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October 15, 2019

The von der Leyen Commission: Some Preliminary Observations


On 10 September 2019, European Commission President-elect Ursula von der Leyen proposed the structure of what she called the "Geopolitical Commission". One of her most notable moves was that Danish commissioner Margrethe Vestager, promoted to Executive Vice-President, kept the competition portfolio. But keen Brussels-watchers will be looking for other early signs of how von der Leyen, this daughter of a former Director-General for Competition, will want to position her team when it comes to issues affecting the business community, such as competition policy, regulatory activity, financial stability, and trade. Important in this context is also how the set-up of her team compares to that put in place by her predecessor Jean-Claude Juncker in 2014. We intend to update this Advisory once von der Leyen has obtained approval for her team, in its final composition, from the European Parliament. 

For a start, the team put forward by von der Leyen may be characterized as more diverse than that of her predecessor. Quite uniquely, she is aiming to achieve gender balance among the 27 proposed commissioners (the UK not having proposed a commissioner in view of their expected withdrawal from the EU on 1 November, the expected starting date of the new Commission). This compares favorably to the nine female commissioners in the Juncker Commission. 

More political diversity is also an issue. In the May 2019 elections for the European Parliament, the former 'grand coalition' of Christian-Democrats (EPP political group) and Social-Democrats (S&D political group) lost its absolute majority, such that support from other groupings like the liberals (Renew Europe political group) will be required to back the new Commission. This became obvious last July when von der Leyen's nomination was somewhat narrowly approved by the European Parliament including the support from the liberals. Consequently, the top leadership of her Commission is no longer built on the traditional Christian-Democratic and Social-Democratic tandem, but has been broadened to also include the liberals. Keeping Dutchman Frans Timmermans (S&D) as First Vice-President, von der Leyen has created below her a triumvirate of three so-called Executive Vice-Presidents representing the three main political groupings in the European Parliament, composed of Timmermans, Margarethe Vestager (Renew Europe) and Former Latvian Prime Minister Valdis Dombrovskis (EPP). 

Juncker introduced a system of Vice-Presidents (previously a largely ceremonial title) in which he delegated to the initially seven, currently five, Vice-Presidents powerful coordination tasks by letting them chair groups of commissioners ("project teams") preparing policy proposals in various areas. Under Juncker, only a few Vice-Presidents had the possibility to utilize directly the resources within the corresponding policy departments. Instead they largely relied on staffers from the secretariat-general that operated under the instructions of the President. Von der Leyen has kept this system, but in addition given each of the three Executive Vice-Presidents an explicit portfolio with the possibility to give direct instructions to the policy departments concerned, in addition to their task of coordinating groups of commissioners with the help of the secretariat-general. This gives the three Executive Vice-Presidents more ability to command resources to fulfill their instructions from van der Leyen.

While the explicit portfolios of Timmermans (climate action) and Dombrovskis (financial services) are a logical extension of their coordination responsibilities—respectively "European Green Deal" and "Economy that works for the People"—it is remarkable that Vestager has been able to retain the competition policy portfolio in a new administration, a development not seen since the 1960s. As Vice-President, she also is responsible for the coordination of "Europe fit for the Digital Age", a position that brings her closer to the industry she is currently scrutinizing as the commissioner for Competition. It is also noteworthy that, as regards her competition brief, von der Leyen is asking her to "develop tools and policies to better tackle the distortive effects of foreign state ownership and subsidies in the internal market". Under current rules the Commission has not taken into consideration the effect on competition of foreign subsidies or state-owned enterprises. On the other hand, while the directive to Vestager mentions ongoing evaluation of merger control, there is no visible sign that Vestager is asked to make changes to the merger rules to favor mergers involving EU companies. This is significant because changes to merger policy were urged by some officials after the Commission prohibited some highly visible pan-European mergers (e.g. Siemens-Alstom). 

Von der Leyen also has given a strong signal on where she wants to head with European industry by making the candidate French commissioner responsible for no less than three departments, covering digital issues, the internal market and the defense/space industry. This commissioner will prepare a "Digital Service Act" that will undoubtedly seek to further regulate digital platforms operating in Europe. She is also asked to address the distortive effects of foreign subsidies, such as for public procurement. While she generally reports to Vice-President Vestager, she also will work with Vice-President Dombrovskis for two strategies she is instructed to prepare, on industrial policy and on small and medium sized enterprises respectively.

In a similar vein, former Italian Prime Minister Paolo Gentiloni, who becomes commissioner dealing with the euro and taxation, will have to prepare a proposal for a "Carbon Border Tax" under the joint guidance of Vice-Presidents Timmermans and Dombrovskis. This tax is one example of measures that could be put by Timmermans under his "European Green Deal" that strives to make Europe climate-neutral by 2050 and that could significantly impact business. Indeed von der Leyen has already announced that she wants to introduce support measures for (European) industries affected by this key policy objective. 

As an apparent compensation for those who fear too much new regulation under the von der Leyen Commission, Vice-President Maroš Šefčovič, who was moved to Interinstitutional Relations and Better Regulation, has been tasked by von der Leyen to devise an instrument to apply the "one-in, one-out" principle for reducing regulatory burden of new policy proposals. This principle, which represents the simple idea that any increase in regulatory burden from new regulations should be compensated by a corresponding decrease in burden somewhere else, will be challenging to implement in practice. One reason is the multi-layered legislative decision-making structure in the European Union, under which amendments by lawmakers to proposals from the Commission are not systematically checked for their impact on regulatory burden. Another is that EU member states do not report systematically on the way in which they transpose EU directives into national law. So-called "gold plating" of EU rules, whereby EU member states add on more rules than is necessary when they do this transposition, is allegedly one source of regulatory burden.

By proposing her "Geopolitical Commission", von der Leyen sends a strong signal about promoting the interests of EU industry in the digital age and ensuring a level playing field world-wide, whether it concerns carbon emissions, tariff wars, subsidies, procurement, market access or investment policies. A newly formed team of close advisers of her commissioners will scrutinize the external impact of her policies on a weekly basis in view of preparing strategic discussions in the college of commissioners. But first, after some initial candidate Commissioners had to be replaced after hearings in the European Parliament, she needs to get her final team approved with an up or down vote of approval in the plenary meeting of the European Parliament, originally scheduled for 23 October, 2019. 

* Dr. Alexander Italianer is a Senior International Policy Advisor

© Arnold & Porter Kaye Scholer LLP 2019 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.