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ESM ruling: Verdict of German court not final. Awaiting the ECJ’s response

ESM ruling: Verdict of German court not final. Awaiting the ECJ’s response

24.9.2012 13:56
Autor: Sasha Štěpánová, KSB

A series of challenges since early July, with one signed by 37,000 German citizens (making it the largest protest ever brought before the court according to the Financial Times), claim that the ESM and the Fiscal Compact violated the terms of the German constitution by undermining the sovereignty of the German parliament and transferring powers to Brussels and putting German taxpayers’ money at risk without democratic control. The plaintiffs sought an injunction to prevent Germany from ratifying the ESM treaty and the Fiscal Compact.

However in its preliminary ruling (the final formal ruling is not expected until later in the year), the Constitutional Court rejected calls for the injunction and allowed for the ratification of the ESM/Fiscal Compact under certain conditions. The court stipulated 2 conditions for ratification of the treaty by Germany: Both houses of German parliament must be informed about ESM decisions. Confidentiality provisions in the ESM should not prevent the distribution of “comprehensive information” to parliament. Germany must ensure that Germany liability to the ESM does not exceed 190 billion Euros without approval of the lower house of parliament.

Meanwhile in Ireland in July of this year, the Irish Supreme Court rejected an appeal against a High Court ruling that the ESM was legal under Irish law. In a similar vein to the German challenges against the ESM, the Irish claim at the Irish Supreme Court was brought on grounds not only that the ESM was contrary to the Irish constitution but also that it unlawfully breaches provisions of EU treaties concerning economic and monetary policies and by adopting the treaty, Ireland would impinge on the exclusive competence of the EU regarding the Euro. The Irish constitutional law claim was rejected and following the ruling by the Irish Supreme Court, the Irish government decided to formally ratify the ESM. However, in an interesting development, despite rejecting the Irish constitutional law claim, the Irish Supreme Court has referred certain aspects of the claimant’s questions concerning the ESM to the ECJ (European Court of Justice) for deliberation as to whether the Fiscal Compact and the ESM are in compliance with EU treaties and EU law.

Swinging back to the case last week at the German Constitutional Court, one of the requests made by the plaintiffs was that the Constitutional Court adjourn its decision until the ECJ has issued its decision in the Irish case. The Constitutional Court rejected this request, on the grounds that its 12 September decision is technically an interim ruling only and a reference to the ECG judgment could be made in the Constitutional Court’s final formal decision some months from now. No doubt due to the extreme tension and instability in the eurozone financial markets and the urgent ongoing need across the eurozone to seek financial safety measures, the Constitutional Court proceeded to give an interim decision last week on the ESM issue. However the decision should be seen correctly as a ruling on compatibility with the German constitutional law and democratic procedures rather than any broader European law interpretation. Amidst the celebration of the financial markets and politicians over last week’s interim ruling, it will nevertheless be very interesting to see what the ECJ says in its ruling on EU law issues surrounding the ESM and Fiscal Compact later this year.

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