ^higher ^national ^authority ^and ^the ^ECJ ^respectively, ^and ^let ^P ^denote ^the ^probability ^that ^the ^judgment ^of ^the ^national ^court ^will ^not ^be ^overturned ^by ^the ^higher ^national ^authorities. ^P ^increases ^as ^the ^difference ^between ^C ^and ^G ^decreases ^and ^also ^depends ^on ^other ^institutional ^factors. ^For ^example, ^according ^to ^Cooter ^and ^Ginsburg ^(1996), ^the ^probability ^of ^non ^reversal ^will ^be ^increasing ^on ^the ^degree ^of ^constitutional ^division ^of ^powers ^(effectively, ^the ^number ^of ^vetoes ^that ^legislation ^has ^to ^overcome) ^and ^the ^number ^of ^parties ^and ^degree ^of ^party ^discipline ^in ^the ^ruling ^coalition. ^Assuming ^a ^risk ^neutral ^national ^court, ^the ^expected ^utility ^from ^not ^referring ^is ^written ^as ^PU(C)+(1-P)[^U(G)-Q], ^where ^Q ^represents ^the ^additional ^loss ^suffered ^by ^the ^court ^when ^its ^judgment ^is ^overturned ^(reflecting ^the ^disutility ^of ^adverse ^reputation ^and ^career ^prospects). ^On ^the ^other ^hand, ^if ^the ^court ^refers ^the ^case ^to ^the ^ECJ ^its ^utility ^is ^U(E)-S, ^where ^S ^is ^the ^price-for-service ^that ^the ^national ^court ^will ^have ^to ^pay ^towards ^covering ^the ^resource ^cost ^of ^the ^mechanism. ^Obviously, ^the ^smaller ^the ^size ^of ^S ^the ^larger ^the ^benefits ^from ^referring. ^The ^national ^court ^will ^refer ^to ^the ^ECJ ^when ^the ^expected ^utility ^from ^referring ^the ^case ^is ^greater ^than ^the ^expected ^utility ^from ^ruling ^on ^the ^case ^and ^not ^referring, ^that ^is, ^if ^U(E)-S ^> ^PU(C)+(1-P) ^[U(G)-Q].

 ^(iii) ^The ^European ^Court ^of ^Justice

^The ^ECJ ^makes ^the ^judgment ^on ^the ^case ^referred ^and ^supplies ^the ^ruling ^to ^the ^national ^court. Followi^ng ^the ^rational ^choice ^theory ^and ^in ^analogy ^to ^national ^courts, ^the ^ECJ ^is ^assumed ^to ^have ^its ^own ^policy ^preferences, ^which ^reflect ^the ^“deeply ^internalised” ^notions ^of ^justice ^held ^by ^judges. ^It ^is ^also ^assumed ^to ^dislike ^to ^see ^its ^rulings ^overturned ^by ^the ^political-legislative ^authorities, ^and ^crucially, ^being ^rejected ^by ^the ^national ^courts, ^whose ^co-operation, ^as ^stated ^above, ^is ^crucial ^to ^the ^construction ^of ^the ^European ^edifice. ^To ^say ^that ^the ^ECJ ^has ^preferences ^over ^policies ^is ^not ^to ^deny ^its ^independence ^from ^partisan ^or ^national ^interests, ^or ^the ^interests ^of ^other ^branches ^of ^the ^EU, ^nor ^to ^disregard ^the ^formality ^of ^legal ^reasoning. ^It ^is ^however ^to ^recognise ^that ^its ^rulings ^have ^a ^significant ^effect ^on ^policy ^outcomes. ^Through ^the ^process ^of ^interpreting ^the ^law, ^the ^ECJ ^shares ^policy ^making ^with ^the ^other ^organs ^of ^the ^EU. ^In ^contrast ^to ^the ^political ^institutions, ^however, ^it ^has ^no ^agenda ^setting ^power, ^that ^is, ^it ^cannot ^initiate ^legislation ^but ^can ^only ^rule ^on ^those ^cases ^brought ^before ^it. ^As ^a ^result, ^its ^principal ^contribution ^to ^policy ^has ^been ^characterised ^as ^negative ^integration, ^because ^its ^rulings ^have ^served ^to ^remove ^and ^dismantle ^various ^national ^restrictions ^to ^the ^fundamental ^freedoms ^of ^movement. ^Its ^role ^in ^positive ^integration, ^that ^is, ^the ^construction ^of ^supranational ^rules ^of ^conduct ^to ^replace ^national ^legislation, ^although ^important ^has ^been ^less ^pronounced. 

It should be borne in mind that treating the ECJ, which is a collective body, as a single decision maker is a simplification made for the purpose of the present study. A more detailed public choice account of the Court would have to investigate the behaviour of individual judges and how the latter shape the collective outcome of its deliberations.

^Transforming ^the ^preliminary ^ruling ^system ^into ^a ^mechanism ^for ^the ^enforcement ^of ^EC ^law ^has ^conferred ^considerable ^autonomy ^to ^the ^ECJ ^and ^freed ^it ^from ^being  ^subservient ^to ^the ^national ^governments ^that ^set ^it ^up. ^Specifically, ^offering ^individuals ^and ^companies ^the ^possibility ^of ^challenging ^national ^law ^increases ^the ^ability ^of ^the ^ECJ ^to ^pursue ^its ^most ^preferred ^policies, ^while ^it ^simultaneously ^decreases ^its ^dependence ^on ^the ^governments ^of ^the ^member ^states ^and ^the ^Commission ^to ^raise ^infringement ^cases. 

^But ^what ^explains ^the ^autonomy ^that ^the ^ECJ ^enjoys ^in ^practice ^to ^pursue ^its ^own ^policy ^objectives? ^Borrowing ^from ^the ^economic ^theory ^of ^the ^principal ^- ^agent ^relation ^the ^ECJ ^is ^seen ^as ^an ^institution ^(agent) ^to ^which ^sovereign ^states ^(principals) ^have ^delegated ^authority ^in ^order ^to ^facilitate ^transnational ^co-operation ^between ^the ^member ^states ^of ^the ^EC ^by ^interpreting ^the ^laws ^that ^govern ^their ^relationships. However, ^given ^the ^powers ^granted ^to ^accomplish ^its ^functions, ^the ^institution ^may ^take ^a ^life ^of ^its ^own ^and ^serve ^its ^own ^interests ^by ^pursuing ^its ^most ^preferred ^policies ^rather ^than ^those ^of ^the ^principals. I^n ^practice this ^takes ^the ^form ^of ^advancing ^pro-integration ^policies ^that ^would ^not ^have ^been ^favoured ^by ^some ^of ^the ^member ^state ^governments.

Beneficial transnantional co-operation is plagued by the transaction costs, which comprise all those costs that a decision maker bears in order to ensure that the actual outcome of a transaction is the same as the expected outcome, and include the costs of collecting information, monitoring and sanctioning the behaviour of other parts to an exchange. See Garrett and Weingast (1993), Pollack (1997) and Doleys (2000) for detailed accounts of the autonomy of the ECJ and other supranational EC institutions using the agency theory.

^The ^agency ^losses ^can ^be ^limited ^by ^introducing ^various ^control ^mechanisms ^which ^define ^ex ^ante ^the ^nature ^and ^range ^of ^the ^activities ^of ^the ^agent ^and ^monitor, ^reward ^or ^punish ^ex ^post ^its ^behaviour. ^However, ^since ^the ^control ^procedures ^are ^costly ^to ^operate ^in ^terms ^of ^resources ^to ^be ^invested ^and ^speed ^of ^decision ^making, ^monitoring ^in ^practice ^can ^never ^be ^perfect, ^implying ^that ^the ^agent ^may ^still ^enjoy ^considerable ^discretion ^in ^its ^decision ^taking. ^The ^sanctions ^available ^to ^minimise ^the ^agency ^losses ^include ^budgetary ^cuts, ^dismissal ^of ^personnel, ^non ^compliance ^with ^the ^decisions ^of ^the ^agency, ^introduction ^of ^new ^legislation ^to ^overturn ^a ^decision ^of ^the ^agency ^and ^even ^a ^change ^of ^the ^charter ^of ^the ^agency. ^There ^are ^severe ^limits ^to ^the ^effectiveness ^of ^all ^those ^types ^of ^sanctions ^in ^relation ^to ^the ^ECJ. ^Biting ^budgetary ^cuts ^may ^undermine ^its ^ability ^to ^carry ^out ^its ^assigned ^role ^of ^adjudication. ^The ^judges ^are ^appointed ^for ^(renewable) ^terms ^of ^six ^years. ^National ^governments ^cannot ^dismiss ^serving ^judges; ^nor ^can ^they ^single ^out ^non ^grata ^judges, ^since ^the ^Court ^announces ^its ^rulings ^under ^the ^rule ^of ^unanimous ^consent ^and ^no ^dissenting ^views ^are ^published. Non com^pliance ^by ^government ^of ^a ^member ^state  ^singles ^out ^the ^member ^state ^as ^an ^uncooperative ^player, ^while ^in ^addition, ^it ^pits ^the ^government ^of ^the ^member ^state ^against ^the ^domestic ^courts ^which ^apply ^the ^ECJ ^rulings. ^Introducing ^new ^legislation ^to ^reverse ^Court ^rulings ^is ^not ^an ^option. ^Effectively, ^the ^ECJ ^rules ^on ^constitutional ^matters, ^the ^compatibility ^of ^national ^law ^with ^EC ^legislation ^and ^the ^interpretation ^of ^the ^latter, ^and ^no ^secondary ^legislation ^can ^reverse ^the ^constitutional ^provisions. ^Changing ^the ^constitutional ^provision ^or ^changing ^the ^role ^and ^the ^functions ^of ^the ^Court ^requires ^treaty ^revision, ^which ^renders ^it ^as ^an ^extremely ^costly ^option ^since ^it ^can ^only ^be ^accomplished ^after ^calling ^an ^intergovernmental ^conference, ^securing ^agreement ^by ^unanimity ^and ^ratification ^by ^each ^member ^state. ^The ^latter ^implies ^that ^the ^threat ^of ^revising ^the ^Court’s ^mandate ^may ^lack ^credibility ^and ^diminish ^its ^value ^as ^a ^sanction. ^It ^then ^follows ^that ^the ^ECJ ^is ^in ^a ^position ^to ^exercise ^autonomous ^influence on ^European ^public ^policy by delivering rulings which ^are ^closer ^to ^its ^own ^preferences ^rather ^than ^those ^of ^the ^member ^states, ^(principals).

The unanimity in reaching decisions is consistent with the presumption that judges spread responsibility for a verdict equally amongst themselves strengthening the validity of the ruling and minimising the opportunity for contesting the decision reached.

Needless to say, ^the ^discretionary ^power ^of ^the ^ECJ ^is ^not ^without ^limits. ^Two ^constraints ^are ^noted, ^in ^particular. ^On ^the ^one ^hand, ^it ^must ^enjoy ^enough ^support ^in ^the ^legislative ^bodies, ^so ^that ^attempts ^to ^repeal ^its ^decision by the other political organs of the EU ^can ^be ^blocked. ^On ^the ^other ^hand, ^its ^interpretation ^of ^the ^law ^must ^have ^the ^support ^of ^the ^national ^court ^that ^asked ^for ^the ^ruling. The former issue has been analysed using the spatial model of public choice theory. However, no analogous treatment of the latter using the same tool of analysis is found in the literature. The next session aims to fill this gap.

IV.	A spatial model of the discretionary power of the ECJ.

This section applies the spatial model of public choice theory to explore in detail the interaction between the national courts and the ECJ. Specifically, given that the most preferred policy outcome of a national court may differ from that of the higher national authorities, (since it is only under this circumstance that it makes sense for the national court to seek ways to implement its most preferred policy), we show how the ECJ can position its ruling to pursue its own preferences. Since the ECJ can act as an independent policy maker, we study the range of its discretionary powers, that is, the set of policy outcomes that it can sanction without by its rulings being overturned by new legislation. 

For the use of the spatial model in studying the impact of courts in policy making see McNollgast (1990), Ferejohn and Shipan (1990), Gely and Spiller (1990) and Ferejohn and Weingast (1992). The spatial model has also been applied by Cooter and Drexl (1994) and Bednar, Ferejohn and Garrett (1996) to study the interaction between the governments of the member states and the ECJ under alternative majority voting rules.

To simplify, but without loss of generality, we assume a single dimension policy issue, so that the set of possible policy points is depicted as a straight line and can be ranked from “small” to “large” as one moves from the origin to the right, as shown in Figure 5. For example, the dimension of choice may be restrictions on tobacco advertisement, constraints on the content of a particular substance in a product (e.g., a harmful chemical) or removal of restrictions on the freedom of movement. The origin 0 indicates the absence of relevant legislation on the level of the measure. It is assumed that all political actors, including courts, have a most preferred or ideal point along that line and that their preferences over different policy points depend only on the Euclidean distance of the policy outcome from that ideal point. That is, given its ideal point, where  utility is maximised, a decision maker prefers policy outcomes closer to its ideal point than further away from it and will be indifferent for equi-distant points to the left or the right of the ideal point. 

Let point C denote the most preferred policy (ideal point) of the national court and point G denote the ideal point of the higher national authorities of the same member state. In the first instance, it is assumed that  G < C. Other things being equal, the bigger the distance between G and C, the larger the utility loss suffered by the national court if G is implemented. Let C(G) denote the point where the size of the policy measure has been set at such a large value (and is therefore so far away from the ideal point of the court) that the national court is now indifferent between G and C(G), that is, CG=CC(G) and the national court will prefer C for any policy further to the right of C(G). Similarly, let G(0) denote the point where the higher national authority is indifferent between 0 and any further increase in the level of the policy measure, that is, G0=GG(0). To simplify, it is also assumed that G is the ideal point of the member state with preferences farthest to the left in the dimension of choice whose vote is required to pass EC legislation (unanimity or qualified majority voting as the case may be). Finally, let X represent the ideal point of the member state with preferences farthest to the right (that is, in favour of the largest policy value) and whose vote is required to pass EC legislation. Thus, policy points between G and X are stable equilibria, in the sense that they cannot be overturned in the Council, while measures represented by points to the left of G or the right of X will never be enacted. In a national setting without access to the supranational legal system, the national court has few, if any chances, to see policies close to its ideal point implemented, since the further away from G the ruling of the national court is, the more likely that the higher national authority will reverse it on appeal or by new legislation.

For simplicity we have abstracted from the role of the Commission to propose legislation and of the European Parliament whose consent is also needed under the co-decision procedure to pass legislation. For a recent analysis of the latter, see Cooter and Drexl (op.cit.), Bednar et al. (op.cit) and Tsebelis and Garrett (2000).

When the national court is given the option to refer the case to the ECJ and apply its ruling, the set of attainable policy points changes dramatically. The very act of a request for a reference by a national court signals its willingness to accept the interpretation given by the ECJ. The ECJ will be informed of the preferences of the national governments through the “observations” sent. It can then offer a ruling that is acceptable to the national court that referred the case and will not be reversed by the relevant majority of the legislative bodies of the EC. Effectively, upon following the ruling of the ECJ, the policy that is implemented must be close enough to C to confer utility benefits to the national court and lie within the GX interval. The question is then to find the range of policy outcomes that the ECJ can implement when it interprets the law, denoted by E. Three configurations of the preferences of national courts and higher national authorities are possible, namely: (1) G < C < X; that is, the ideal point of the national court lies between the ideal point of the authorities in its own country and the ideal point of the pivotal voter in the Council with preferences farthest to the right. (2) G < X < C; that is, the ideal point of the national court is at a level higher than that preferred by the pivotal voter in the Council with preferences farthest to the right.  (3) C < G < X; that is, the ideal point of the national court is at a level smaller than that preferred by the country’s national authorities. 

(1) G < C < X. This is the most complicated setting since several different structures of preferences are possible as detailed in panels 1.a to 1.g of Figure 5. 
(a) When G < G(0) < C < C(G) < X. Compared to G, the national court is better off with an ECJ ruling that lies in the interval G(0)C(G), but will be worse off with an ECJ interpretation of the law represented by points to the right of C(G). The higher national authorities will not object to a policy level at the interval GG(0), but they will object to policy points to the right of G(0). However, in so far as enacting legislation to reverse the ECJ ruling (or reform of the ECJ itself), requires support from the member state with preferences for a larger policy level, X, the necessary majority is lacking and the ECJ ruling to the right of G(0) cannot be overturned. It then follows that the discretionary power of the ECJ is represented by the G(0)C(G) range.

(b) When G < G(0) < C  < X < C(G). Since a decisive majority in the Council ceases to exist to the right of X, the discretionary power of the ECJ is now G(0)X.

(c) When G < GG(0) < C  < G(0) < C(G) < X, where GG(0) denotes the mid point of the distance GG(0). Since the national court will suffer utility losses with an ECJ ruling to the right of G(G) the range of discretionary policy of the ECJ is in the interval G(0)C(G). 

(d) When G < C < GG(0) < G(C) < G(0) < X. In this case, the level of the policy measure most preferred by the national court exceeds the ideal point of the national authorities by a small margin only (C is rather close to G). This limits the range of discretionary action of the ECJ to the distance CC(G).

(e) When G < C < C(G) < X < G(0). Similarly to the reasoning of the previous case, the discretionary range of the ECJ is CC(G).

(f) When G < C < X < G (0) < C(G). Even though the national court would not object points up to G(C), in the present circumstance, C is close to X rendering the interval CX as the range of ECJ discretion (recall that rulings beyond X will be repealed by new legislation).

(g) When G < C < X < C(G) < G(0). Following the same reasoning as in the previous case, the discretionary range of the ECJ is CX. 

(2) G < X < C. Under this structure of preferences the ideal point of the national court is further to the right than the upper limit of stable equilibria X. Nevertheless, the national court will still prefer a policy outcome to the right of the ideal point of its own national authorities G. The discretionary power of the ECJ is then the interval GX.

(3) C < G < X. In this setting, any policy point to the right of G will make the national court worse off. If it applies for a preliminary ruling, the ECJ  can implement a policy outcome anywhere in the interval GX with fear of being reversed by new legislation. The optimal response for the national court is therefore not to apply for a preliminary ruling. The ECJ will then have no effective power whatsoever (since it cannot initiate legislation, only the Commission can do so). This finding serves to reiterate the point that, even though the preliminary reference mechanism offers an instrument of empowerment, the instrument will be taken up by the national court only if its preferences regarding policy outcomes differ from those of the higher national authorities and are better served by the ECJ.
 
In sum, the discretionary range of ECJ rulings is as follows
For	G<C<X 	=>	{min[C,G(0), C(G)], min[C(G),X]}. 
For	G<X<C 	=>	{G,X} 
For	C<G<X	=>	0
Note that the above ranges denote the intervals of feasible outcomes, that is, those that the ECJ can implement in practice, without its rulings being overturned. If the policy outcome most preferred by the ECJ (equivalently, maximising its utility however defined) lies within the above region, it will be able to apply it in practice. On the contrary, if it lies further to the right of the feasible range, it will not be able to pursue it and will have to contend itself with a policy outcome corresponding to C(G). 

A number of important corollaries follow from the above exposition. First, with G<C<X (that is the ideal points of the national court and the pivotal country are both aligned to the right of G), the range of policy outcomes that the ECJ can pursue will be wider, the further to the right the ideal point of the national court applying for a preliminary ruling from the ideal point of the higher national authorities, and the closer to the ideal point of the pivotal voter in the Council.

Second, given the institutional arrangements needed to reverse an ECJ ruling, the policy preferences of national courts along with those of the pivotal voter in the Council with preferences furthest to the right in the dimension of choice constitute effective constraints on the policy outcomes that ECJ can pursue. This further implies that in interpreting the founding treaties the ECJ can pursue a more expansive account (up to the upper bound described) not necessarily envisaged by the original and enacting legislators. 

Third, in so far as different countries have different preference configurations for different policy fields, where such configurations are captured by points like G, C and X, the pace of applications for preliminary rulings and consequently the extent of legal integration will differ across the different countries and across the different policy fields. This result may well explain the cross country variation in national court acceptance of the doctrines of direct effect and supremacy observed in practice (documented by amongst others, Golub, 1996, and Mattli and Slaughter, 1998). 

Fourth, institutional reforms, which reallocate legislative power in the EC within the Council and between the Council and the European Parliament (following the Amsterdam Treaty of 1997), will affect the range of discretion of the ECJ to the extent that they make more (or less) easy to reverse its rulings.

VI.	Summary and Conclusions

The present study demonstrated how the process of legal integration in Europe, and more specifically, the use of the preliminary system, can be considered as the outcome of optimising behaviour on the part of three groups of decision makers, litigants, the national courts and the European Court of Justice. The three together form a complex of causal relationships that generate demand and supply for interpretation of EC law. Litigants have an economic stake deriving from (or lack thereof) integration. They are the primary source of demand for law rulings and their ultimate recipients, rendering the level of economic activity and the financial and legal terms by which they can access the justice systems of their home countries as an important determinant of demand for preliminary rulings. However, such demand becomes effective only when national courts refer to the ECJ, which is the ultimate source of supply. National courts will turn to the ECJ when the expected benefits from referring in terms of ability to implement their own preferred policy outcomes exceed the benefits from not referring. The ability of national courts to influence policy is much weaker in the national context of each member state than in the supranational context of the EC, where national courts implement the authoritative interpretations of the law given by the ECJ. The rulings of national courts can be overturned and altered more easily by higher national authorities than the rulings of the ECJ can be altered by the equivalent authorities of the EC. An additional cause of the buoyancy in the growth of references has been the absence of rationing of demand by price. For the ECJ, the use of the preliminary ruling system offers both a source of cases to deal with as well as an opportunity to exercise an autonomous influence in determining policy outcomes. The ECJ has been delegated with the authority to resolve the problems that result from the unpredicted aspects of  transnational co-operation, while it has also been endowed with procedures and  mechanisms that minimise the ability of states as principals to meddle with and bias its decisions. The ECJ has therefore room to pursue its own most preferred policies regarding the interpretation of the law, but, within a given institutional framework, its range of discretion is constrained by the position of the policy preferences of  national courts and government authorities of the relevant member states. 

The application of public choice methodology suggests a more eclectic view than those suggested by both intergovernmentalism, which gives a prominent position to the governments of the member states, and supra-nationalism, which considers the Court as serving faithfully the interests of a “nascent” supranational society. In terms of the delegation relationship outlined above, intergovernmentalism assumes that principals can always control fully the agents. Supranationalism is largely “apolitical” ignoring the motives and opportunities of the various sets of players to advance their own interests. The eclectic view models both the national courts and the ECJ as decision takers pursuing their own objectives, subject to the relevant institutional constraints, and interacting with other relevant players in the policy making game. Intergovernmentalism and supranationalism would then both appear as polar cases occupying opposite extremes, which would be valid only under restrictive circumstances.

Table 1A. Average number of references per member state 
(during the period of membership)
_____________________________________________________________________
Country	Number	Country	Number	Country	Number
_____________________________________________________________________
Austria		  9.75		Germany	31.67		Netherlands	12.35
Belgium	12.26		Greece		  3.92		Portugal	  2.67
Denmark	  3.00		Ireland		  1.55		Spain		  5.08
Finland	  	4.00		Italy		13.59		Sweden	  5.67
France		16.18		Luxembourg	  1.09		UK		10.13
_____________________________________________________________________

Table 1B. Composition of references by legal subject matter, 1958-98
_____________________________________________________________________
Subject Matter			per cent	Subject Matter			per cent
				of the total					of the total
_____________________________________________________________________
Agriculture			21.42		Establishment			  6.14
Free Movement of Goods	17.68		Social Provisions		  5.01
Social Security		  9.43		External			  2.31
Taxation			  7.31		Free Movement of  Workers	  4.29
Competition			  6.76		Environment			  4.29	
Approximation of Laws	  4.61		Commercial Policy		  1.59
Transportation			  1.63		Other Domains		10.26
_____________________________________________________________________

Source: Stone Sweet and Brunell (1999)

Figure 3. The process of demand and supply for preliminary rulings

	           Demand for 	            Demand for	      
Private				     National				European
Transactors	    Litigation	     Courts	Preliminary ruling   	Court of
									Justice
	             Supply of       	           Supply of	     

_____________________________________________________________________

Figure 4. The structure of the decision of national courts

						       (P)
						               Ruling not reversed by higher
							       national authorities  U(C)

			       	Rule on the case   			
							
						                  Ruling reversed by higher
	National				             national authorities  U(G)-Q
	court	          			       (1-P)

			    	Refer the case to
			    	the ECJ U(E)-S

_____________________________________________________________________

Figure 5. The range of discretionary power of the ECJ

(1)	G < C < X

(a)	G < G(0) < C < C(G) < X
						 ----------------- E --------------
			 							      	
0 			G			G(0)	C		      	C(G)	X

(b)	G(0) < C  < X < C(G)
						------------ E  ----------|
			 								
0 			G			G(0)	C		X	C(G)

(c)	G < GG(0) < C  < G(0) < C(G) < X
						--- E---
			 								
0 			G		C	G(0)	C(G)		X	

(d)	G < C < GG(0) < G(C) < G(0) < X
				|----E---|
			 							
0 			G	C	C(G)	G(0)			X	

(e)	G < C < C(G) < X < G(0)
				|---E ---|
			 		      					
0 			G	C      C(G)   X G(0)				

(f)	G < C < X < G (0) < C(G)
					|- E -|
			 		     						
0 			G		C    X	G(0)	C(G)			

(g)	G < C < X < C(G) < G(0)
				|- E -|
			 	     	      					
0 			G	C    X   C(G)	G(0)				

(2)	G < X < C
			 |--- E----|
			 	   	     						
0 			G	   X	C    	G(0)	C(G)			

(3)	C < G < X

0	C(G)	C	 G  	 		G(0)	 		X	

G:	Ideal point of higher national authorities of member state
C:	Ideal point of national court which has to choose whether to refer to the ECJ
X:	Ideal point of the member state in favour of the largest policy level
E:	Policy point implemented by the European Court of Justice
C(G):	The national court is indifferent between G and C(G)
G(0):	The higher national authority is indifferent between 0 and G(0)

Preferences						Discretionary power of the ECJ

G < G(0) < C < C(G) < X			=>		G(0)C(G)
G(0) < C  < X < C(G)				=>		G(0)X
G < GG(0) < C  < G(0) < C(G) < X		=>		G(0)C(G)
G < C < GG(0) < G(C) < G(0) < X		=>		CC(G)
G < C < C(G) < X < G(0)			=>		CC(G)
G < C < X < G (0) < C(G)			=>		CX
G < C < X < C(G) < G(0)			=>		CX
G < X < C					=>		GX 
C < G < X					=>		No referral

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^Notes