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12th May 2020
Banking & Finance Institutional law Justice & Litigation

Op-Ed: “An Infringement Action against Germany after its Constitutional Court’s ruling in Weiss? The Long Term and the Short Term” by Daniel Sarmiento

After the dust has settled, the time has come to reflect on what to do next. Once the German Federal Constitutional Court, the Bundesverfassungsgericht (‘BVerfG’) decided to drop the bomb and declare a judgment of the Court of Justice and the ECB’s Public Securities Purchase Programme ultra vires, where should we go from here? Is there any hope for an orderly exit from this mousetrap that the BVerfG has put Germany, the EU and its European partners in?

In a recent piece published in the midst of the shock, I argued that the Commission should bring an infringement action against Germany. It was a first reaction voiced not alone, but followed shortly by a statement of the Commission President announcing that the Institution was considering all courses of action, including an infringement procedure. Shortly before, the Court of Justice had issued a rare press release, recalling, on the basis of past case law, its authority to rule in the last instance on the interpretation and validity of EU law. The stakes are now higher than ever.

But we should be cautious when flagging the idea of an infringement against a Member State due to its court’s rulings and, above all, we should manage expectations very carefully.

First, it must be said that ‘judicial infringements’ have never been the Commission’s cup of tea. We can only find two infringements of this kind in the history of EU Law, first in an obscure VAT case against Spain (C-154/08), and later in a more high-profile tax case against France (C-416/17). The principle was laid down in Commission v Italy (C-129/00), but it has only been put into action on two occasions. In both cases the Court found that the Kingdom of Spain and the French Republic had, respectively, breached EU Law as a result of a judgment of their supreme jurisdictions (the administrative chamber of the Spanish Tribunal Supremo and the French Conseil d’État). Thus, there are precedents, but only very few (see Araceli Turmo’s excellent comment on the French case and a summary of the evolution of this case law)

The reason why the Commission has shied away from these cases is because judicial infringements are difficult to amend, and the Court has stated on many occasions that the res iudicata of national judgments must be upheld, even if they breach EU law (with very, very few exceptions). Also, the Commission does not want to push the Court of Justice into becoming an appellate court that reviews judgments of national courts of last resort. This kind of appeal is not among the remedies provided in the Treaties, and no Member State has shown any interest in creating such a remedy in the course of past Treaty reforms.

Second, it is also important to highlight that the situation created after the BVerfG’s judgment is nothing like the past ultra vires declarations rendered by other supreme and constitutional courts. In Landtovà and Ajos, where the Czech Constitutional Court and the Danish Supreme Court declared, respectively, that the Court of Justice had acted ultra vires, both cases concerned potential breaches of EU law by national statutory provisions and international treaties. There was nothing that the Czech Republic or Denmark could not amend through the ordinary channels of rulemaking. In the case of the BVerfG the situation is quite different and considerably more difficult to fix: the German court has ruled on the validity of an EU act, because the preliminary reference it made in Weiss was a reference of validity over the ECB’s PSPP Decision. And it has done so in a field of exclusive competence of the EU: monetary policy. Thus, by declaring the Weiss judgment of the Court of Justice ultra vires, the BVerfG is going well beyond its Czech and Danish counterparts, stepping into the shoes of the Luxembourg judge and directly reviewing the legality of an EU act in an area of exclusive EU competence: an ECB monetary policy Decision.

The judgment is not only undermining the Court of Justice’s role as the supreme interpreter of EU law, particularly in areas of exclusive competence, but also as the sole reviewer of illegality of EU acts, something that was settled and has been accepted since the Foto-Frost (C-314/85) ruling in 1987. In other words, this is an ultra vires declaration that strikes at the very heart of the Court of Justice’s role in the EU’s judiciary and of the EU enforcement and dispute settlement system that has functioned for decades (and remarkably well, I must add).

Therefore, and in contrast with other precedents of ultra vires declarations, this is a judgment that is difficult to enforce through statutory law. Through its judgment, the BVerfG is demanding an amendment of EU Law that the EU cannot abide by, for it would entail a tacit recognition of the BVerfG’s new role as ultimate guardian of EU law. And if Germany was to introduce legislation to repeal the judgment, the obvious course of action would have to be a constitutional amendment, but in a country that has ‘eternity clauses’ in its Constitution, so eventually the BVerfG would, once again, have the last word on the matter. Legislative measures could be targeted at improving the BVerfG’s decision-making procedures and avoiding situations like the one in Weiss (for example, amending the BVerfG’s statute to force the court to refer cases on EU competence to its plenary), but that would only be a partial solution for the future. The damage from the judgment has already been done.

In this diabolical scenario, would an infringement procedure solve the conundrum? Unfortunately, an Article 258 TFEU infringement procedure can help, but it will not put an end to the matter.

However, it can be a very useful tool.

And to understand how an infringement procedure against Germany could be of use in this situation, we need to look at the situation from a broader perspective.

I very much doubt that the BVerfG’s judgment is to the liking of the German Federal Government, the Bundesrat or even the Bundesbank. I can imagine German politicians and lawyers finding themselves deeply divided: they probably share many of the concerns pointed out in the judgment, but they probably also abhor the way it has been done, the reasoning and its timing. All the Germans I have spoken to so far are deeply concerned about the negative consequences of this judgment. Many of them even admit to be deeply saddened by the BVerfG. The published opinion of the Supreme Court justice Peter Meier-Beck, publicly stating that the judgments caused him ‘horror’, is highly revealing. However, some voices also share their worries about the ECB going too far, the need for Treaty change, the risk of twisting EU rules and competences too far and the lack of democratic accountability of the ECB policy.

I fully share those concerns and I think that that is exactly how the matter should be approached. The judgment of the BVerfG is a lesson from which we must take good note, on its positive side but, above all, on its negative points.

But how can the effects of such a damaging judgment be amended, and how can the German Government react to a breach of EU law from its ultimate court? How can a country put a Constitutional Court on the negotiating table of the EU? It simply cannot. The judgment is there, it cannot be revoked. Amending the Grundgesetz is opening Pandora’s box and it could mean a turn for the worse. So what can we do?

At the present time, we should be realistic and assume that the main outcome we can aspire to is achieving a European consensus about the inadequacy of this judgment, to wait with patience for an overruling in the course of time and start working on a Treaty reform that reaffirms the primacy of EU law and settles the matter of constitutional conflict in a practical and understandable way. This is a long-term strategy in which the infringement procedure is just a tool in the first phase. An important tool, but one among others in the toolkit.

 

The short term

I very much doubt that Poland and Hungary, and particularly their constitutional courts, will be appeased or contained on the mere grounds of a press release. No matter how resolute and powerful the Court of Justice’s press release of 8 May 2020 may sound, it is not a judgment. And the same applies to the Commission President’s statement of 10 May 2020. The press releases will do the trick for a time and they will probably restrain the Polish Government for a few weeks, but they are only a provisional fixture. A band aid for a very severe and bloody wound.

Therefore, the infringement procedure is necessary and a letter of formal notice must be addressed to the Federal Republic of Germany before the three-month period granted by the BVerfG to the defendants expires. In fact, that letter should not be sent by the Commission alone. It should be sent after the 18 remaining Member States of the euro area refer the matter to the Commission on the grounds of Article 259 TFEU, as a sign of support to the Court of Justice, to confirm that, in their view, the sole interpreter of EU law in the euro area is the Luxembourg court. Because order and certainty are particularly relevant for the euro area’s institutional arrangements and its ability to carry out its monetary policy, it is crucial that the euro area Member States voice their concerns too, in a joint and organised way that provides the Commission with even more authority when sending the letter of formal notice.

This quick reaction from the Commission, plus all the euro area countries requesting Germany to return to the rules of the game, should exert considerable pressure on the country’s main authorities. And such pressure should result in a simple and straightforward statement from the Bundesbank, as an integral member of the Eurozone, stating that the PSPP complies with the principle of proportionality. No statement should be issued by the ECB and the Bundesbank’s declaration should be based only on the information available in its archives (which is probably very abundant). At this stage, it should be obvious for the BVerfG that any escalation of the crisis would only make things worse. If its intention was to render a mere declarative judgment, a declaration by the Bundesbank should be enough for the BVerfG. But if the BVerfG is not satisfied with this outcome, it will be good proof that its intention is to provoke a full-blown institutional crisis that could split the euro and the EU apart. And if that is the will of eight judges sitting in the Second Senate of the BVerfG, then there are good reasons to put an end to the crisis by enacting a constitutional reform, or, alternatively, forcing Germany to make use of Article 50 TEU and withdraw from the EU. I very much doubt that that was the aim of the BVerfG when it started this fire, but that is the logical outcome of its decision once it decided to walk down that path.

But if the BVerfG is deemed to be satisfied with the Bundesbank’s statement, it will be good proof that the Weiss judgment is just a declaratory exercise, devoid of practical effect and therefore of no harm to the effectiveness of EU Law. The matter will be solved, but only on the surface.

At that point, the Commission could have arguments to refrain from continuing its infringement. By that time, the message received by the markets will be of reinstatement of the EU’s authority. And if the Poles decide to go ultra vires, the Commission could very well launch the infringement against them, with the argument that the BVerfG had deactivated its own bomb, hollowing its judgment of any practical effect. Ignoring a judgment of the Court of Justice to carry on enforcing a judicial reform is not the same as a judicially hollow statement with no practical effects, and thus the Commission could make a distinction and justify full enforcement against Poland or any other Member State toying with an ultra vires tool that attempts to go all the way.

 

The long term

In the meantime, a long-term overhaul of the EU judiciary at its highest level, as conceived thus far, will be needed. Things cannot remain the same, and a new and more unitary approach towards judicial dialogue should be built collectively. And depending on the signals coming from national courts, the approach can be adjusted.

A first test case will be the BVerfG’s upcoming rulings on the PEPP, which will certainly be brought before Karlsruhe in due course. A full or partial reconsideration of its case law on the right to political participation would be welcome, as a chance to reset things and put Weiss in its proper place, as a (non-admitted) unfortunate precedent that simply spiraled out of control.

But Treaty amendments will be necessary, as a sign that something went terribly wrong in the relationship between supreme courts in Europe, and that it cannot be repeated ever again.

The introduction of primacy clauses in national constitutions is the optimal choice, but the truth is that Member States still need an escape clause in cases of structural shifts of competence within the EU. The rationale of the original ultra vires doctrine still stands and it must be given attention, particularly in a Union of constitutional States that have not given away having the last word under their own sovereignty. As long as Article 50 TEU is enshrined in the Treaties, it is obvious that the last word remains in each Member State, articulated through its right to withdraw from the Union.

And thus, we need an operative solution for situations in which a constitutional court decides that it is time to push the button. And here is where we should start getting creative, not destructive. And the options are as plentiful and abundant as the imagination of European lawyers can reach, which is (fortunately) very far.

A personal favorite is the creation of a constitutional chamber within the Court of Justice, an ad hoc body that rules upon the request of a supreme or constitutional court when it considers that the EU has manifestly exceeded its powers. Such a chamber could be composed of judges of the Court of Justice and national constitutional and supreme court judges. To make things even more balanced, the composition could include the President of the European Court of Human Rights. Three judges of the Court of Justice, three judges of supreme or constitutional courts and the President of the European Court of Human Rights, all seven of them deciding, at the request of a concerned constitutional jurisdiction, on whether the EU has manifestly gone beyond its powers.  What court of law could have more authority to rule on such cases?

This is not an original contribution. It was flagged by Joseph Weiler and also developed by Juan Luis Requejo, among others. It would provide a sensible solution to the extreme cases of EU competence transgressions, but it would also set the standard to determine when such breaches must be called out. A judgment like the BVerfG’s in Weiss could be solved by reasserting the EU’s competence as confirmed by the Court of Justice, thus avoiding the unfortunate mess that we have been thrown into. But that outcome would not come from the EU court or a national court, but from a composite chamber representing both legitimacies. And the voice of this constitutional chamber could not be questioned by any court of law, since it would represent the ultimate source of our collective national and European sovereignty.

In the context of the upcoming Conference on the Future of Europe, this is a proposal that could at last be worth discussing. The BVerfG has given Europe’s political representatives the perfect excuse to reflect upon it. And if the proposal arrived upon the initiative of the Federal Republic of Germany, it would even be more satisfactory, as a sign that the Member State that created this conundrum is seriously attempting to fix it for good.

A way forward is possible. It will require a lot of effort, empathy and consensus, but it is possible. Only a solution of this kind will overrule the nefarious consequences of last week’s ruling. And in the meantime, it is important that the Commission plays its role, exerts maximum pressure collectively with all the euro area Member States, and, together with the German authorities in a spirit of sincere cooperation, diffuse the practical effects of the judgment, but with an eye set on the future. On the future of EU law after Weiss.

Daniel Sarmiento is Professor of EU Law (Complutense University of Madrid) and Editor-in-Chief of EU Law Live

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