To Rule or Not to Rule? Should the German Constitutional Court Have the Last Word in the Eurocrisis?
June 18, 2013
On 11 and 12 June 2013 the Bundesverfassungsgericht (German Constitutional Court; GCC) held the hearings for the ECB case. One might be forgiven to think: ‘Another case concerning the measures taken to save the Euro?!’ Indeed in 2011 and 2012, judicial contestations of the legal instruments aimed to mitigate the Eurocrisis were decided by the GCC (three times), the French Conseil Constitutionnel, the Estonian Supreme Court, the Irish Supreme Court, and the Court of Justice of the European Union (CJEU). Each court was asked to consider domestic law (e.g. national implementation measures). Yet the different legal spheres are so tightly interlocked that it would be artificial to hide behind a strict dualist reading.
By Christina Eckes
The current challenge of the ECB’s announced Outright Monetary Transactions (OMT) bond buying scheme before the GCC is different. It concerns for the first time a direct contestation of the Realakt (the public announcement of the scheme) of an EU institution. The negative decision of the German Constitutional Court would have great repercussions within the entire Eurozone, most immediately outside of Germany – in the Member States that could potentially benefit from the scheme.
Last year (2012), the ECB President Mario Draghi promised to do “whatever it takes” to save the Eurozone. The ECB established the OMT scheme, which allows it, under certain conditions, to buy bonds issued by Eurozone Member States in secondary, sovereign bond markets. However, while the ECB can buy government bonds as part of its monetary policy, it is explicitly prohibited to finance Member States. Yet it is difficult to argue with Jens Weidmann, the President of the German Bundesbank, who opines that the OMT scheme is effectively an indirect way to give out loans to other EU Member States and that Germany’s spending liability under the scheme is virtually unlimited (the Bundesbank was opposed to the OMT scheme). After the two days of hearings before the GCC, it is expected that the judgment will only be delivered until after the German general elections in September 2013.
Extraterritoriality of Judicial Decisions: Is the Situation Comparable to the Kadi Case of the Court of Justice of the European Union?
Besides the interesting and complex legal and economic questions concerning the powers of the ECB, the case raises deeper concerns about the boundaries of the jurisdiction of domestic courts. The tirelessly discussed Kadi case of 2008 comes to mind, in which the CJEU declared the EU’s implementation of UN counter-terrorist sanctions illegal. The Court was repeatedly, harshly criticized for indirectly ruling on the legality of an act of the Security Council. The present ECB case before the GCC raises parallel issues of how far a domestic court can and should extend its jurisdiction. In both cases, the defence further argued that the end (containing terrorism and saving the Eurozone) justified the contested extraordinary means – a dangerous logic, in both cases. However, the differences prevail. And, as a consequence of these differences a decision of the GCC to rule on the constitutionality (under the German Constitution!) of the ECB’s bond buying scheme would arguably be a more far-reaching expansion of jurisdiction beyond the boundaries of the domestic legal order.
Firstly, the ECB case concerns a general policy decision rather than a specific decision of listing and sanctioning individuals as terrorist suspects. Secondly, the GCC does not review a domestic act of implementation but directly the act of the external institution (the ECB). Thirdly, the EU legal order possesses a strong judiciary, which is competent to review the ECB’s acts, while the Security Council imposed sanctions on individuals in a complete judicial vacuum. Finally, a negative decision of the GCC will have far more dramatic consequences for a larger number of people, since the GCC could require the German political players to withdraw support for the EU rescue schemes, while the CJEU had no means to stop the UN sanctions regime outside of the EU legal order. The stakes are exceptionally high in the ECB case.
Whether or not an act should be judiciable could arguably be seen as a matter of principle – depending on whether the act infringes human rights or whether it has legal effects. Yet, the context, in which the act was adopted, is highly relevant – not necessarily only in strictly legal ways. Should the national court of one Member State review acts that do not originate within its legal order? Should it be able to render these external acts void? These issues are particularly pertinent since the GCC may be the only national court in that position (Germany contributes 27 % of the ESM funds followed by France with 20 %)?
Bottom-Up Challenges with Horizontal Consequences Face Deep Legitimacy Problems
In the interlocking of legal spheres within the EU context, taking account of EU legal norms within the national legal context has become common practice. In the specific context of the Eurocrisis, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG) of 2 March 2012 even required its signatories to introduce the balanced budget rule in national law through ‘provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes’. An agreement ‘preferably’ to change the national constitution is both an example of the shifts of powers to the executives through transnational cooperation and a new level of interlocking between EU law context and national constitutional law: a Treaty agreed outside of the EU legal framework specifically obliges Member States to adapt the national constitution while giving the Commission the right to propose more detailed rules and the CJEU enforcement powers. Accepting over a long time that one is part of a Union of states with all the consequences of limited legal and political autonomy, with elections for the European Parliament, and with a certain understanding that it is a union of fate – particularly visible for the common currency – changes the rules of interaction and necessarily allows for more interference in each other’s business.
However, all this may not justify that the GCC effectively decides on the fate of the Greek and Cypriote economy. While the GCC is not directly democratically legitimized, within Germany it enjoys a very high level of perceived legitimacy and public support. It is further indirectly legitimized through a politically controlled appointment procedure. The ECB case raises the question of whether such legitimacy extends beyond the boundaries of the German legal order.
As was made clear by Andreas Voßkuhle, the President of the GCC, on the first day of the hearings, the success of the OMT scheme will not be part of the Court’s considerations. However, the Court should consider the (potential) effects of its ruling. It is not the lack of economic expertise that should concern us the most. The Court questioned leading economists and there is no immediate reason to assume that well-trained and experienced judges are less well-placed than national politicians to understand the scheme. A more concerning limitation of the process is that everything is evaluated through the viewpoint of the German Constitution. The internal effects of exposing the German taxpayers to a risk of becoming liable for billions of euros will be part of the judges’ considerations – as should be the risk of what happens to German taxpayers’ money if the calming forces of the OMT are taken away. But, to what extent should and can the Court consider the external effects of an imminent bankruptcy of other EU Member States on the people of these Member States, as well as on the EU economy as a whole?
Is There an Easy Way Out? A Plea for a Preliminary Question
The existence of the Euro might be at stake if the GCC gives a negative ruling. The harm for the German economy could be much greater than the billions that it might potentially lose under the OMT scheme. At the same time, perhaps even because other constitutional courts may not be in the position to stop the ECB, the GCC should not stand idly by if this powerful institution assumes powers that arguably may be unconstitutional under EU law. After all, the ECB is no more directly democratically legitimized than the GCC and enjoys extraordinary independence.
The GCC has the mandate to protect the German Constitution and by extension the entire German legal order, including from ultra vires power grabs of EU institutions. Yet, from a legitimacy perspective, the CJEU would be in a much better position to defend a decision on whether or not the ECB overstepped its mandate. The GCC has never made a reference to the CJEU. The ECB case would be a good opportunity to kick that habit!
Dr. Christina Eckes is associate professor in EU law at the University of Amsterdam. Currently, Dr. Eckes is Emile Noël Fellow at New York University for the academic year 2012/2013. Her personal page can be accessed here.