The Principle of Proportionality in Regulatory Matters
24 March 2025In the following, we briefly outline the interplay between the legal principle of proportionality and the EU Charter of Fundamental Rights (‘Charter’). The principle of proportionality plays a crucial role in regulatory matters by ensuring that legislative and administrative actions do not exceed what is necessary to achieve their objectives. The Charter, on the other hand, serves as a cornerstone of EU law, ensuring the protection of fundamental rights and freedoms across Member States.
This assessment is particularly significant in areas such as competition law, consumer protection, financial regulation, data protection, and environmental policies, where stringent rules could impact economic activities and fundamental rights. Regulatory authorities must carefully balance the need to protect public welfare with the economic and social implications of their decisions, ensuring that regulations do not impose unnecessary hardships. This principle is therefore essential in maintaining the balance between effective governance and the protection of individual rights.
Origins and basis of the principle of proportionality in EU law
The principle was formally codified in EU law by the Treaty of Maastricht in 1992, but it had been recognised by the Court of Justice of the EU (CJEU) much earlier. Its current iteration is in Article 5(4) of the Treaty on European Union (TEU), which provides that ‘[u]nder the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties’. The principle of proportionality in EU law was later developed in the Treaty on the Functioning of the European Union (TFEU), in particular in its Article 296(1), which expressly requires observing proportionality of the principle when EU legislative and administrative acts are adopted. The CJEU case-law dating prior to the TFEU innovation retains its significance.
While the express language of the TEU prima facie suggests that the principle applies to the acts of EU institutions and bodies, the CJEU’s settled case-law is clear that it also extends to Member States when applying EU law (such as regulations and directives), irrespective of the sphere of Union action concerned. This means Member States must comply with proportionality when taking measures to implement EU legislation.
In their application of EU law, Member States must also comply with the principle of sincere cooperation, according to which ‘the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties’ (Article 4(3) TEU). Compliance with the duty of sincere cooperation must also inform any proportionality assessment.
Substantive requirements
Under the principle of proportionality, Member States’ measures must be necessary to attain a legitimate objective, that is, there must be no less restrictive measures at their disposal, capable of achieving the same objective equally effectively. In other words, measures must be appropriate to achieve the aim pursued and not go beyond what is necessary to achieve it.
The CJEU has summarised the requirements of proportionality as follows: ‘the Member State must employ means which, whilst enabling them effectively to attain the objective pursued by their domestic laws, are the least detrimental to the objectives and the principles laid down by the relevant [Union] legislation’. The case-law also establishes that even if the measure is suitable and effective in attaining a legitimate goal and there are no less restrictive means to that end, the measure must not have an excessive effect on the applicant’s interests (this is described as ‘proportionality stricto sensu’). This entails a balancing exercise as to the applicant’s interests on the part of the decision-maker.
In summary, the proportionality test therefore consists of three steps:
- Is the relevant measure suitable to attain its legitimate goal effectively (suitability);
- Is the relevant measure the least restrictive measure available to achieve that legitimate goal (necessity);
- Have the parties’ competing interests been balanced adequately (proportionality stricto sensu)?
Suitability
A measure is considered to be suitable to achieve its objective, i.e. it is capable of achieving the said goal. This is assessed on a case-by-case basis, where the actual measure is considered against its immediate purported objective.
Necessity
The CJEU approaches proportionality review bearing in mind the general objectives of protecting the EU legal order, safeguarding rights arising from EU law and ensuring their proper implementation at national level. Consequently, the standard of review of the necessity requirement by the CJEU in relation to Member State action (as opposed to decisions taken by EU institutions and bodies) is very strict. Member States are prohibited from restricting rights derived from EU law more than strictly necessary and to choose more intrusive restrictions when less restrictive measures are available to achieve the relevant goal equally effectively.
Proportionality stricto sensu
As noted above, proportionality stricto sensu requires a balancing of the competing interests involved. The CJEU has held that ‘where several rights and fundamental freedoms protected by the [EU] legal order are at issue, the assessment of the possible disproportionate nature of a provision of [EU] law must be carried out with a view to reconciling the requirements of the protection of those different rights and freedoms and a fair balance between them’.
Consequences of a measure being in breach of proportionality
If, after applying the proportionality test, a measure is found not to be proportionate, it infringes EU law and, in accordance with the principle of primacy, it is invalid. As a result, national courts must not apply it (in the case of infringing legislation) or must make a finding of invalidity and offer appropriate remedies (in the case of infringing administrative decisions).
Proportionality under the Charter
Per Article 51(1) of the Charter, it applies to the Member States only when they are implementing EU law. This will always be the case in particular where Member States are applying an EU regulation, transposing a directive or acting in an area where there is another EU legal act in force, making the Charter’s scope of application quite broad.
Article 52(1) thereof further expressly provides that ‘[s]ubject to the principle of proportionality, limitations [to fundamental rights] may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others’. Therefore, the Charter serves to codify the CJEU case-law on the application of the principle of proportionality by referring to the tripartite test considered above, while expressly including the previously implied requirement that the national measure must pursue a legitimate goal.
Article 52(3) of the Charter provides that insofar as Charter rights correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR), the meaning and scope of those rights is the same as those laid down by the ECHR. However, this is subject to the possibility that EU law may provide more extensive protection to the relevant rights. Therefore, European Court of Human Rights (ECtHR) case-law regarding the corresponding ECHR rights – including any proportionality requirements – has strong persuasive value in relation to the application of the Charter, but the CJEU may recognise that the level of protection afforded by the Charter exceeds that afforded by the ECHR.
Right to good administration
Proportionality must be observed in connection with all of the rights and freedoms enshrined in the Charter (e.g. right to property, to conduct business, etc) but, from a practical standpoint, it is in particular closely linked to the right to good administration, as outlined in Article 41 of the Charter, which ensures that administrative procedures are fair, transparent, and not overly restrictive. This provision therefore has potentially quite a broader scope of application.
Whilst Article 41 of the Charter is addressed solely to EU bodies, it is settled case-law that the right to good administration is a general principle of law which binds not only EU agencies but also national authorities and can be invoked against the latter whereas Article 41 cannot. The CJEU has ruled that administrative decisions must provide sufficient reasons to allow for a meaningful review of their legality. Therefore, transparent reasoning is essential for the effective exercise of the right to good administration.
Conclusion
Overall, the principle of proportionality remains a fundamental tool in ensuring that EU regulations strike a fair balance between achieving policy objectives and upholding the rights enshrined in the Charter. By incorporating the right to good administration into regulatory frameworks, the EU reinforces its commitment to governance that is both effective and respectful of individual liberties. Moving forward, the continued application of proportionality in regulatory matters will be crucial in fostering a fair and transparent legal environment that serves the interests of all stakeholders.