April 23
2021
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29th March 2021
Covid-19 Institutional law

Analysis: “Karlsruhe, again: The interim-interim relief of the German Constitutional Court regarding Next Generation EU” by René Repasi

On 26 March, the German Constitutional Court (Bundesverfassungsgericht (BVerfG)) in Karlsruhe issued a remarkable press statement: the German Federal President (Frank-Walter Steinmeier) is not allowed to sign the law approving the Own Resources Decision on behalf of the Federal Republic of Germany. This law is necessary, under Article 311(3) TFEU, to allow for the entry into force of the new Own Resources Decision 2020/2053 of 14 December 2020, and, most prominently, for the activation of the 750 billion-euro pandemic recovery fund ‘Next Generation EU’. This decision was issued only shortly after the Bundestag (on 25 March) and the Bundesrat (on 26 March) adopted this law. On the reasons for this decision the BVerfG keeps us in the dark. The currently available text of the decision only states: ‘Die Begründung wird nachgereicht’  (the reasoning will be provided at a later moment in time).

The background of the decision is a constitutional challenge of the law approving the new Own Resources Decisions submitted by a group of professors led by the founder of the German right-populist party ‘Alternative für Deutschland’, Prof. Dr. Bernd Lucke. They base their challenge mainly on two grounds: First, the Own Resources Decision is ultra vires for two reasons: (a) borrowed capital is not own capital and the wording of Article 311 TFEU only allows for ‘own resources’ but not borrowed resources; and (b) the Treaties preclude that Member States can be held mutually liable for their debt. Second, the new Own Resources Decision violates the ‘constitutional identity’ of Germany as it deprives the German Parliament of its effective control of fundamental budgetary decisions in the future. The latter argument is based on the assumption that Germany could be held liable for the entire amount of 750 billion euros that will be raised by the European Commission on the financial markets.

The BVerfG’s decision of 26 March does not have much to do with these arguments in substance. It only prevents the German Federal President from signing the law, being the last step before the official entry into force of this law after its publication in the official journal (Bundesgesetzblatt). In constitutional challenges with regard to the ratification of international agreements it is not unusual that the BVerfG decides on the constitutionality of a draft agreement before the signature of the president since this is the only way the binding force of a ratification under public international law can be avoided before the Constitutional Court has decided. In the past, the Court normally had contact with the office of the president and kindly asked to wait with the signature until the Court had decided on the substance of the challenge. Whether this has happened with regard to the law approving the Own Resources Decision is unclear. Yet, the BVerfG officially precluded the president from signing the law.

This decision can be seen as an interim-interim relief (in German, beautifully called: ‘Hängebeschluss’ (literally: a hanging decision)). The Court did not enter into any substantial discussion with the German law or the Own Resources Decision. It simply wants to secure its margin of manoeuvre to decide against both within its interim relief procedure. In such an interim relief procedure the Court makes an assessment of the consequences of a successful interim relief (here: the German approval of the Own Resources decision is on hold) as compared to not granting interim relief (the Own Resources Decision can enter into force). If the grounds underlying the constitutional challenge are considered obviously unfounded, the Court will also refuse to grant interim relief.

This decision is hence only the first of many steps in the constitutional challenge of the Law approving the Own Resources Decision. It is now followed by a decision on interim relief, which is then followed by a decision on the substance of the claims. Between the decision on interim relief and the decision on the substance there could also be a preliminary reference to the CJEU on questions relating to the interpretation of the Treaties or the Own Resources Decision, as published in the Official Journal of the EU (although this decision is, legally speaking, not yet valid. But since the EU institutions have concluded the EU legislative procedure regarding the Own Resources Decision it can be considered a valid subject-matter for a preliminary reference procedure).

The decision is, however, not about the substance of the claims. Whilst this is not the place to comment on these claims in detail, a first look at these claims show already that they are rather weak given that the business management distinction between borrowed and own capital can hardly be applied to the notion of own resources for the EU budget. Moreover, the assumption of the claimants that a single Member State could be held liable for the entire amount of obligations of 750 billion euros is simply not accurate. It seems therefore, and against the background of the significant negative implications of a postponed entry into force of the new Own Resources Decision on the recovery of the European economy, rather unlikely that the BVerfG will grant interim relief. But, when speaking of Karlsruhe, you never know for sure. To be continued …

 

René Repasi is Professor of Law on the Chair on Public and Private Interests at the Erasmus School of Law, and Director of the Erasmus Centre for Economic and Financial Governance.

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