Tweet Storm on Karlsruhe’s OMT Judgment (with additional commentary)

With the Brexit referendum tomorrow, it will be easy to overlook yesterday’s OMT judgment from the German Federal Constitutional Court (English press release here, full German judgment here).  The conventional wisdom is that the decision is the usual “yes, but…” effort.  There’s some element of truth in that, but it also misses some important dimensions of ruling that will no doubt occupy commentators on Germany’s legal relationship with the EU for some time.  I’m still absorbing the judgment and also awaiting an English translation.  But in the interim, I thought I’d pass on my tweets from yesterday that tried to identify several key paragraphs worthy of deeper analysis. 

My current bottom line on the judgment is this: It’s basically a ripeness decision (to use American terminology) even if it's cast as a judgment on the merits. The Court acknowledged that, within the CJEU’s sphere of competence, the CJEU had the right to rule on the meaning of OMT in the first instance, as it did in Gauweiler.  The German Court, in exercising "ultra vires control," would give some significant deference to the CJEU’s interpretation.  But even with this deference, the Court found that the CJEU’s interpretation barely passed muster (indeed, it implied that the CJEU may well have been ultra vires, just not “manifestly” so, per the standard from Honeywell). So, should OMT actually ever be implemented, it will require continued monitoring by German political actors and perhaps even a new ruling by Karlsruhe.

The Court also went to great lengths, moreover, to define the limits and constitutional underpinnings of its otherwise “Europe-friendly” deference--what I called in Power and Legitimacy (pp.166 et seq) "the limits of strong deference."  This stands as a counterpoint to the CJEU's doctrine of supremacy.  And in advancing this alternative conception of EU law, the Court also strongly rejected the idea that the EU had any normative autonomy apart from what the Member States’ national constitutions permitted.  In particular, it is incumbent on all judges (supranational as well national) to police the boundaries of power delegated to the EU level in the interest of preserving democratic and constitutional legitimacy derived from the Member States. In this regard, the Court expressed profound concern about the CJEU's interpretation of the nature and scope of the ECB's independence.

In short, this a very interesting case and one worth of further study and debate.  It is also one that may have significant consequences for the future.

OMT Forum: Alicia Hinarejos on 'Gauweiler' and the legality of the OMT programme

Network member Alicia Hinarejos (Cambridge) has passed on this new contribution to our OMT Forum, which originally appeared on EU Law Analysis and which we are cross-posting here by permission.

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On the 16th of June the Court of Justice delivered its decision in the Gauweiler case, concerning the legality of the Outright Monetary Transactions (OMT) programme of the European Central Bank (ECB). The Court considered the programme compatible with EU law. The decision has important implications for the powers of the ECB, the constitutional framework of the EU’s Economic and Monetary Union, and for the relationship between the Court of Justice of the EU and the referring court, the German Federal Constitutional Court. This was the first time that the German court asked for a preliminary ruling, and it remains to be seen whether the reply given by the Court of Justice will be to the national court’s liking.

Background

The ECB is in charge of conducting monetary policy for the euro area and its role is very narrowly defined in the Treaties. This role, however, has evolved and expanded substantially in recent years, as the ECB has announced or adopted various ‘non-standard’ measures in response to the euro area sovereign debt crisis. The OMT programme is one of these measures: it was announced in September 2012 in a press release and, so far, it has never been used.

The idea is that the ECB will buy government bonds from euro countries in trouble, i.e., when nobody else buys these bonds, or their yield is becoming so high that the Member State will not be able to cover interest payments on newly issued bonds, thus having no more access to credit and risking default. Crucially, the Treaty prohibits the ECB from acquiring government bonds directly (Art 123 TFEU) as this would amount to monetary financing, or becoming a direct lender of last resort to a Member State. Instead, the ECB would buy government bonds in the secondary market—that is, from a party that has bought these bonds first from a Member State—rather than from a Member State directly. While the ECB has already done this before, with the OMT programme there would be an added formal element of conditionality, as the Member State in question would need to obtain financial assistance from the European Stability Mechanism or the EFSF and comply with its conditions (i.e. macroeconomic reforms negotiated between the Member State and the troika: the Commission, the ECB, and the IMF).

The applicants before the German Court argued that the ECB had overstepped its Treaty role by creating a programme that should be viewed as a tool of economic, not monetary, policy; it was also alleged that the programme violated the prohibition of monetary financing. In an exercise of ultra vires jurisdiction, the German Constitutional Court’s preliminary response was to consider the OMT programme illegal under EU law. For the first time ever, the national court then referred the case to the CJEU. In the referring court’s view, the Court of Justice might either declare the OMT scheme contrary to EU law, or provide a more limited interpretation of the programme that is in accordance with the Treaties. The German Court provided certain indications as to what those limits should be, and it went on to state that whether the OMT scheme could eventually be held to violate the constitutional identity of the German Basic Law would depend on the CJEU’s interpretation of the scheme in conformity with EU primary law.

The case was sensitive for various reasons: although not yet used, the mere announcement of the OMT scheme played an important role in getting the euro area out of the acute phase of the crisis, and offers a credible defense against similar future scenarios. A declaration of illegality, or the placing of substantive limits on the programme, could have jeopardised post-crisis recovery. Additionally, the reference was the first ever submitted by the German Constitutional Court, and its tone was quite bold; there was, and is, clear potential for conflict between the two courts, with consequences unknown for EMU. Moreover, the case touches on the nature and legitimacy of the role of the ECB as an independent expert, and on the dichotomy between the original, rule-based conception of EMU and the evolving, more policy-oriented EMU that rose out of the crisis.

OMT Forum: Herwig Hofmann on the CJEU's Response to the BVerfG in 'Gauweiler'

New network member Herwig Hofmann (Luxembourg) has posted a working paper on SSRN entitled 'Gauweiler and OMT: Lessons for EU Public Law and the European Economic and Monetary Union'. Herwig has graciously agreed to post a condensed version of the paper's argument here, as part of a forum on the OMT dispute before both the German Constitutional Court, the Bundesverfassungsgericht (BVerfG), and the Court of Justice of the European Union (CJEU). We hope to have additional contributions to the forum in the coming days.

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Do exceptional situations make exceptionally good or exceptionally bad law? This is an old question often asked anew – especially in the context of the post-2008 economic crises travails of the European Economic and Monetary Union (EMU). The legal disputes which resulted from differing opinions about how to solve the crises and also how, incidentally, to improve the EMU’s governance have reached the Court of Justice of the European Union (CJEU). The most prominent case to date is the so-called Gauweiler case, a preliminary reference procedure initiated by the German Constitutional Court, the Bundesverfassungsgericht (BVerfG). I discuss this case in more fully argued working paper available on SSRN, 'Gauweiler and OMT: Lessons for EU Public Law and the European Economic and Monetary Union'.

Gauweiler concerns the legality of the decision of the Governing Board of the European Central Bank (ECB) of September 2012 on so called ‘Outright Monetary Transactions’ (OMT). This case is significant for legal integration in the EU since, although it is the first instance in which the German BVerfG has ever taken advantage of the preliminary reference procedure (Article 267 TFEU), the reference by the BVerfG was formulated in very terse words. Essentially, the reference asks for clarification about the legality of the ECB’s OMT decision. But that reference is not formulated in terms of a dialogue between Courts, each respecting the other’s distinctive powers. Instead, the BVerfG explains why it considers the ECB’s decision to be ultra vires of its mandate and asks the CJEU essentially to confirm this interpretation warning about potential consequences in its assessment of the ‘constitutional identity’ of the Federal Republic of Germany. Inherent in the reference is a thinly veiled threat not to accept the exclusive competence of the CJEU to review the legality of EU law and, instead, to unilaterally hold an act of an EU institution to be invalid within a Member State of the EU. The BVerfG reinforced its sceptical position of the primacy of EU law over the law of Member States by recalling in its decision for preliminary reference its case-law concerning the limits it perceives are set for the Federal Republic of Germany’s integration in the European Union. In its decision, it refers to and further interprets the scope of its own case-law making reference inter alia to its judgments concerning the Treaty of Maastricht, the Treaty of Lisbon and in Honeywell, as precedent for its questions to the CJEU.

This approach to formulating the preliminary ruling, a legal obligation for any court of a Member State of the EU ‘against whose decisions there is no judicial remedy under national law’ (Article 267 para 3 TFEU) can therefore not be seen as a long overdue normalisation of the relations between the CJEU and the BVerfG. The BVerfG as one of the last remaining constitutional courts of Member States instead of simply complying with its clearly defined obligations under the Treaties to submit in adequate cases questions for preliminary reference. Rather, it is formulated as ‘last warning’ by the BVerfG after which, if the CJEU does not fall in line with its approach, it would consider to radically challenge the constitutional order of the EU and, in effect, questioning the Union’s very existence as a constitutional order.

Book Announcement: Susan Rose-Ackerman et al., Due Process of Lawmaking: The United States, South Africa, Germany, and the European Union (CUP 2015)

Network member Susan Rose-Ackerman (Yale), together with Stefanie Egidy and James Fowkes, has a new book out from CUP entitled Due Process of Lawmaking: The United States, South Africa, Germany, and the European Union.  The publisher's blurb is below and more information can be found on the CUP site here.

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With nuanced perspective and detailed case studies, Due Process of Lawmaking explores the law of lawmaking in the United States, South Africa, Germany, and the European Union. This comparative work deals broadly with public policymaking in the legislative and executive branches. It frames the inquiry through three principles of legitimacy: democracy, rights, and competence. Drawing on the insights of positive political economy, the authors explicate the ways in which courts uphold these principles in the different systems. Judicial review in the American presidential system suggests lessons for the parliamentary systems in Germany and South Africa, while the experience of parliamentary government yields potential insights into the reform of the American law of lawmaking. Taken together, the national experiences shed light on the special case of the EU. In dialogue with each other, the case studies demonstrate the interplay between constitutional principles and political imperatives under a range of different conditions.

The “Rumble in Karlsruhe”: The German Federal Constitutional Court’s Historic OMT Case (Russell Miller)

Network member Russell Miller (W&L), on the I-CONnect blog, has recently weighed in on the German Federal Constitutional Court's decision last Friday on the ECB's OMT program.  Below are the opening paragraphs of his post and you can read the remainder here.

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A few years ago I was at a transatlantic policy event in Washington, DC.  It was the height of the Eurozone’s sovereign debt and banking crisis and there was palpable fear that that the Euro would crumble.  If the ten year old currency union were brought to its knees, it would be the result of a near-fatal one-two-punch.  The hard left-cross had been delivered by the profligate budgetary policies in the so-called “crisis countries.”  And the match-ending right-handed uppercut had come in the form of Germany’s almost-genetic revulsion towards monetary solutions in the face of debt difficulties.

There was very real concern that Europe’s dreadful handling of the crisis might have devastating economic effects around the world.  It was clear, however, that no proper conversation about the crisis could go forward without taking account of the role played by the German Federal Constitutional Court.  This bordered on the bizarre for many of the Americans involved in the discussion.  What does a domestic court have to do with European policy, many wondered.  And for those more sensitive to judicial activism in general, it was a question of the propriety of any role for any court in such high-stakes and highly-technical matters. [continue reading here]

Barking vs. Biting: Understanding the German Constitutional Court’s OMT reference … and its implications for EU Reform

The reflections below are cross-posted, with permission, from eutopialaw.com.

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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 Network on SSRN: Russell Miller, "Germany vs. Europe: The Principle of Democracy in German Constitutional Law and the Struggle for European Integration"

Network member Russell Miller (W&L) recently posted to SSRN the article "Germany vs. Europe: The Principle of Democracy in German Constitutional Law and the Struggle for European Integration." The abstract is below and the full article may be downloaded here.

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As the Euro-crisis grinds on, the German Federal Constitutional Court has repeatedly intervened to review and qualify Germany’s essential participation in bail-out measures. The Court has sought to ensure that involvement in Europe’s ever-deeper economic and political integration does not compromise Germany’s domestic constitutional commitment to democracy. The principle of democracy (Demokratieprinzip) is part of Germany’s unalterable “constitutional identity” and it has emerged as the main limitation on Germany’s participation in and contribution to the European Union. On the basis of the German Constitutional Court’s European jurisprudence, this paper characterizes the principle of democracy as a valorization of fully-informed, rational, parliamentary governance exercised on behalf of the electorate by a plurality of widely representative political parties in open debate over public policy. This is a vision of democracy suited to national political systems and cultures and only poorly aligned with the reality of Europe’s supranational political institutions and framework.

Book Announcement: Bill Davies, Resisting the European Court of Justice: West Germany's Confrontation with European Law, 1949–1979 (Cambridge)

With apologies for the delay, we're pleased to announce the appearance of a book by network member Bill Davies (American University).  Entitled Resisting the European Court of Justice: West Germany's Confrontation with European Law, 1949-1979, it is published by Cambridge University Press.  The book is major contribution to a developing literature on the history of European legal integration that we've blogged about before here and here.  An excerpt can be found here and the publisher's description is reproduced below.

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The European Union's (EU) powerful legal framework drives the process of European integration. The Court of Justice (ECJ) has established a uniquely effective supranational legal order, beyond the original wording of the Treaty of Rome and transforming our traditional understanding of international law. This work investigates how these fundamental transformations in the European legal system were received in one of the most important member states, Germany. On the one hand, Germany has been highly supportive of political and economic integration; yet on the other, a fundamental pillar of the post-war German identity was the integrity of its constitutional order. How did a state whose constitution was so essential to its self-understanding subscribe to the constitutional practice of EU law? How did a country who could not say 'no' to Europe become the member state most reluctant to accept the new power of the ECJ?

German Law Journal: The Trials and Tribulations of the European Stability Mechanism

Network members Russell Miller and Peer Zumbansen, co-editors-in-chief of the German Law Journal, are pleased to announce the appearance of a new issue: "The ESM Before the Courts" (full issue pdf here and table of contents here).  The overview below gives a sense of the contents, but for those interested, please check out the full issue.

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As the Journal did with the German Constitutional Court's landmark Lisbon Case in 2009, we have again worked quickly to provide you with commentary on and criticism of the Karlsruhe and Luxembourg courts' recent engagement with the ESM Treaty. This timely special section, "The ESM Before the Courts," was coordinated by GLJ editors Moritz Renner, Emanuel Towfigh and Floris de Witte. The cases themselves, just as much as the challenging notes we've collected here, more than adequately fill the month's promised insight into "German" and "European" jurisprudence—even while demonstrating that those old categories are increasingly questionable. The general tenor of these pieces seems to be that the Karlsruhe court was up to its old tricks and that the Luxembourg court was helping the EU chart new, controversial territory, even if the path it laid out doesn't thoroughly convince or satisfy. 

Book Announcement: Kommers & Miller, The Constitutional Jurisprudence of the Federal Republic of Germany (3d ed.)

We are introducing a new feature on the blog: periodic announcements of recent or forthcoming books by members of the network.  This is the first installment of what we hope and expect will, over time, be a long series.  Additional notices of recent publications are also available in the tab above, under "Recent Books by Network Members."

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Duke University Press recently announced the publication of the third edition of The Constitutional Jurisprudence of the Federal Republic of Germany.  Network member Russell Miller (W&L University School of Law, Co-Editor-in-Chief of the German LawJournal) has joined the project’s original author – Notre Dame’s Donald Kommers – on this third edition.  This renowned English-language treatise on German constitutional law has been fully updated and significantly expanded to incorporate previously omitted topics and recent decisions of the German Federal Constitutional Court. Ruth Bader Ginsburg wrote the foreword while also contributing a cover blurb, along with (network member) Kim Scheppele, Vicki Jackson, and Aharon Barak.  The book was also recently the subject of a symposium – hosted by the Wissenschaftskolleg zu Berlin and the American Academy inBerlin – honoring Professor Kommers on his 80th birthday.  

Aside from its inherent interest in comparative constitutional law, this volume will be invaluable to those who seek a better understanding of the role of the German jurisprudence in European integration and the Eurozone crisis.  In that regard, the book features a new chapter on the jurisprudence of Germany’s “open state” – exploring the tangled relationship between German constitutional law, international law, and European integration.  We urge all network members – indeed, the broader public – to take a look.