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.

Daniel Halberstam: The Judicial Battle over Mutual Trust in the EU -- Recent Cracks in the Façade

Network member Daniel Halberstam (Michigan) has forwarded us this posting that originally appeared on Vervfassungsblog, which is cross-posted here with permission.

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In a little-noticed decision in April, the Court of Justice of the European Union (CJEU) significantly revised its approach to the doctrine of mutual trust among the member states. Even though the decision was issued only as an interpretation of the European Arrest Warrant, it will have profound consequences for the Area of Freedom Security and Justice more generally, including ongoing controversies concerning refugees.

Background

Mutual trust in the area of freedom, security, and justice has been at the center of judicial disagreement across Europe. Well known, for instance, is the longstanding skirmish between the CJEU and the European Court of Human Rights (ECtHR) in Strasbourg about the limits of the Dublin system’s requirement that a refugee be returned to the Member State of first entry for processing. The ECtHR has held that any court – even a court of an EU member state – must first conduct an individualized inquiry to ensure that a refugee not be returned to another state if such return would create a “real risk” that the individual will suffer inhuman and degrading treatment. The CJEU, by contrast, has insisted that the EU’s foundational principle of mutual trust constrains such inquiries by one member state into the affairs of another. The CJEU limited a refugee’s claim against return to the member state of first entry to cases in which there is proof of a “systemic deficiency” in the member state of first entry. The CJEU’s insistence on “systemic” risk thus potentially foreclosed certain individualized claims of harm, unless they were accompanied by proof of broader deficiencies in the recipient country that were system wide. Member State courts caught in the middle between these two doctrines have shown some resistance to Luxembourg, with the U.K. Supreme Court, for example, saying it would disregard Luxembourg’s interpretation and heed the U.K.’s obligations to Strasbourg instead.

On another front, the CJEU has been doing battle with Member State courts on the European arrest warrant. Recall that in the landmark Melloni decision, the CJEU shut down the Spanish Constitutional Court’s objection that surrender of Mr. Melloni to Italy could be refused because it might violate his particular right against trial in absentia under the Spanish Constitution. The CJEU held that under the circumstances of that case there was no EU fundamental rights violation, and that Spain could thus not invoke an individual right under its own constitution to refuse surrender. In response, the Spanish Constitutional Court gave in – albeit not by following the ECJ directly, but by adjusting its own domestic jurisprudence under the Spanish Constitution.

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.

National Constitutional Rights as a Limit on the Application of European Law in Integration's Early Decades (Will Phelan)

Network member Will Phelan (Trinity College Dublin) has let us know about a new article entitled "The Limited Practical Relevance of National Constitutional Rights as a Constraint on the National Application of European Law in the Early Decades of European Integration". The article is available from the Irish Journal of European Law and can be downloaded in full here. An abstract is below.

Scholarship on the early development of the supremacy of European law has frequently been dominated by discussion of the possibility that a directly effective European law obligation would not be applied in the national legal order because it violated a national constitutional law fundamental right, as discussed, for example, in the Frontini and Solange decisions of the Italian and German Constitutional Courts. This paper argues that such a possibility should instead be seen as of limited practical relevance. This claim is supported by early scholarship on the application of European law in the national legal orders and by the practice of constitutional review of laws giving execution to treaty obligations in Denmark, Ireland, Italy and Germany, including the German Constitutional Court’s 1955 decision on the Saar Statute. Two conclusions are drawn from this discussion. First, scholarship examining the development of European law supremacy in relation to national constitutional law fundamental rights in particular should be situated within the context of the flexible and politically sensitive approach to adjudication demonstrated by Europe’s national courts in their decisions on potential conflicts between constitutional rights and international legal obligations. Second, scholarship offering a general explanation of the development of the supremacy of European law should not focus on the national constitutional rights question to the exclusion of a thorough examination of national law solutions to European law’s lex posterior problem. 

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.