On the Enforceability of EU Agencies’ Soft Law at the National Level: The Case of the European Securities and Markets Authority

The delegation of more and more soft regulatory powers to EU agencies occurs in an increasing number of policy areas, e.g. aviation, medicines and financial services. Although the growing scope of the delegation of public authority to agencies is said to be necessary to enhance the effectiveness of EU policies, it raises doubts concerning the legitimacy of agencies and their decisions at the same time. This article aims to contribute to the ongoing discussion on EU agencies’ regulatory powers by uncovering the problematic aspects which the application and enforcement of soft law rules of EU agencies may induce at the national level. Furthermore, it adds new elements to the wider reflection on the function and status of soft law within the EU. Ultimately, it argues that further procedural and good governance guarantees are required in order to ensure both the legitimacy and effectiveness of the soft regulatory powers of EU agencies. It does so by taking one of the European Supervisory Authorities (ESAs), namely the European Securities and Markets Authority (ESMA), as an illustrative example of how the establishing regulations of newer EU agencies proceed in the direction of the institutionalisation and proceduralisation of soft law rule-making.


Introduction
The proliferation of EU agencies 1 is one of the most important institutional developments at the EU level. 2 Because they are considered to be an effective tool in implementing EU policies, 3 the scope of delegation to agencies has grown not only in quantitative terms, but also qualitatively, implying the growth of agencies' powers. 4 Next to their information-gathering, cooperation, service and advice-providing tasks, EU agencies have been given regulatory powers as well. Overall, there are two main types of rulemaking through which 'EU agencies seem to provide a substantial regulatory contribution to the smooth functioning of their policy sectors. ' 5 First, agencies may participate, as technical actors, in procedures leading to the adoption of binding implementing rules, either assisting the European Commission or directly adopting technical rules. Second, they are often formally or de facto granted the power to issue soft law instruments, either to the regulatees or to other administrations participating in the sectoral network they coordinate. 6 What sets these 'regulatory' agencies apart within the broader agency population is that these powers, 'although not binding, are anything but negligible and represent a culmination of agency contribution to rule-making. ' 7 Especially the delegation of more and more soft regulatory powers to EU agencies occurs in a growing number of policy areas, e.g. in the field of aviation, medicines and financial services, in order to increase the effectiveness of EU action. 8 Indeed, the flexibility of soft law instruments allows for easy anticipation on the dynamics of societal and technological developments. Although the growing scope of the delegation of public authority to agencies is said to be necessary to enhance the effectiveness of EU policies, it raises doubts concerning the legitimacy of agencies and their decisions at the same time.
First of all, while being an increasingly important part of the Union's institutional framework, the creation of EU agencies and the delegation of regulatory competences thereto are matters that are not explicitly regulated in the European Treaties or general secondary legislation. 9 As a consequence, agencies are usually established by secondary law acts on the basis of a specific Treaty provision, such as Articles 114 and 352 TFEU. 10 Because of the absence of a general legal framework on the possibility to delegate general implementing powers to entities other than the Commission and the Council, the powers of EU agencies are still subject to the constitutional limits the Court of Justice of the European Union (CJEU) formulated in its case law. 11 In its famous Meroni judgment, the CJEU established that powers may be delegated to such organs, but this must be confined to clearly defined executive powers and does not extend to powers involving a wide margin of discretion. 12 As a result, the delegation of general regulatory powers to agencies is excluded. Yet, the delegation of soft rule-making powers to agencies seems to provide a means for circumventing the properly competent legislative bodies in the decision-making process. In addition, such delegation appears to bypass the Meroni restrictions, because they are not considered to stand in the way of allocating soft rule-making powers to agencies. 13 It must be said, though, that the relevance of the Meroni doctrine in the future is unclear, since this non-delegation standard seems to have been overturned at least in part by the CJEU in its recent ESMA -Short-selling case. 14 Secondly, EU agencies' soft rule-making acts are not legally binding by definition, but may generate both practical and legal effects. The EU Treaties do not grant any form of legally binding force to soft law documents and EU soft law cannot by itself create any rights or impose any obligations. However, soft law obtains an important authoritative function in legal practice and it appears from the case law of the CJEU that it is definitely not devoid of legal effects. 15 Soft law measures are thus not 'harmless' , especially when they are simply 'rubber-stamped' by the Commission into legally binding acts. 16 Given their lack of (inherent) legally binding force it is uncertain to what extent soft law instruments are an adequate and sufficient means to realize the regulatory goals laid down therein, and thus to what extent they can actually be effective. The purpose of a particular instrument is namely not always clearly stated by its maker or emitter. 17 The question remains, therefore, whether agencies' soft law acts put enough pressure on the Member States and other possible addressees to implement and enforce them. 18 Those concerned must be at least willing to give effect to them. 19 Thirdly, EU agencies' regulation by soft law 'is concerned with an extremely low degree of proceduralisation' . 20 There is no overall tendency to formalize the procedures through which soft law measures are adopted, no common framework for agencies' governance, and the attempts to conclude an inter-institutional agreement on regulatory agencies so far have not led to any concrete results. 21 In On the Enforceability of EU Agencies' Soft Law at the National Level: The Case of the European Securities and Markets Authority most cases, the establishing regulations and the agencies' rules of procedure do not 'envisage any kind of procedural provision concerning the elaboration and adoption of soft law measures' and 'the information available on the websites does not suggest the existence of consolidated administrative practices' either. 22 This is a problematic practice, since legitimacy requires that regulatory decision-making follows formal rules. 23 In fact, the current procedural framing of soft rule-making is of 'a very ad hoc nature' and resembles a 'patchwork blanket' , where some agencies may have put into place far more sophisticated procedural rules than others. 24 Such a practice 'does not contribute to the predictability, consistency and coherence of EU action' and the 'reasons behind the differences in approach in this regard are not always evident. ' 25 All in all, EU agencies, 'which on the basis of the law and for reasons of lack of democratic legitimacy should not have far-reaching general rule-making powers, increasingly obtain them de facto' . 26 Consequently, the current non-regulation of the delegation of regulatory powers to agencies in the Treaties and the restrictions in the case law of the CJEU 'increasingly appear out of step with the daily institutional and legal reality' . 27 Obviously, the enhancement of both the legitimacy and effectiveness of rule-making through agencies by having recourse to soft law instruments is difficult to achieve under these circumstances. Hence, given the risks this type of rule-making involves for the legitimacy and effectiveness of the EU, an adequate institutional and procedural response is called for. 28 Indeed, recent developments in specific areas of EU law demonstrate an 'increasing awareness in the Union's institutional practice of the need for procedural limits to soft post-legislative rulemaking' , 29 even if still embryonic and haphazard. 30 Especially in comparison with older agencies, it has been found that the establishing regulations of a number of newer EU agencies proceed in the direction of a proceduralisation of soft law rulemaking. 31 This is particularly the case for the European Supervisory Authorities (ESAs). Their procedures for issuing guidelines and recommendations addressed to national supervisory authorities or financial institutions are provided by their establishing regulations themselves. 32 Rather than providing answers to all questions, this article aims to contribute to the ongoing discussion on European agencies' regulatory powers by uncovering the problematic aspects the application and enforcement of soft law rules of EU agencies may induce at the national level, and argues that further procedural and good governance guarantees are required in order to ensure both the legitimacy and effectiveness of the soft regulatory powers of EU agencies. It does so by taking one of the ESAs, namely the European Securities and Markets Authority (ESMA), as an illustrative example of how the establishing regulations of newer EU agencies proceed in the direction of the institutionalisation and proceduralisation of soft law rule-making.
The article first introduces the current financial supervisory structure in which a transition of powers from the national to the European level has taken place, and explains the tasks and competences of ESMA, especially its role in the adoption of soft law instruments (Sections 2 and 3). Subsequently, the ambiguities regarding the legal basis (Section 4) and legal status (Section 5) of ESMA's soft law instruments are set out in order to demonstrate why the enforceability of these instruments at the national level presents a problem. As such, the article adds new elements to the wider reflection on the function and status of soft law within the EU. The next section devotes attention to the problems regarding the enforcement of ESMA's guidelines and recommendations in relation to the differences that exist at the national level (Section 6). The article finishes with a conclusion which advocates more proceduralisation in the adoption process of soft law measures (Sections 7 and 8).

The Europeanization of the financial supervisory structure
The Europeanization of the current architecture of financial market regulation has its origins in the so-called Financial Services Action Plan of 11 May 1999, which entailed an ambitious programme of legislative reform and intensified the presence of the European Union in financial law. On 15 February 2001, the Plan was accompanied by the Final Report of the Committee of Wise Men on the Regulation of European Securities Markets, 33 also known as the Lamfalussy Report as it was issued by the Committee of Wise Men under the direction of Baron Alexandre Lamfalussy. One of the major conclusions of the report was that the existing regulatory system at that time was too slow, too rigid, and too ambiguous. Therefore, 'a higher degree of convergence and greater Community presence in the field of enforcement' was thought to be necessary. 34 To this end, the Lamfalussy process introduced a new four-level lawmaking model in the area of financial services: While the Lamfalussy system has enhanced cooperation between EU Member States, the 2008 financial crisis challenged its foundations and revealed the necessity to reform the system by furthering integration. The follow-up De Larosière Report, 35 issued by a group of experts mandated by the European Commission under the chairmanship of Jacques de Larosière, demonstrated the weaknesses of the Lamfalussy architecture, such as low convergence and differences in enforcement laws and practices. Also, the lack of binding regulatory powers of the 'level 3 committees' , i.e. CESR, CEBS and CEIOPS, was seen as a pressing problem, since stronger powers were considered to be necessary to address the inconsistencies and enforcement deficits at the national level. 36 This in its turn has led to the transformation of the 'level 3 committees' with non-binding powers into EU agencies with legally binding decision-making and supervisory powers. The current European Supervisory Structure comprises the European Systemic Risk Board (ESRB) and the European System of Financial Supervision (ESFS). The ESRB is a new independent body for macro-prudential supervision without legal personality and legally binding powers, 37 but it does enjoy soft law powers by exerting influence through its warnings and recommendations. 38 The ESFS consists of the three European Supervisory Authorities -the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority -a Steering Committee and the national supervisory authorities.
On the Enforceability of EU Agencies' Soft Law at the National Level: The Case of the European Securities and Markets Authority ESMA is the formal successor of CESR. As such, it is created with the objective 'to protect the public interest by contributing to the short, medium and long-term stability and effectiveness of the financial system, for the Union economy, its citizens and businesses' . 39 It may be considered as one of the strongest agencies in the EU as it enjoys far-reaching regulatory, decision-making 40 , and (exclusive) supervisory powers, 41 especially in comparison with the competences of all other EU agencies. ESMA assists the European Commission in formulating and adopting a single rulebook applicable to all EU financial institutions. For this purpose, ESMA is provided with the power to participate in procedures leading to the adoption of binding rules as it has the task of developing draft regulatory and implementing technical standards in accordance with Articles 290-291 TFEU. It submits its drafts to the Commission, which may then endorse them as delegated or implementing acts, reject them, or endorse them in part or with amendments after coordinating with ESMA itself. 42 On the basis of Article 16 of its founding Regulation, ESMA is also entitled to issue soft law measures in the form of guidelines and recommendations to national supervisory authorities and financial market participants with a view to establishing consistent, efficient and effective supervisory practices and to ensuring the common, uniform and consistent application of EU law. These guidelines and recommendations are not legally binding. Yet, the competent authorities and financial institutions 'shall make every effort to comply with those guidelines and recommendations' and are called upon to provide reasons for non-compliance. 43 Hence, these soft law measures do not seem to be that 'soft' after all.
ESMA can thus be said to contribute to administrative rule-making by exercising two types of powers: participation in the adoption of implementing rules (through the drafting of regulatory and implementing technical standards) and regulation by soft law (through the adoption of guidelines and recommendations). 44

ESMA's soft law activity
In comparison with its forerunner CESR, the number of ESMA's soft law measures is rapidly growing. As of this writing, a total of 27 guidelines and recommendations have been issued by the agency, even though it has only been operative for about four years. This may be considered as a huge amount of soft law since, in comparison, CESR has issued only 41 soft law instruments over a period of ten years. 45 In the past, CESR always made a distinction between guidelines or guidance, on the one hand, and recommendations, on the other, without being clear on what the difference actually was. ESMA does not differ between guidelines and recommendations though, and refers to both terms in the titles of its documents. As such, there does not seem to be a difference regarding the use of and binding force between the two.
Regarding the addressees, according to Article 16(1) of the ESMA Regulation, the Authority addresses its guidelines and recommendations to competent authorities or financial market participants. Most of these instruments do indeed attend to the national competent authorities directly, and two of them also refer to sectoral competent authorities. 46 There is only one document in which competent authorities  are not mentioned as addressees at all, but it refers to them in the section on compliance and reporting obligations with the following sentence: 'Competent authorities to whom the guidelines apply should comply by incorporating them into their supervisory practices, including where particular guidelines are directed primarily at financial market participants. ' 47 It follows that even though the authorities are not mentioned as addressees, they seem to be under an obligation to comply nonetheless. The financial market participants are not addressed in all the guidelines and recommendations. In some instances, they are referred to as financial market participants in general, but usually they are specified, for example as Alternative Investment Fund Managers (AIFMs), investment firms, credit institutions, third-country entities, firms or Credit Rating Agencies (CRAs). As of this writing, there is only one set of guidelines that applies to ESMA itself. 48

The legal basis of ESMA's guidelines and recommendations
As was already mentioned in Section 1, there is no general legal framework for the adoption of soft law by EU agencies in the Treaties. There do exist, however, some specific secondary legislative provisions, which provide for the adoption of soft law, and as such for the legal basis thereof. With regard to ESMA, the question as to where to find the legal basis for its soft regulatory activity is also a relevant one, since it is not always clear in which situations it is empowered to issue guidelines and recommendations. Although at first glance ESMA seems to be able to issue such instruments, also on its own initiative, on whatever issue needs to be resolved in whatever area it deems this necessary and important, some subtle obstacles to its discretion to do so may present themselves. According to Article 8(2) of the ESMA Regulation, the Authority has the power to develop draft regulatory technical standards in the specific cases referred to in Article 10; to develop draft implementing technical standards in the specific cases referred to in Article 15; and to issue guidelines and recommendations, as laid down in Article 16. The first two paragraphs of Article 8(2) limit the drafting of regulatory and implementing technical standards to 'specific cases referred to in' Articles 10 and 15. 49 Therefore, there is a need for the legislator to empower ESMA in securities legislation to draft such technical standards. Articles 10 to 15 of the ESMA Regulation only provide the procedural framework for drafting regulatory and implementing technical standards. In contrast, Article 16 of the founding Regulation empowers the agency directly and explicitly to issue soft law measures. This follows from Article 16 read together with the third paragraph of Article 8(2) of the ESMA Regulation, which does not limit the issuance of guidelines and recommendations to 'specific cases referred to in' Article 16. Therefore, there is no need for the legislator to empower ESMA in securities legislation to adopt guidelines and recommendations, although there do exist regulations and directives in which such empowerments may be encountered. Since the start of its operation in 2011, ESMA has made extensive use of its wide discretion and has shown an appetite for setting the standard-setting agenda through its own-initiative guidance. 50 From this development it is also becoming clear that ESMA guidance can indeed address areas not directly addressed in the legislative framework and thus it significantly expands ESMA's sphere of influence. 51 However, the freedom as provided for by Article 16 does not necessarily mean a carte blanche for ESMA simply to adopt soft law measures in any situation. First, Article 16(1) of the founding Regulation refers to two relevant objectives for which the agency may decide to issue guidelines and recommendations: to establish 'consistent, efficient and effective supervisory practices' and to ensure the 'common, uniform On the Enforceability of EU Agencies' Soft Law at the National Level: The Case of the European Securities and Markets Authority and consistent application of Union law' . 52 There is some uncertainty, also in practice, as to whether the instruments should always address both purposes, or whether instruments dealing with one purpose are also considered adequate. If both purposes need to be addressed at the same time, it will be more difficult for ESMA to find areas in and issues for which it may issue soft law measures. In its recent review of the operation of the European Supervisory Authorities, the European Commission expressed the view that the two objectives for issuing guidelines and recommendations have to be read cumulatively. 53 Secondly, it is necessary to consider Recital 26 of the Preamble to the ESMA Regulation which provides that 'in areas not covered by regulatory or implementing technical standards, the Authority should have the power to issue guidelines and recommendations on the application of Union law' . 54 On the one hand, this Recital may imply that ESMA is indeed free to issue guidelines and recommendations on whatever issue in whatever area it deems this to be necessary and important. On the other hand, however, the Recital may be interpreted as meaning that ESMA is not always free to adopt soft law measures. It seems that if securities legislation provides for the power to draft regulatory or implementing technical standards, ESMA may not use its power to issue guidelines and recommendations.

The legal status of ESMA's soft law instruments
Although ESMA's soft law instruments prove to be a flexible instrument for convergence, the concrete legal status of these measures is surrounded by uncertainty. Even though the soft law measures are not legally binding by definition, there seems to be at least an intention of legally binding force deriving from ESMA's guidelines and recommendations on the basis of its wording and terms. In addition, also the 'comply or explain' mechanism for national competent authorities and financial market participants is indicative of a certain intention of legally binding force.

The intention of legally binding force: wording and terms
Since ESMA generally adopts its soft law instruments under Article 16 of its founding Regulation, most documents in English, including those that cover both general and detailed guidelines and recommendations, 55 contain more or less the same phrases on the status of the measures. Most texts begin to refer to Article 16 by simply stating that 'this document contains Guidelines and Recommendations issued under Article 16 of the ESMA Regulation' . In general, the documents then continue with the following statement: 'In accordance with Article 16(3) of the ESMA Regulation, competent authorities and financial market participants must make every effort to comply with guidelines and recommendations' . In fact, the choice of this wording is very interesting, since Article 16(3) itself states that the competent authorities and financial market participants shall make every effort to comply with the guidelines and recommendations. There is in fact only one document that uses the words 'shall make every effort to comply' . 56 This inconsistency may have an effect on how binding the soft law measures are supposed to be. As also follows from the case law of the CJEU, it is the wording which seems to create the binding character of the measure rather than the name of the document and the authority that has issued it. 57 The Court has asserted that 'not the chosen form of the act determines its legal nature, but rather the intention of the authors as this can be derived in particular from the actual contents of the act' . 58 Hence, if the terms of a soft law act are of an obligatory nature, 'it will be difficult to maintain that the act does not intend to impose any obligations' . 59 52 Art. 16  Subsequently, the documents seem to weaken this obligatory nature once again as they also provide that 'competent authorities to whom the guidelines and recommendations apply should comply by incorporating them into their supervisory practices, including where particular guidelines are directed primarily at financial market participants' . There even exists one set of guidelines and recommendations which explicitly states that they do not reflect obligations and that therefore the word 'should' is used. 60 Two of the documents also state that 'ESMA expects all relevant competent authorities and financial market participants to comply with guidelines unless otherwise stated' . 61 On the one hand, the wording and terms of ESMA's soft law measures seem to suggest a certain legally binding force by using words like 'must' and 'shall' . On the other hand, words like 'should' and 'expect' seem to pull in the other (non-binding) direction.

The 'comply or explain' mechanism for national competent authorities and financial market participants
Formally speaking, as guidelines and recommendations are not strictly binding on their addressees, they are not enforceable. 62 However, this does not mean that they are merely voluntary or without legal effect. 63 Indeed, on the basis of the so-called 'comply or explain' mechanism, the competent authorities and financial market participants shall make every effort to comply with the guidelines and recommendations. Whereas it is still quite unclear how binding this effort really is, it follows from Article 16(3) of the ESMA Regulation that, as a rule, all competent authorities to whom the guidelines and recommendations apply must notify ESMA whether they comply or intend to comply with the guidelines and recommendations within two months of the date of publication by ESMA (sometimes including an e-mail address, such as post-trading@esma.europa.eu 64 or info@esma.europa.eu 65 ). A template for such notification is available from the ESMA website. 66 In the absence of a response by this deadline, competent authorities will be considered as non-compliant. In the event that an authority does not comply or does not intend to comply, it shall inform ESMA, stating its reasons. ESMA will publish this fact and may also decide, on a case-by-case basis, to publish the reasons provided by the competent authority for not complying with the guidelines and recommendations. The competent authority shall receive advance notice of such publication. If required by a particular soft law instrument, financial market participants shall also report, in a clear and detailed way, whether they comply with the guidelines and recommendations. This is often reflected within the section on reporting requirements rather by excluding certain players in the field from the requirement to comply. Some examples: AIFMs, 67 financial market participants, 68 or UCITS Management Companies 69 are not required to report to ESMA whether they comply with the guidelines in question. The Board of Supervisors 70 of ESMA informs the European Parliament, the Council, the Commission, the Court of Auditors and the European Economic and Social Committee, in its annual report, of the guidelines and recommendations that have been issued, stating which national On the Enforceability of EU Agencies' Soft Law at the National Level: The Case of the European Securities and Markets Authority supervisory authority has not complied with them, and outlining how ESMA intends to ensure that the competent authority concerned follows its guidelines and recommendations in the future. This annual report is made public. 71 The fact that the agency may outline how it intends to ensure compliance in the future is of particular concern as it makes one wonder whether ESMA's soft law measures are really as soft as is suggested. In addition, at this moment we do not know what the consequences of being noncompliant are and neither do we know in what ways ESMA aims to ensure compliance. Following up on the 'comply or explain' mechanism, ESMA stimulates compliance with and the coherent application of its soft law measures by publishing so-called 'guidelines compliance tables' on its website. 72 These tables literally state which competent authorities of which Member States comply or intend to comply with ESMA's guidelines by indicating a 'Yes' in green or a 'No' in red. The practice of labelling Member States' authorities red or green, however, raises serious doubts with regard to the non-binding character of the soft law measures, since it may entail some sort of 'naming and shaming' mechanism for enforcement which results in undesirable pressure on Member States to comply anyway. Clearly, no national authority is likely to be happy with being marked in red. Up to now, ESMA has published six compliance tables on its website, 73 even though twenty-seven guidelines and recommendations have been issued. In general, as follows from the tables, all competent authorities have indicated that they comply or have this intention, and therefore all boxes are coloured green. Regarding one of the compliance tables though, five competent authorities (Denmark, Germany, France, Sweden and the United Kingdom) did not confirm their compliance or their intention of doing so. 74 ESMA decided to publish their rather technical reasons for non-compliance in this document. In general, the five non-compliant Member States intend to comply with the majority of the guidelines; however, they have no such intention regarding certain parts or provisions of the guidelines. The French Autorité des marchés financiers (AMF) provides an interesting reason for non-compliance in this case: 'The AMF declared to ESMA that it intends to comply with the full provisions of the guidelines though the said guidelines shall only enter into force as soon as they are fully applied by all National Competent Authorities throughout the EU. This is in order to avoid competition distortion between the French financial industry and that of any EU Member States partially or not applying the Guidelines. Hence, a common level playing field based on converging supervisory and market practices across the EU shall be achieved. ' 75 With this statement, France indicates the desire for consistent, efficient and effective supervisory practices and a coherent as well as common, uniform and consistent application of ESMA's soft law measures within the EU from the perspective of the Member States. It indirectly refers to the goals of the use of soft law as set out in Article 16(1) of ESMA's founding Regulation.
According to these compliance tables, Member States in general thus seem to be willing to comply with the guidelines and recommendations issued by ESMA, notwithstanding the doubts as to whether this occurs voluntarily or rather as a result of peer pressure caused by 'naming and shaming' . Hence,

Enforcement of ESMA's soft law instruments at the national level: problems and possibilities
The fact that the implementation duty, and thus the concrete legal status, of the guidelines and recommendations is very unclear, follows from the many deviations in the official translations of the texts and may lead in its turn to many different obligations throughout the EU. It also results in great variances in the ways supervisory authorities implement and/or apply the soft law measures at the national level. For this latter issue, ESMA has the competence to conduct peer reviews, which may be regarded as soft enforcement mechanisms, in order to stimulate compliance with and the coherent application of its soft law measures.

Deviations in the translations of ESMA's guidelines and recommendations
There is a tendency to be discerned in the publication of ESMA's soft law measures on its website in all the official languages of the EU. However, since only twelve out of twenty-seven guidelines and recommendations have actually been translated and only some of them stated beforehand that the document would be published in all of the EU's official languages, 76 it is still not clear whether or not all soft law measures will be translated in the future. After a comparison of the translated versions on the website of ESMA, some interesting deviations in the translations come to the fore. In most of the Dutch versions, the national competent authorities and financial market participants 'moeten zich tot het uiterste inspannen om aan de richtsnoeren te voldoen' (must make every effort to comply with the guidelines and recommendations). There is only one exception where they 'dienen zich tot het uiterste in te spannen om aan de richtsnoeren en aanbevelingen te voldoen' (shall make every effort to comply with the guidelines and recommendations). 77 Many more different wordings may then be encountered regarding the strictness of compliance: the national competent authorities and financial market participants 'zouden aan deze richtsnoeren moeten voldoen' (should comply with these guidelines), 78 'dienen deze na te leven' (shall comply), 79 'voldoen aan deze richtsnoeren' (comply with these guidelines), 80 'moeten aan de richtsnoeren voldoen' (must comply with the guidelines), 81 'dienen aan de richtsnoeren en aanbevelingen te voldoen' (shall comply with the guidelines and recommendations), 82 or 'ESMA verwacht dat alle betrokken bevoegde autoriteiten en financiële marktdeelnemers deze richtsnoeren naleven' (ESMA expects all competent authorities and financial market participants to comply with the guidelines). 83 When looking at the literal texts of the French versions, it may be noticed that in most cases the national competent authorities and financial market participants 'doivent mettre tout en oeuvre pour respecter ces orientations et recommandations' (must make every effort to comply with the guidelines and recommendations). 84 In other instances, it is stated that they 'mettent tout en oeuvre pour  85 It is also possible to observe many varieties regarding the intended legal force of the guidelines and recommendations: the national competent authorities and financial market participants 'devraient s'y conformer' (should comply with them), 86 'doivent les respecter' (must meet them), 87 'doivent s'y conformer' (must comply with them), 88 'sont tenus de s'y conformer' (are obliged to comply with them), 89 'sont tenues de les respecter' (are obliged to meet them) 90 and ' AEMF s' attend les respectent' (ESMA expects to meet them) 91 / 'l'ESMA escompte se conforment' (ESMA expects to comply with them). 92 The As appears from these two examples, the English versions demand from competent authorities that they should comply with the guidelines, the Dutch versions require the same level of compliance by stating that the national authorities 'de richtsnoeren dienen na te leven' (should comply with the guidelines), but the French versions seem to be far stricter by stating that the national competent authorities 'sont tenus de s'y conformer' (are obliged to comply with the guidelines) and 'doivent s'y conformer' (must comply with the guidelines) respectively. As a result, the soft law measures seem to be much 'harder' for the French supervisor and market participants than for the Dutch and English players in the field. Although such differences cannot be observed in relation to all the guidelines and recommendations, it is already a very serious matter that they do exist in some instances, because they create a fair degree of uncertainty as to the obligations the instruments impose on national supervisory authorities and financial market participants. It seems that one national authority or market player could be subject to a stricter regime than another one. Hence, the question regarding who translates the guidelines and recommendations becomes relevant. Are the texts translated by the national supervisory authorities themselves, by a translation centre within ESMA or by the general translation services of the EU? In the latter two cases, the differences may be the result of negligence or inattention by the translators. But if the competent authorities are the ones to translate the texts, they might alter the wording of a particular set of guidelines and recommendations and opt for a more or less binding choice whenever it suits them. This is obviously undesirable, as in some instances a soft law instrument may impose far more binding obligations on one Member State than on another. Such a practice would not only lead to great inequality before the law, but also to great difficulties in achieving the objectives of consistent, efficient and effective supervisory practices and ensuring the common, uniform and consistent application of EU law as set out in Article 16(1) of the ESMA Regulation. The questions therefore remain whether such variances are deliberately in place or are only just arbitrary. Are the differences a result of the unclear legal status and implementation duty of the guidelines and recommendations? Is it possible that one soft law instrument is more binding in one Member State than in another? These questions become even more relevant if one considers the different types of obligations that the foregoing comparison seems to demonstrate: the wording 'must comply' may hint at a result obligation whereas the terms 'must make every effort to comply' rather seem to imply an effort obligation. Therefore, the above-mentioned issues regarding the legal status and implementation obligation of ESMA's soft law instruments require further attention in future research.

The role of national supervisory authorities in the implementation of ESMA's guidelines and recommendations
The lack of clarity as to the legal status of ESMA's soft law acts may also create problems for legal unity within the EU. 93 It creates uncertainty for the national supervisory authorities that are involved in the implementation of these rules. Therefore, Member States give their own interpretation to the implementation duty with regard to ESMA's guidelines and recommendations and many different implementation instruments are being used by national supervisory authorities. The following comparison of the Dutch, French and English implementation tools demonstrates which important differences come to the fore.
The Netherlands presents a unique case in the sense that it is the only Member State that applies ESMA's guidelines and recommendations directly in its own supervisory practices. If it decides to do so, the Netherlands Authority for the Financial Markets (Autoriteit Financiële markten, AFM) publishes this fact on its website. In its publication, the AFM indicates in relation to what laws and regulations -both European and national -it will take account of ESMA's guidelines and recommendations in monitoring the compliance thereof. 94 If applicable, the AFM also identifies the companies to which the soft law applies. As such, the AFM does not implement ESMA's soft law measures, but rather applies them when monitoring compliance with national law e.g. the relevant rules of conduct of the Dutch Financial Supervision Act (Wet op het financieel toezicht, Wft), 95 or with European law, e.g. Regulation (EU) No. 36/2012 on short selling and certain aspects of credit default swaps. 96 In the United Kingdom, the Financial Conduct Authority (FCA) most often chooses to integrate the guidelines and recommendations of ESMA in a section of its Handbook of Rules and Guidance. It does so by making explicit reference to the soft law instruments 97 or by including a link to them. 98 The FCA Handbook consists of rules that do not all have the same legal value. 99 There is a categorization of the rules whose status is indicated by icons containing the letters R, E, G, D, P and C. 100 Legally binding rules are marked with an R, whilst sections marked with a G are only a guidance to aid interpretation and indicate the FCA's legal understanding. 101 Even though in general the FCA Handbook is presented as a non-binding integration instrument, it is considered by financial market participants as entailing rules that are binding upon them.
In France, the Authority for Financial Markets (Autorité des marchés financiers, AMF) has tried to incorporate all guidelines and recommendations of ESMA in its own legal framework over the years. These are presented in a table on its website. 102 As follows from this table, in most cases AMF adopts its own non-binding positions in order to integrate ESMA's soft law instruments. But sometimes guidelines and recommendations are issued by ESMA on topics already dealt with by AMF, for example in instructions. In that case, AMF does not adopt a 'position' , but continues to refer to the 'instruction' . 103 Considering the above, there is no guarantee that rules will always be uniformly applied, since important differences in the ways ESMA's soft law acts are implemented present themselves. Consequently, the common, uniform and consistent application of EU law throughout the Member States cannot always be guaranteed by soft law measures and it is not inconceivable that in this way soft law achieves the opposite result of what it intends to realize. 104 Depending on the national follow-up given to soft law acts, rights and obligations or costs and benefits derived therefrom may thus vary from one Member State to another. 105

Peer review
In order to ensure a more coherent application of its soft law measures at the national level, ESMA has the competence to conduct peer reviews by virtue of Article 30 of its founding Regulation. Reviewing the way the recommendations and guidelines have been implemented in the national jurisdictions has always been on the agenda of CESR. 106 Therefore, peer reviews are now an official task of ESMA. On the basis of Article 30, ESMA periodically organises and conducts peer reviews of some or all of the activities of the competent authorities. They are essential instruments on the road to regulatory convergence aiming at consistent supervisory outcomes. A peer review includes, but is not limited to, an assessment of the adequacy of the resources and governance arrangements of the competent authority; best practices; and the effectiveness and the degree of convergence reached with regard to the enforcement of the provisions adopted in the implementation of Union law. 107 In addition, it considers the degree of convergence reached in the application of Union law and in supervisory practice, including regulatory and implementing technical standards, guidelines and recommendations, and the extent to which the supervisory practice achieves the objectives set out in Union law. 108 On the basis of a peer review, ESMA may issue guidelines and recommendations and it takes the outcome of a peer review into account when developing its draft technical standards. 109 In this sense, the peer review process is very much linked to ESMA's quasi-rulemaking activities. 110 The outcomes of peer review are multiple: they may contribute to a better understanding of the differences between the different regulatory systems, urge lagging national supervisory authorities to perform better, give rise to initiatives in terms of regulation, guidelines or recommendations, and generally constitute a monitoring device for the state of regulation in the Member States. 111 ESMA adopts the best practices that can be identified from peer reviews publicly available, but the weaknesses and shortcomings may only be disclosed subject to the agreement of the competent authority involved. 112 This makes the use of peer reviews as a mechanism for naming and shaming very difficult as the jurisdictions identified as non-complying will strongly object. 113

Towards more procedural guarantees?
Next to the uncertain legal status of soft law instruments and the many differences at the national level resulting therefrom, EU soft law suffers from the lack of an adoption procedure in the current legal framework. Nevertheless, ESMA's establishing Regulation includes rather elaborate provisions on consultation and participation in regulatory procedures, which demonstrates the 'correlation between the scope of rule-making powers allocated to EU agencies and the level of proceduralisation' . 114 ESMA is always under the obligation to conduct open public consultations, perform cost-benefit analyses and request opinions or advice from the Securities and Markets Stakeholder Group (SMSG) when it drafts binding technical standards, but it is at ESMA's own discretion to do so when issuing guidelines and recommendations. 115 The idea behind the differences in the optional or compulsory nature of these requirements is that 'the more rule-making powers are granted to agencies, the more stringent procedural requirements need to be put into place' . 116 Besides, this confirms the increasing awareness in the Union's institutional practice of the need for procedural limits to soft rulemaking activities. 117 On the basis of the arrangements for guidelines and recommendations in Article 16(2) of the ESMA Regulation, even though they are discretionary, it is observed that the actual documents may contain several elements that could positively contribute to the legitimacy of the soft law instruments. First of all, the guidelines and recommendations may include a feedback statement from the stakeholders to the open consultation held by ESMA. The feedback statement generally includes the following elements: the On the Enforceability of EU Agencies' Soft Law at the National Level: The Case of the European Securities and Markets Authority number of responsive stakeholders, the questions asked by the agency, a summary of the answers of the stakeholders as well as the responses of ESMA thereto. Secondly, the document may include the opinion or advice of the SMSG. The Group either answers the questions that were asked to the stakeholders from its own perspective, or focuses on certain key points or paragraphs of the text of the guidelines and recommendations concerned. The advice is than published on the SMSG section of ESMA's website. It is not clear, however, when or on what basis the SMSG is asked to issue its 'advice' or 'opinion' nor is it certain whether there is a difference as to the legal status thereof. Thirdly, Article 16(2) also allows ESMA to analyse the potential costs and benefits related to the guidelines and recommendations. This results in a cost-benefit analysis annexed to the actual document which so far has only happened in three instances. 118 At this moment in time six out of twenty-seven guidelines and recommendations have comprised a feedback statement and five of them an opinion or advice from the SMSG. 119 This is obviously a result of the fact that the Authority shall conduct, only where appropriate, open public consultations and request opinions or advice from the stakeholder group, but the fact that ESMA has only used these possibilities in a couple of instances is regrettable from the point of view of legitimacy. The feedback statements, advice and opinions namely provide a great contribution to the transparency of ESMA's rulemaking procedures. The addressees obtain an insight into which considerations have been important for ESMA and to what extent it has provided a follow-up to the issues brought forward by the stakeholders as well as an overview of what issues the SMSG considers important and to what extent ESMA has dealt with them. In terms of legitimacy, both mechanisms are to be welcomed as they clearly enhance stakeholder participation. The SMSG itself serves as a permanent body of carefully selected and highly specialized stakeholders, which increases the quality of participation even more so. 120 At this point it therefore seems interesting to turn the open public consultations, cost-benefit analyses and opinions or advice from the SMSG into mandatory steps in the adoption procedure for ESMA's guidelines and recommendations. However, even though this could increase the legitimacy of soft law measures, it may possibly decrease the effectiveness thereof by making the process too rigid and rather lengthy. 121 Hence, although it can be said to put more emphasis on ex ante and ex post control mechanisms of the rulemaking process, it is important to keep the right balance. 122

Conclusion
Enhancing both the legitimacy and effectiveness of EU action by having recourse to soft law instruments seems difficult to realize if the nature, function and legal status of these instruments are far from clear. 123 This problem is not only relevant in relation to soft law by the European Commission and the Council, but, as demonstrated in this article by the issues of ESMA, it also weighs heavily upon EU agencies.
The legal basis for ESMA's guidelines and recommendations leaves us with quite some questions regarding the issues which the Agency may regulate with the help of soft law. Article 16 of the founding Regulation does not seem to provide a carte blanche, but it is not clear what its limits are either. Furthermore, there are several ambiguities in relation to the legal status of ESMA's soft law. The wording and terms of the documents provide considerable controversy as some words seem to suggest a certain legally binding force, but other words may pull in completely the opposite (non-binding) direction. In addition, the 'comply or explain' mechanism also seems to indicate a certain legally binding force of the guidelines and recommendations.
The uncertainties regarding the legal basis and legal status of the guidelines and recommendations lead to incoherence at the national level. Due to the different translations of the measures, the obligations stemming therefrom are formulated in different ways throughout the Member States. Moreover, national supervisory authorities use a wide variety of instruments for the implementation of the soft law measures. This ultimately very much complicates the enforcement thereof. Although ESMA has the competence to conduct peer reviews in order to stimulate compliance, this instrument is rather to be regarded as a soft enforcement mechanism which does not necessarily take away all the differences at the national level.
All these ambiguities seriously affect the consistency, efficiency and effectiveness of supervisory practices throughout the EU and do not help in ensuring the common, uniform and consistent application of EU law either. As a result, the goals of the use of soft law as set out in Article 16(1) of ESMA's founding Regulation cannot be achieved by the Agency and the expectations as regards effectiveness cannot be realised. Adding to this the lack of a solid procedure for the adoption of soft law measures, we may also conclude that the legitimacy issues are far from resolved.
All in all, more clarity on the legal basis and legal status of EU agencies' soft law is essential in order to contribute to the legitimacy and effectiveness of policy-making through agencies. The realization that 'the more rule-making powers are granted to agencies, the more stringent procedural requirements need to be put into place' is especially important if soft law indeed has a certain legally binding force. 124 Hence, next to a clarification of the basis, function and status of EU agencies' soft law measures, the question for future research is what stronger procedural and good governance guarantees should be put into place that would reflect a more adequate balancing of both legitimacy and effectiveness concerns. ¶