* * *
I find myself in familiar territory. Just as with the
ESM Ruling of September 2012, some of the insta-commentary on a decision of
the German Federal Constitutional Court (GFCC) on the Eurozone crisis calls for
a response. At issue in September 2012 was the claim that the GFCC’s refusal to
issue a preliminary injunction against the European Stability Mechanism (ESM) was
evidence of “the
Court’s weakness in EU matters.” At issue now is the idea that the
Court’s decision this past Friday to refer a question to the CJEU – on the compatibility
of the ECB’s
OMT program with the treaties – is somehow an “abdication,”
indeed “nothing
less than a surrender of sovereignty by Germany’s highest court.”
Commentators much closer
to as well as more knowledgeable
of these matters have already weighed in on this over-reaction. I’d still like
to offer some additional reflections, not merely to add what I hope will be
some context to Friday’s decision, but also to shed some light on the Court’s strategy
in the “game” in which it inescapably finds itself. Finally, I’d like to
suggest that the Court’s ruling has major implications for the process of EU reform
that David Cameron has been struggling to energize. As I’ll explain in the
conclusion to this post (apologies in advance for its length), it is hard to
envision any outcome of Friday’s decision that will not compel the Angela
Merkel’s government to undertake reform, including treaty changes. This presents an opportunity for the British
government but only if it’s prepared to accept that European reform must
include not merely “less” Europe, but also “more,” including possibly an
expanded mandate for the ECB to explicitly embrace OMT.
* * *
The use of the word “game” in connection with the GFCC’s
decision on Friday was not meant to trivialize the Court’s actions or its European
jurisprudence more generally. Rather, I
am using the term in the sense of “game theory” – the study of
strategic decision-making – an approach that can often yield important insights
across a range of social, economic, political and legal contexts. As I’ve written
on this blog before, I admire the work of Arthur Dyevre,
who applies the insights of
game theory to judicial behavior and in particular to the European
jurisprudence of the GFCC. In a 2012 paper
Dyevre reflected upon the “non-compliance threats” of the GFCC since the Maastricht Decision of 1993, concluding
that, from a game-theoretic perspective, the Court “need not ‘bite’ in order
for its ‘barking’ to be consequential.” In
Dyevre’s view, there has been little need for GFCC to strike down European
measures directly in order to effect changes in the behavior of other
institutions, whether at the national or supranational levels. Indeed, had the Court taken a more directly
confrontational approach, Dyevre suggests the Court may well have diminished its
overall effectiveness.
In other words, the Court’s “bark” has been more powerful
than any “bite” could possibly have been.
The day may well come when the GFCC will run out of threat options and
will need to take more direct action.
But the Court is apparently not there yet. As explained in further detail below,
Friday’s decision may well have been the GFCC’s loudest and clearest “bark” to
date. But depending on how other players
in this “game” respond, the Court may still not need to test its “bite” more
directly.
* * *
Let’s begin with some basics, to counter the simplistic
notion that the GFCC has been, or somehow should be, inveterately protective of
some idealized vision of its own prerogatives in the process of European
integration. The Court’s approach has in fact always been highly accommodating
of the functional demands of integration as well as the political choice to
pursue it, not least in the context of monetary union (see, e.g., Maastricht Decision of 1993 paras. 95-96
on ECB independence, and European Monetary Union Decision of 1998
paras. 99-105 on deference to the political decision in favor of EMU). In both these foundational decisions, the
Court bent over backwards to approve deepened integration, notably the EMU, even
as it laid down legal parameters that integration could not cross consistent
with the Court’s interpretation of the Basic Law.
More recently, the Court’s jurisprudence on Europe –
starting with the Lisbon Decision of 2009 and carrying
through its various decisions on the Eurozone crisis over the course of 2011-2012
(here,
here,
here,
and here)
– has articulated not merely substantive bounds but also procedural
requirements for the vindication of “constitutional identity” and the so-called
Demokratieprinzip on the national
level. For the most part, however, the Court’s
concrete holdings (generally relating to heightened
Bundestag involvement) have been directed only against German domestic institutions, which have dutifully complied with
the judicially-defined parameters in their participation in the process of
European integration going forward.
These instructions have had, in particular, concrete consequences for
the subsequent course of the negotiations in connection with the Eurozone
crisis, as the ESM Decision of September 2012
and the negotiations
over the Single Resolution Fund (SRF) well demonstrate.
The Court has of course, in dicta, expressed concerns about aspects of the CJEU’s
jurisprudence, some of which have been more directly actionable than
others. Perhaps the most actionable was
expressed in the Maastricht Decision
itself: the concern that the old-Article 235 (now Article 352 TFEU) might be
misinterpreted to provide “effects that are equivalent to an extension of the
Treaty. Such an interpretation ... would not produce any binding effects for
Germany” (see para.
99 of the Maastricht Decision). This particular “bark” led to a quick and
favorable response by the CJEU in Opinion 2/94, which held (in para.
30) that Article 235 “cannot serve as a basis for widening the scope of
Community powers,” and more particularly that it “cannot be used as a basis for
the adoption of provisions whose effect would, in substance, be to amend the
Treaty without following the procedure which it provides for that purpose.”
The GFCC’s more fundamental challenge to the authority of
the CJEU, of course, has been in the reservation of ultimate Kompetenz-Kompetenz, an assertion in
obvious tension with the doctrines of supremacy and the CJEU’s purported exclusive
competence to rule on the legality of EU measures. Here, however, the German court has proceeded
cautiously, careful not to overplay its hand, even as its position on ultimate Kompetenz-Kompetenz is arguably shared by other national high
courts.
First, the GFCC has long recognized that, within the scope
of the political choice to delegate certain powers to the supranational level,
the CJEU is the “lawful
judge” (gesetzlichen Richter) to
which German citizens have a right to recourse under Article
101 of the Basic Law. This basic acknowledgement should be kept in mind as
we turn to the details of Friday’s
OMT reference further below.
Second, the GFCC (post-Solange
II) has been broadly deferential to the CJEU’s handling of many crucial questions,
notably relating to individual rights.
This stands in contrast to the Court’s more aggressive position in the
defense of “constitutional identity” and national democracy under the so-called
“eternity
clause” of Article 79(3) of the Basic Law.
In the Court’s view, the obligation to defend constitutional identity
and national democracy may require the recognition of substantive constraints
on delegation to the supranational level. I spell out one possible explanation
for this differential approach to rights- vs. democracy-protection in Power and
Legitimacy (pp.177-78):
The incentives for
private litigants to vindicate their fundamental rights are always strong
regardless of the forum, national or supranational. Moreover, the judicial culture of the last
half-century has been generally very receptive to rights-based claims; thus a
national high court could safely expect a supranational adjudicator to treat a
rights-based challenge to supranational action in manner reasonably respectful
of rights protection. By contrast, the
incentives have been much weaker for litigants and (at least) supranational
judges to protect [national democracy] through the enforcement of delegation
constraints. In the parliamentary
systems of Europe, the legislative majority (even a coalition) will usually be
hesitant to oppose the government’s support for a European measure except in
rare circumstances. Consequently, the incentive of other institutional players
to mount a challenge is significantly weaker in the democracy-protection
context, thus necessitating a more aggressive judicial role.
(This insight helps to counter objections raised in the dissents
of Justices Lübbe-Wolff and Gerhardt in Friday’s decision. Both justices express concern about the separation-of-powers
implications of the broad standing to seek judicial review vis-à-vis European
integration that the Court has recognized under Article 38 of the Basic Law. While the discomfort of the dissenting
justices is understandable, the incentive structure outlined above points to why,
in the unique circumstances of European integration, the Court’s Article 38
standing doctrine may well be justified.)
Third, and finally, even as to the exercise of “ultra vires”
review in defense of “constitutional identity” and national democracy, the
Court has sought a balance with Germany’s overarching constitutional commitment
(expressed in Article
23 of the Basic Law) to an “openness to European law,” or Europarechtsfreundlichkeit. Thus, for example, the Lisbon
Decision (para. 240) speaks only of controlling “obvious transgressions,”
for which “legal protection cannot be obtained at the Union level,” thus
implying an obligation first to exhaust supranational remedies, notably a
preliminary reference. The Court more
recently refined and clarified these obligations in its Honeywell decision of 2010, holding
that, in order to be actionable before the GFCC, the purported ultra vires actions
must not only be “manifest” but also “structurally significant” (para. 71) –
again a continuation of the strongly deferential approach that the Court has
taken over many decades (for more details, see Power and Legitimacy, ch. 4). Moreover, Honeywell
makes clear that, before the
Constitutional Court will take up a claim that a European act is purported ultra
vires in such a structurally significant way, the CJEU must first “be afforded
the opportunity to interpret the Treaties, as well as to rule on the validity
and interpretation of the legal acts in question, in the context of preliminary
ruling proceedings” (para. 60). This is
a concrete realization of the idea that the CJEU retains a role as a “lawful” (if
not necessarily exclusive) judge of European acts under German constitutional
law.
Viewed in the context of the Court’s prior case-law, the decision
this past Friday to refer the question of the legality of the ECB’s OMT program
is thus not a radical break in the GFCC’s approach to European integration, and
certainly not a “surrender” or “abdication.”
The importance of the decision is to be found elsewhere, not in the
decision to make a preliminary reference itself, but in the substance of the
Court’s proffered interpretation of the OMT program. Very much in keeping with its established
strategy of “barking” over “biting,” the GFCC majority on Friday outlined four essential
substantive points that it strongly urges the CJEU to take into consideration
as it undertakes its own review of the OMT program:
(i) the OMT program, in the GFCC’s view, “does not appear to
be covered by the mandate of the European Central Bank,” i.e., is a measure of not
of “monetary” but “economic” policy designed to reduce interest-rate spreads
and provide quasi-fiscal redistribution among the member states “albeit without
their parliamentary legitimation and monitoring” (para.
4a);
(ii) the OMT program “aims at a prohibited circumvention” of
the ban on monetary financing contained in Article 123 TFEU (para.
4b) and that the ECB’s asserted defense of the program is inadequate
because it “would largely suspend the prohibition of monetary financing” of
national budgets (para.
4c);
(iii) these violations of the ECB’s mandate and the ban on
monetary financing, if upheld by the CJEU, would, in the GFCC’s estimation, constitute
a “manifest” and “structurally significant” violation of the scope of authority
delegated to the ECB, thus giving rise to an ultra vires claim cognizable
before the GFCC (paras.
2 and 3); and finally
(iv) whether these violations would thus “also violate the
constitutional identity of the Basic Law is currently not clearly foreseeable
and depends, among other factors, on the content and scope of the OMT Decision
as interpreted in conformity with primary law” by the CJEU (para.
5). The GFCC offers a more limited
interpretation of the OMT program (again, “barking” but not “biting”) that the
Court would deem acceptable and would avoid the need for it undertake the
“constitutional identity” claim. This, in the Court’s view, “would probably
require that the acceptance of a debt cut must be excluded, that government
bonds of selected Member States are not purchased up to unlimited amounts, and
that interferences with price formation on the market are to be avoided where
possible” (para.
4d).
* * *
As noted above, this is a loud and clear “bark.” But it is
still a bark and not a bite; that is, it is an effort to gain influence through
non-compliance threats rather than
outright non-compliance, very much in the vein of the Court’s well-established
strategy. The CJEU may respond by
calling what it deems to be a bluff.
Certainly the pressure to do so may be intense, from the ECB, the
Commission, other member states, the markets, all of which view the ECB’s mere announcement
of OMT as essential to the salvation of the common currency.
But in many respects the CJEU’s reaction is beside the
point. The GFCC’s decision on Friday makes clear that the more important target
is, as always, the German political class, in the form of the federal
government and the German parliament (Bundestag and Bundesrat). As the Court specifies (in para.
3a), these bodies:
can retroactively
legitimise the assumption of powers by initiating a corresponding change of
primary law [i.e., the EU treaties], and by formally transferring the exercised
sovereign powers in proceedings pursuant to Art. 23 sec. 1 sentences 2 and 3 GG
[requiring transfers only “by a law” adopted by the Bundestag “with the consent
of the Bundesrat” and “subject to paragraphs (2) and (3) of Article 79”].
However, insofar as this is not feasible or wanted, they are generally obliged
within their respective powers, to pursue the reversal of acts that are not
covered by the integration programme, with legal or political means, and – as
long as the acts continue to have effect – to take adequate precautions to
ensure that the domestic effects remain as limited as possible.
In short, even if the CJEU does not agree with the GFCC’s
limiting interpretation of the OMT program (in para.
4d), the Court says that the German government and parliament will nevertheless
be under a duty to “legitimise the assumption of powers” claimed by the ECB and
ratified by the CJEU. Or, if “this is
not feasible or wanted,” then they must “pursue [a] reversal … with legal or
political means” and “to take adequate precautions to ensure that the domestic
effects remain as limited as possible.” Either way, the likely fall-out of Friday’s
OMT reference is that the German government will find itself, whether it wanted
to be or not, clearly aligned with the project of EU reform and treaty change. The only other course open to the German
government would be to attempt to strip the GFCC of jurisdiction over questions
relating to European integration as some
have suggested in the past. Given
the way in which the Court’s European jurisprudence is now so deeply interwoven
with the “eternity clause” of Article 79, this alternative seems deeply
unlikely, risking a constitutional crisis that the Merkel government could not
easily control.
As David Cameron welcomes Angela Merkel to London later this
month, he should take cognizance of this fact. But to gain “the
support of Mrs Merkel in his attempt to reform Britain’s relationship with the
EU,” Cameron must be prepared to help the German Chancellor. It
has long been clear that reforms emerging out of the Eurozone crisis will
entail both “more Europe” and “less” –
more, to consolidate the EMU through supranational surveillance of national
budgets, establishment of a banking union, and now perhaps redefinition of the
ECB’s mandate to accommodate OMT; but also less, through a possible
reinvigoration of subsidiarity, reinforcement of the single market, and
promotion of greater democratic legitimacy through expanded powers for national
parliaments – all options that Angela Merkel may well favor.
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