Soft Law’s Increasing Clout

The non-binding nature of soft law is rather self-evident, yet, its influence is growing, as reflected in the recent Jemerak case, decided on 5 September 2024. While the judges in Luxembourg explicitly stated that the Commission’s guidance document had no effect on their interpretation of Union law whatsoever, their decision de facto indirectly reviewed that document. Moreover, the Commission’s soft law instrument predominately triggered the very dispute concerning the interpretation of Regulation 833/2014 that led to the preliminary reference ruling. I argue that the Jemerak case exemplifies the growing significance of soft law. Accordingly, EU institutions should exercise more caution when producing soft law instruments – it is not only the real-life consequences of such instruments that necessitate a more careful approach to their drafting but also the possibility of indirect review in the course of a judicial proceeding.

European soft law as authority

EU soft law refers to an array of instruments that some EU institutions use primarily to clarify European law and its application or as an alternative regulatory means. The most important feature of EU soft law is that it has no legally binding effect. After all, this is what makes it soft law. European soft law can take many forms, such as recommendations, guidance, white papers, opinions and so on. What makes such documents stand out is their authoritativeness. Coming usually from the very top and resulting from the work of qualified specialists employed by the institutions, soft law instruments draw attention and, in the absence of any legally binding interpretation, serve as the first point of reference when one is faced with legal uncertainty.

Saying that EU soft law is completely powerless and produces no consequences whatsoever would be a grave mistake. On the one hand, in Art. 288, the TFEU clearly establishes that “recommendations and opinions shall have no binding force.” On the other hand, European soft law can hardly be ignored and, in indirect and not easily traceable ways, shapes the application of Union law at least to some extent. It is not surprising that, like in Jemerak, soft law can find itself under judicial scrutiny.

The often-cited case in this context is Grimaldi which was decided in 1989. The case concerned an Italian migrant worker who worked in Belgium for decades. Due to the extensive use of a pneumatic drill, Grimaldi acquired Dupuytren’s contracture. The Occupational Disease Fund refused to recognise the condition as an occupational disease because it was not included in the respective national schedule of occupational diseases. Yet, Grimaldi’s condition was likely to fall within one of the categories listed on the European schedule of occupational diseases which, however, was only a recommendation. Expectedly, the Court of Justice decided that recommendations had no legal effects and, hence, did not produce any rights that individuals can invoke before a national court. At the same time, the Court also noted that it would be wrong to say that recommendations had no effect whatsoever. In the Court’s words, “[t]he national courts are bound to take recommendations into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding Community provisions.”

The Grimaldi case created some considerable uncertainties. If an instrument is not binding, why does a national court have to take it into consideration? Also, how much should the consideration of a soft law instrument influence the court’s decision? Against the background of Grimaldi, European soft law is bound to play a role in the understanding and development of Union law. Among other things, this is evident from the judgment handed down by the Court of Justice on 5 September 2024.

The Jemerak case

The judgment in Jemerak resulted from the refusal of a Berlin-based notary to authenticate the sale of a flat located in the German capital. The apartment was owned by a company registered in Russia and having its office in Moscow. Explaining the refusal, the notary cited Regulation 833/2014. The Regulation sets out a list of restrictive measures adopted against Russia. Amended several times since 2014, the Regulation now prohibits the provision of legal advisory services to legal persons established in Russia. The prospective buyers, two German nationals, and the flat’s owner challenged the notary’s refusal in Landgericht Berlin which referred the matter for a preliminary ruling.

The key question facing the Court was whether the notary’s services, namely the authentication and execution of a sale of immovable property, were covered by the meaning of legal advisory services and, as a consequence, caught by the reach of the respective restrictive measures.

When deciding on this question, both Advocate General Medina and the Court mentioned a guidance document produced by the Commission under the title of “Frequently asked questions concerning sanctions adopted following Russia’s military aggression against Ukraine and Belarus’ involvement in it.” This soft law instrument was brought up by the referring court in its order of reference. The document is regularly updated. The relevant part in the version updated on 21 December 2022, clearly said that “notarial services are covered by the prohibition under Article 5n(2) of Council Regulation 833/2014 if they are provided to an entity established in Russia.” The guidance also noted that even when a service is mandated or required by the law, which is likely to be true when a transaction concerns immovable property, it is still covered by the restrictive measure.

In her opinion, Advocate General Medina paid attention to the effects produced by the Commission’s guidance document. When reciting the order of reference from Berlin, the Advocate General wrote that “[e]ven though the opinion expressed by the Commission is not binding, it creates a significant degree of uncertainty as to the correct interpretation of that provision.” Advocate General Medina seems to note the far-reaching consequences of the guidance document due to its authoritative nature. Indeed, in the absence of a binding or at least more reliable interpretation, this instrument of soft law affected how the Regulation was applied and led to some real-life consequences, such as the Berlin notary’s refusal that gave rise to the case. In her core analysis, the Advocate General stated that the Commission’s guidance document was “of no consequence” and that it could not determine the result of her analysis “in any manner.”

The Court of Justice also mentioned the guidance document in the part dealing with the order of reference, albeit in less decisive formulations. Specifically, the Court said that, “[a]lthough that guidance is non-binding, it gives rise to uncertainty as to the correct interpretation of that provision.” Unlike the Advocate General who wrote about “a significant degree of uncertainty,” the Court acknowledged just “uncertainty” without specifying its scale. Yet, even this passage is notable as it may amount to the judicial acknowledgement of the effects that the soft law instrument produced.

Following the Advocate General’s suit, the Court of Justice decided that Regulation 833/2014 did not cover the notary’s services. The Court produced an analysis that included, among other things, the ordinary meaning of legal services, as well as one of the recitals of Regulation 2022/1904 (amending Regulation 833/2014) that explicitly included “preparation, execution and verification of legal documents” within the ambit of legal advisory services. The Court also took into account the position of a notary within the German legal system and the legislative context of Regulation 833/2014. In essence, the Court saw the German notary as the holder of a public office who does not advise their clients and is equally distanced from both parties to a transaction. Lastly, it is notable that, in the course of the hearings, the Council stated that it was not its intention to make it impossible for the legal persons established in Russia to dispose of their immovable property in the EU.

Consequences

The judgment has some considerable consequences. In the first place, it affects the reach of the EU’s restrictive measures and is likely to be criticised by some with regard to how it perceived the nature of the notary’s work. However, this blog post is concerned with the blow to the Commission’s authoritativeness when it comes to soft law instruments, as well as how this judgment evidences the growing importance of European soft law.

Although the Court did not review the Commission’s guidance document, the judgment essentially annulled a part of the guidance document. Of course, the Court did not adjudicate whether the guidance document was compatible with EU secondary law, but noted the non-binding nature of the guidance document. The Advocate General made it even more clear that the document had no legal effects. Yet, in essence, the judgment leads to the conclusion that the Commission misinterpreted Regulation 833/2014 and made a mistake in its soft law instrument. With some reservations, one can say that, at least indirectly, the Court of Justice reviewed the Commission’s guidance document.

The Jemerak case signifies the growing importance of EU soft law. Both the Advocate General and the Court seem to recognise that the Commission’s guidance document was at least partially responsible for the legal uncertainty that led to this preliminary ruling. The judgment makes it clear that the Commission, as well as other institutions, should be more careful when drafting their soft law instruments. First, they produce real effects. The authors of soft law instruments should be mindful of the importance and potential of such instruments. Second, they can be reviewed, albeit in a non-explicit manner, by the Court of Justice. Although non-binding, “soft” law instruments must never conflict with “hard” EU law.