Judicial conflict or normal procedure?

On Friday the German Federal Constitutional Court announced that for the first time in its history it was submitting several questions to the European Court of Justice (ECJ) and requesting a preliminary ruling. Franz C. Mayer, who is Professor of European Law at the University of Bielefeld, explains the court's decision and provides an assessment of the possible consequences.

On Friday the German Federal Constitutional Court announced that for the first time in its history it was submitting several questions to the European Court of Justice (ECJ) and requesting a preliminary ruling. The issue at stake is first and foremost whether or not the OMT (Outright Monetary Transactions) programme announced by ECB President Draghi in July 2012 is compatible with the law of the European Union. It is generally believed that the OMT programme is going to play an important role in the stabilization of the eurozone, for it means that the European central bank system can go ahead with unlimited purchases of government bonds issued by certain member states if and as long as these member states are participants in one of the European safety net or reform programmes (ESFS or ESM). The OMT programme has not as yet been implemented. However, a lawsuit filed at the Federal Constitutional Court has challenged its legality. The judges in Karlsruhe have now submitted the points at issue to Luxembourg for clarification. Franz C. Mayer, who is Professor of European Law at the University of Bielefeld, has acted as counsel for the German Parliament in the case of other European issues dealt with by the Federal Constitutional Court in Karlsruhe. He explains the court's decision and provides an assessment of the possible consequences.

So what is at stake in the court proceedings devoted to the ECB?

The issue is whether or not the European Central Bank's OMT programme is compatible with EU law and with German constitutional law. The OMT programme aims at purchases of government bonds on the secondary market. On the one hand there is the question of whether or not the European Central Bank has overstepped the terms of its mandate, and that would be a problem as far as EU law is concerned. If this turns out to be the case, it will also be a constitutional problem as far as the Federal Constitutional Court is concerned, for it means that something to which Germany never gave its assent in the treaties is in fact happening. And this is what the Federal Constitutional Court considers to be an ultra vires legal act, that is, an act that goes beyond the powers that have been assigned to the EU by law. Such an act would be legally irrelevant in Germany, the court claims, because there is no contractual obligation to this effect.

What are the issues that the Federal Constitutional Court has referred to the ECJ, and why has it submitted them?

The Federal Constitutional Court is referring to the ECJ specific questions relating to the interpretation of the relevant provisions of EU law. In other words, the provisions which govern the activities of the European Central Bank. The Federal Constitutional Court is currently of the opinion that these provisions of EU law have been violated, that the OMT-programme is outside the mandate of the ECB and thus illegal under EU law. However, it believes that the European Court of Justice can still issue a ruling with regard to the OMT programme which will make it possible to avoid a violation of EU law by the ECB. The terms and conditions of this are described under recital 100 of the decision. The restrictions on the OMT-programme which the Federal Constitutional Court has in mind pertain, for example, to the size and extent of the government bond purchases. The Federal Constitutional Court obviously believes that the European Court of Justice should tell the ECB that unlimited purchases of government bonds are illegal. However, if this were to be the case, many observers believe that the OMT programme would be dead - unless the ECJ found a very general definition of abstract and wholly theoretical limits.

If the ECJ does not come up with what the Federal Constitutional Court calls for under recital 100 in the way of restrictions and provisions, then the Federal Constitutional Court would tend to assume that it was dealing with an ultra vires legal act of the ECB. The question then arises of what this kind of label would signify. The most obvious consequence might be that the German Bundesbank will simply not be able to participate in secondary market purchases. The ECB itself buys only a small percentage of the total. The vast majority of the transactions are carried out by the national central banks. On a purely formal level it is possible to imagine that if the Bundesbank is not allowed to participate, then other central banks will jump in to fill the gap.

If the Federal Constitutional Court believes that all this is illegal, why has it decided not to issue a ruling of its own? What is the explanation for this course of action?

Evidently it thinks that there is still a possibility to interpret the relevant European procedure and European law in a narrow sense, and that as a result there will not be a problem as far as EU law is concerned. Which would mean that there wouldn't be any constitutional law problem either. For the time being it is leaving it to the ECJ to formulate this narrow interpretation. On the one hand because the ECJ is the one institution responsible for interpreting European law in a consistent and uniform manner, consistency certainly being a sensible idea. And on the other hand because in a previous case, the 2010 Honeywell case, it developed its ultra vires-doctrine by stating inter alia that, since the interpretation of EU law is actually the preserve of the ECJ, it always wants to give the ECJ at least the opportunity to interpret the EU law in question - insisting on the possibility to issue an ultra vires ruling, after the ECJ decision.

This is a rather dubious arrangement, for the treaties make it fairly clear that the European Court of Justice shall be the final arbiter on EU law – and at the end of the day nothing else really makes sense, if we don't want 29 arbiters competing with each other. Nevertheless, the Federal Constitutional Court continues to adhere to the view, and this is clearly enunciated in the decision, that it may scrutinize the rulings of the ECJ and pass judgement on whether or not it has interpreted EU law with sufficient clarity and precision as far as the Federal Constitutional Court is concerned. In other words, the Federal Constitutional Court considers itself to be the final final arbiter of European law.

We will have to wait and see whether the ECJ will actually tolerate the idea of being treated as some kind of intermediate authority. In point of fact this is not how the ECJ construes its role, and the treaty provisions make it fairly clear that the ECJ (and not one of the national constitutional courts) is responsible for the elucidation of EU law and for dealing with European entities which exceed their powers. Again: if we allow national constitutional or supreme courts to propound some kind of final and independent exegesis of European law, we risk to end up with twenty-eight different versions of EU law at the national level. It would make a mockery of the whole idea of a single body of EU law.

It is the first time that the Federal Constitutional Court is referring an issue to the ECJ. Why is this such a remarkable event?

It is remarkable exactly because it is the first submission. It was overdue. Finally, the Federal Constitutional Court is so to speak bringing up the rear when it comes to making use of the submission procedure. Even supreme courts which have vacillated for many years, such as the Spanish constitutional court or the Italian constitutional court, have made submissions recently. Ancient and traditional courts such as the House of Lords – before the introduction of a Supreme Court in the UK – or the Conseil d’État have been making submissions for quite some time. Here the Federal Constitutional Court has really been something of a straggler. For this reason it is both good news and noteworthy that they finally turn to the preliminary reference procedure. That is one thing. But on the other hand the style and sound of the submission is also noteworthy. It could perhaps be summarized as follows: “Either you see this in the way that we see it, or there is going to be an open conflict with European law.” That is not exactly how the treaties depict the preliminary reference procedure. The two dissenting opinions of Judge Lübbe-Wolff and Judge Gerhard say what needs to be said here. They point out that in this case the Federal Constitutional Court is venturing beyond legal limits, that in the final analysis the questions at stake are political questions that politicians have to decide, and that it is the Federal Constitutional Court that may have violated core principles of separation of powers and democracy by not leaving the issue to be decided within the political process.

So the ECJ is going to issue a ruling, and this decision is either going to be accepted or there will be a conflict with the Federal Constitutional Court. Can you tell us what will happen if that is the case?

The Federal Constitutional Court violates the EU treaties if it decides not to accept ECJ rulings. If the Constitutional Court actually refused to accept a ruling of the European Court of Justice, such a constitutional court decision would mean that Germany is in fact violating the treaties. This in turn would lead to the initiation of treaty infringement proceedings against Germany. It is true that such proceedings appear to be rather problematical if the treaty violation emanates from independent courts, court of the kind that we have in all of the Member States. But in point of fact the European Commission has already on some occasions initiated treaty infringement proceedings against Member States in which courts have violated European law For that reason it is not an entirely inconceivable option in the current context.

Considering this, let us hope that the ECJ will be wise and find a way to issue a balanced and moderate ruling capable of pacifying the Federal Constitutional Court and to guarantee legal control over the ECB without crippling ECB action in the future. After all, legal limits on the ECB are certainly envisaged in the treaties. The ECB is not exempt from the law. At the same time, the ECJ would probably also emphasize that in the present case, the ECB has not overstepped its powers, and that it continues to operate within the terms of its mandate. With this it would in the final analysis be possible to respond to the submission of the Federal Constitutional Court by stating that there are no problems with regard to EU law. If this led the Federal Constitutional Court to back down this would make it possible to resolve the impending judicial conflict. If there were an open conflict between the courts, the victims would be the law, the European community of law (Rechtsgemeinschaft), and in the final analysis both of the courts.

The court's elucidations make it seem as if the judges are actually trying to encourage other submissions in the future. Have I understood that correctly? And how should we assess its importance?

Here I can refer to Judge Gerhard's dissenting opinion, which makes it abundantly clear that the Federal Constitutional Court has created opportunities for litigation out of nowhere which are simply not acceptable. In fact the Federal Constitutional Court has now introduced a legal remedy based completely on judge-made law which means that basically anyone can launch an attack on European law in the Federal Constitutional Court. That of course also means that the Federal Constitutional Court can keep its hand in and retain all possibilities to comment on questions relating to European law.

Allowing people to launch such lawsuits appears tantamount to self-inflicted gridlock. At the last count there were more than 40,000 plaintiffs in the ESM/ECB case. Such cases do not have the status of class action suits as there is no constitutional law class action in Germany. When there are so many people involved, there is quite some evidence that law is no longer the real issue. These are political campaigns and add up to an anti-European political struggle. And they are directed against the legitimate political majorities in parliament that are the result of a legitimate political process. The fact that the Federal Constitutional Court is making it possible to conduct such campaigns and actually encouraging them is increasingly an untenable state of affairs.

Personal details:
Prof. Dr. Franz C. Mayer, LL.M. (Yale), Chair of Public Law, European Law and Public International Law, Comparative Law, Law & Politics, University of Bielefeld

The interview was conducted by: Isabell Hoffmann, Bertelsmann Stiftung, Europe's Future Program



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