July 05
2020
Home
Home
Anjum Shabbir
Anjum Shabbir
share
15th June 2020
Banking & Finance Institutional law Justice & Litigation

Op-Ed: “The Eurogroup and Effective Judicial Protection in the EU: Chrysostomides” by Menelaos Markakis and Anastasia Karatzia

On 28 May 2020, Advocate General (AG) Pitruzzella delivered his Opinion in Chrysostomides (Joined Cases C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P). The cases originate from the Cypriot financial crisis and the haircut of deposits that took place in the run-up to the financial assistance received by the country from the European Stability Mechanism (ESM) in 2013. The cases now before the Court of Justice concern two appeals brought by the Council of the EU, supported by the Commission, against two judgments of the General Court in which the latter dismissed the objections of inadmissibility raised by the Council regarding actions for damages brought, inter alia, against the Eurogroup. The General Court held in Chrysostomides that ‘the Euro Group is a body of the Union formally established by the Treaties and intended to contribute to achieving the objectives of the Union. The acts and conduct of the Euro Group in the exercise of its powers under EU law are therefore attributable to the European Union’ (paragraph 113). It further ruled that: ‘Any contrary solution would clash with the principle of the Union based on the rule of law, in so far as it would allow the establishment, within the legal system of the European Union itself, of entities whose acts and conduct could not result in the European Union incurring liability.’ (paragraph 114).

The present cases are important insofar as they afford the Court of Justice an opportunity for the first time to clarify whether the Eurogroup is an institution, within the meaning of Article 340(2) TFEU, whose actions may trigger the non-contractual liability of the European Union. In the words of the AG: ‘The present cases are unquestionably of constitutional significance. They afford the Court an opportunity to clarify the legal nature of the Euro Group, a body that certainly has considerable political influence, but is at the same time the body within the European constitutional and institutional framework that has perhaps aroused the most debate and is the least easy to circumscribe’ (paragraph 4) (fn 1).

The AG is in agreement with the General Court that ‘the concept of “institution” within the meaning of the second paragraph of Article 340 TFEU is broader than that referred to in Article 13(1) TEU’, hence it covers all other EU bodies which are established by the Treaties and are intended to contribute to the achievement of the EU’s objectives (paragraph 39). Where a body satisfies these two conditions, its actions when exercising the powers assigned to it by EU law may be imputed to the EU under Article 340 TFEU (paragraph 39). According to the AG, however, the Eurogroup is a body ‘outside the institutional and legal framework of the EU’ (paragraph 107), thus the jurisdiction of the Court of Justice of the EU (CJEU) is not activated in the case at hand. As such, the AG concludes that liability cannot be imposed on the EU for the actions of the Eurogroup via Article 340 TFEU and argues that this does not affect the judicial protection of the applicants in the case at hand (paragraphs 109-126).

Most of the AG’s Opinion is devoted to a discussion of the complexities of the EMU – which we will largely skip due to space constraints – and to an exploration of the legal nature of the Eurogroup. In our view, the most notable and impactful part of the Opinion is contained in its final two substantive sections (paragraphs 91-126), where the AG attempts to tackle the argument of the General Court according to which the decisions of the Eurogroup should be subject to judicial scrutiny inter alia due to considerations relating to a ‘Union based on the rule of law’ and particularly due to the requirements of observance of the principle of effective judicial protection. In this brief commentary, we share some reflections on selected conclusions of the Opinion, namely that the Eurogroup is situated outside the EU legal order and that this finding does not interfere with the EU principle of effective judicial protection.

 

The Eurogroup as a body outside the EU legal order

To determine the legal nature of the Eurogroup, the AG employs what he calls a ‘literal, schematic, historic, and teleological interpretation’ of primary EU law, taking into account the role of the Eurogroup ‘within the particular constitutional architecture of EMU’ (paragraph 92). In his opinion, ‘it is unquestionable that the Euro Group was first created as an intergovernmental body outside the institutional and legal framework of the European Union’ (paragraph 92). According to the argument, ‘the Euro Group was in fact instituted by means of an act outside the system of sources of EU law, by a body, the European Council, which, at the time when the Euro Group was created, was outside the institutional framework of the European Union’ (footnote 58). As such, the AG aims to identify by his analysis ‘whether the Treaty of Lisbon merely recognised the Euro Group or whether it sought to alter its legal nature (…)’ (paragraph 92).

First, it is noted ‘…from a literal point of view … that both Article 137 TFEU and the terms of Protocol No 14 maintained the description of the body as a “group” — rather than reclassifying it as a “council” or “committee” — and, most importantly, expressly refer to meetings of “the Ministers of the Member States whose currency is the euro” being conducted “informally”’ (paragraph 93). The AG argues that ‘the express reference to the ministers of the Member States indicates that, when they take part in meetings of the Euro Group, the participants are acting in their national capacity as ministers’ (paragraph 94). He further argues that: ‘That reading is … supported by the next sentence of Article 1 of Protocol No 14, which states that the meetings are to discuss “questions related to the specific responsibilities they share with regard to the single currency”. That wording makes it clear that the responsibilities addressed in the meetings are responsibilities which remain with the individual ministers, by reason of their national powers, rather than responsibilities which are transferred to the forum in which they are meeting…’ (paragraph 95). In our view, this interpretation is not straightforward in textual terms, namely it does not follow from the wording of the aforementioned provisions that the participants are acting in their national capacity as ministers.

Second, this literal interpretation ‘…appears to be confirmed, from a schematic point of view, on comparing the wording used in Article 137 TFEU and Protocol No 14 with that used in other provisions of the Treaties’ (paragraph 97). The AG distinguishes the wording used in relation to the Eurogroup with that used for the composition of the Council in Article 16(2) TEU, ‘according to which “the Council shall consist of a representative of each Member State at ministerial level”. The provision concerning the Council thus refers not to ministers acting in their national capacity, but to the Council as an EU institution consisting of the representatives within that body of each Member State’ (paragraph 97). Furthermore, the wording used in Article 137 TFEU and Protocol No 14 is also ‘plainly different’ from that used in, for example, Articles 136(2) and Article 138(3) TFEU, which stipulate that ‘only members of the Council representing Member States whose currency is the euro shall take part in the vote’ (paragraph 98).

This distinction drawn by the AG is somewhat difficult to grasp. After all, Article 10 TEU states that ‘Member States are represented … in the Council by their governments, themselves democratically accountable either to their national Parliaments, or to their citizens.’ If the ministers are representing their Member States in the Council, what makes their participation different in the Eurogroup? The AG is effectively arguing that finance ministers are participating in the Eurogroup in their capacity as national ministers. According to the argument, they are exercising their own national powers in the Eurogroup and are not acting as members of an EU body. In our view, the wording used in the aforementioned provisions is indeed different, but in reality there would be no reason for the drafters of the Treaty of Lisbon to use similar wording in either Article 137 TFEU or Protocol No 14. Unless the Eurogroup is meeting in an inclusive format (thereby also comprising the ministers of finance from non-Euro area Member States), the Eurogroup only consists of the ministers of finance from Euro area Member States, such that no distinction or further specification of that is needed. Even more so, the very webpage dedicated to the Eurogroup refers to ‘Eurogroup members’ when introducing the finance ministers.

Third, ‘from a historic viewpoint, a perusal of the acts of the Convention on the Future of Europe … reveals no intention of including the Euro Group within the EU institutional framework, but rather indicia to the contrary’ (paragraph 100). In this connection, the AG draws attention to a rejected Commission proposal to establish an ‘Ecofin Council for the Euro area’ that would bring together only the Ministers of Finance of the Member States of the Euro area and have decision-making powers in the spheres of common interest to the Member States that share the same currency (CONV 391/02, p. 4); and the accepted ‘French-German contribution on Economic Governance’ (CONV 470/02, p. 3), which led to the recognition of the Eurogroup in Protocol No 14 (footnote 66). However, the fact that the Eurogroup is not a Council configuration does not in and of itself mean that it is situated outside the EU legal order. What is more, neither of these two documents mentions that, according to the reflections of their authors, the Eurogroup is (or should be) outside the formal confines of the EU Treaties.

Fourth, ‘from a teleological viewpoint, it is apparent from the analysis of the origins and function of the Euro Group within the constitutional architecture of EMU … that the reference to the Euro Group in Article 137 TFEU and Protocol No 14 is intended as a formal recognition of a pre-existing entity outside the EU institutional framework’ (paragraph 101). In the AG’s view, this recognition also empowered the Commission and the ECB to participate in the operations of the Eurogroup; it became compulsory for the Commission to participate and it became compulsory to invite the ECB. ‘Without any autonomous decision-making body for the Member States of the euro area having been created, that recognition made it possible, while meeting the requirements of the other Member States, to preserve undiminished the Council’s fundamental role in the field of economic coordination’ (see paragraphs 101, 63-65, 86). Yet, whatever the origins and function of the Eurogroup may have originally been (which could equally be contested), they do not seem to warrant the conclusion that the Lisbon provisions were merely intended as a formal recognition of an entity situated outside the EU institutional framework.

Seen in this light, it is perhaps unsurprising that the AG is seeking to support the conclusion reached above by means of a normative argument. As part of the teleological interpretation of the Eurogroup’s nature, the AG connects the informality of the Eurogroup with its externality to the EU legal framework. In his view, externality allows the Eurogroup to maintain informality and thus to operate ‘as a forum for political discussion in which complex interests may be reconciled and compromises reached between the Member States whose currency is the euro’ (paragraph 102). However, it could be questioned whether externality is a necessary precondition for informality. In addition, even if one were to accept that the Eurogroup operates simply as a coordination mechanism (see also paragraph 103), it is still unclear why externality is necessary for a forum in which Eurozone Member States discuss complex interests and attempt to find compromises. After all, complex cases are reconciled and compromises are reached between Member States also in Council, without mandating externality (or informality, for that matter).

The arguments pertaining to why the Commission’s (compulsory) participation in the Eurogroup is necessary seem to be beside the point (see paragraph 104). Instead, as we will see below, the reference to the Commission’s role alludes to considerations relevant to the Ledra case, which become apparent later in the Opinion. Regarding the ECB’s participation in the Eurogroup meetings, ‘this satisfies the requirement … of ensuring a link between economic policy and monetary policy within EMU, while preserving that institution’s independence’. (paragraph 104). Notwithstanding this argument, it is not entirely clear to us why the informal nature of the Eurogroup is necessary to preserve the ECB’s independence. Taken to its logical conclusion, this argument would mean that further fiscal integration (possibly accompanied by the creation of European finance ministry of sorts) would endanger the ECB’s independence. If anything, the relevant literature regards the lack of a counterpart in economic policy at the EU level as a danger to the ECB’s independence.

The conclusion that the Eurogroup is external to the EU institutional framework is not altered, said the AG, by the fact that that body is mentioned in various provisions of secondary EU law (paragraph 105). We do wonder, however, whether secondary EU law may confer powers or tasks to non-EU bodies, especially to the point of involving those bodies in the accountability mechanisms in the Banking Union, as the AG himself readily acknowledges is the case for the Eurogroup.

Based on the line of thought set out above, the AG concludes that the CJEU has no jurisdiction to hear actions for damages brought against the Eurogroup, it being ‘a body outside the institutional and legal framework of the European Union’ (paragraph 107) which embodies a particular form of intergovernmentalism that exists within the EMU and operates as ‘a bridge between the State sphere and the EU sphere’ (paragraph 106). In the AG’s opinion, the Treaty of Lisbon merely recognised that the Eurogroup exists outside the EU legal framework and formalised the involvement of the Commission and the ECB in the operations of the Eurogroup (paragraph 106). It could be argued that, in practice, the AG’s conclusion makes it very difficult to separate the Eurogroup from the ESM’s Board of Governors, the only remaining difference being, according to the argument, that the Commission and the ECB may participate in the meetings of the latter body as observers (Article 5(3) ESM Treaty), whereas they shall (be invited to) take part in the meetings of the Eurogroup (Article 1 Protocol No 14).

Overall, the AG blocks the use of Article 340 TFEU for actions of the Eurogroup as a potential avenue for redress for the applicants. It is also established case law that the Eurogroup’s actions cannot be scrutinised by the CJEU under Article 263 TFEU (Mallis). The position of the AG that this conclusion does not affect the rule of law and the principle of effective judicial protection in the EU is discussed in the next section.

 

Eurogroup, the rule of law, and effective judicial protection

In the AG’s Opinion, ‘individuals are ensured judicial protection by the fact that they can bring an action in non-contractual liability against institutions which adopt acts and conduct giving effect to and developing on the conclusions of the Euro Group’ (paragraph 111). This is because ‘political agreements reached within the Euro Group, in the absence of any formal powers, will be crystallised and given effect by means of acts and activities of other bodies either within the European Union or outside its legal framework’ (paragraph 112). Be that as it may, one cannot readily assume that there would be acts implementing the statements of the Eurogroup to challenge, which would include the terms that litigants wish to challenge. The AG further mentions that individuals may also bring challenges against institutions which ‘adopt conduct’ giving effect to and developing on the conclusions of the Eurogroup, but it is unclear what this conduct would be. Even if there would be such acts (or conduct), it should be noted that private persons may have no standing to challenge the acts and activities of bodies situated outside the EU legal framework. This is particularly the case as regards the decisions reached by the ESM bodies pursuant to the ESM Treaty (Article 37).

Nevertheless, the AG goes on to note that, ‘The fact that the Euro Group should not be categorised as an “institution” for the purposes of the second paragraph of Article 340 TFEU does not preclude liability on the European Union’s part for actions whereby the Council or the Commission has implemented a decision of the Euro Group… Individuals are able to bring an action for damages, in accordance with the second paragraph of Article 340 TFEU, against the EU authority, in most cases the Council, which has implemented an agreement concluded within the Euro Group’ (paragraphs 113, 114). Moreover, since the Eurogroup is, in the AG’s view, outside the EU legal order, the Ledra principle applies, hence litigants may bring proceedings against the Commission and/or the ECB seeking compensation for losses suffered as a result of allegedly unlawful conduct on the part of those institutions in the negotiation and signing of the Memorandum of Understanding (paragraphs 115, 121-126).

Focusing now on the Commission’s participation, the AG follows a line of thought that resembles the CJEU’s position in Pringle and Ledra regarding the Commission’s role in the ESM (fn 2). He notes that the Commission participates in the Eurogroup meetings in its role as guardian of the Treaties (Article 17(1) TEU) to ensure that the activities of the Eurogroup are conducted in a manner consistent with EU law (paragraph 104). It will be recalled that in Pringle the Court of Justice also declared that in its participation in the ESM, the Commission is obliged under Article 17(1) TEU ‘to promote the general interest of the Union’ and ‘oversee the application of Union law’ (paragraph 163). As such, the Commission has the task, when participating in the ESM, to ensure that the financial assistance programmes are consistent with EU law. In Ledra, the Court of Justice took this finding a step further by declaring that the fact that the ESM is outside the EU legal order does not prevent the CJEU from examining a claim for damages under Article 340 TFEU against the Commission and the ECB for allegedly unlawful conduct during the adoption of a financial assistance programme. In that case, the Court of Justice actually went ahead and reviewed the conduct of the Commission under the ESM, on the basis of Article 340 TFEU, although the claim was ultimately unsuccessful (fn 3).

The analogy between Ledra and the AG’s Opinion in Chrysostomides regarding the role of the Commission in the operations of these two distinct bodies is clear in so far as the Commission is seen by the AG to operate as the guardian of the Treaties in both the ESM and the Eurogroup. The AG applies this rationale to the case at hand in paragraphs 118-126, where he explains the possibility ‘in exceptional circumstances’ for an applicant to bring an Article 340 TFEU case against the Commission on the basis of the latter’s failure to check the consistency with EU law of a ‘decision’ adopted by the Eurogroup (paragraph 126). This is in addition to the above-mentioned possibility for applicants to challenge the unlawful conduct of the Commission in implementing a ‘decision’ of the Eurogroup in breach of EU law (paragraph 113).

In the opinion of the AG, ’Alongside such remedies, an action for damages brought against the Euro Group would add very little. Even if such an action were admissible in accordance with the second paragraph of Article 340 TFEU, its purpose would in any event be to impute to the European Union any harmful conduct allegedly adopted by the Euro Group. … The outcome does not change if the European Union may … be called upon to answer for the conduct of the Council or the Commission in implementing decisions of the Euro Group’ (paragraph 117). This is a rather surprising argument. Legal certainty pleads in favour of allowing a general measure to be reviewed as soon as possible and not only after implementing measures have been adopted (as argued by AG Jacobs in UPA). Moreover, as noted above, such implementing measures may not exist at all or they may not include the impugned terms that litigants wish to challenge. What is more, the argument cannot be reconciled with the logic behind Article 340 TFEU more generally speaking: it is the EU which will be held responsible for damages for all actions brought under Article 340 TFEU where the conditions for liability are fulfilled. The AG’s argument would mean that it becomes redundant to identify which of the EU institutions, bodies, and so on. was responsible for the original breach (with the exception of the ECB based on Article 340(3) TFEU), because at the end of the day the EU would take the ultimate responsibility. It may be the case that the ultimate bearer of responsibility would not change, but the importance of attributing liability where it belongs is vital in a Union built on the rule of law. If an action cannot be attributed to its original source so that the relevant actors can address their wrongful behaviour, there is a risk that they will repeat it.

 

Concluding remarks

In conclusion, we have seen that the AG opined that the Eurogroup is situated outside the legal and institutional framework of the EU and that its actions can therefore not trigger the liability of the EU for damages. He also opined that the Ledra principle applies, such that litigants may instead seek to hold another institution (such as the Commission) responsible. We do wonder, however, whether the Eurogroup is indeed situated outside the EU legal framework. It seems odd for the Treaties to recognise the existence of a body situated outside the EU legal order. Article 136(3) TFEU springs to mind here, which provides that the Eurozone Member States ‘may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole’. In doing so, it confirms the existence of a national competence (Pringle). However, it does not mention the ESM. Nor does it mention who will be sitting in the ESM, or how the ESM Members will meet. In fact, Article 136(3) TFEU does not even mention a ‘body’. It only refers to a ‘stability mechanism’. If anything, these nuances preclude equating the Lisbon Treaty provisions on the Eurogroup with the one on the ESM, or indeed the legal nature of the Eurogroup with that of the ESM.

Are there any good arguments for excluding the non-contractual liability of the EU for the activities of the Eurogroup? Instead of arguing for placing the Eurogroup outside the EU legal order, a stronger argument for excluding non-contractual liability of the EU for the activities of the Eurogroup could have perhaps been built on the informal nature of the Eurogroup (see however Lamberts (T-209/00), especially paragraph 58), but that is a discussion for another (longer) paper. Alternatively, the Court of Justice may decide that the action is admissible and instead rule on the action based on the substantive criteria for non-contractual liability of the EU. At the end of the day, considerations about the EU rule of law as set out by the General Court should be at the forefront of approaching the issue of the liability of the EU for the actions of the Eurogroup. This would not only be in line with more liberal developments in the case law (see for example Steinhoff (T-107/17)) (fn 4); it would also plug an important hole in the EU’s system of remedies and procedures (fn 5).

 

Menelaos Markakis is Assistant Professor at Erasmus University Rotterdam. He is affiliated with the Erasmus Center for Economic and Financial Governance. He is the author of Accountability in the Economic and Monetary Union: Foundations, Policy, and Governance.

Anastasia Karatzia is Lecturer in Law at School of Law, University of Essex. Her most recent publication can be found in the European Law Review: Karatzia A. and Konstadinides T. ‘The legal nature of Memoranda of Understanding as instruments used by the European Central Bank’ (2019) 44(4) ELR 447. 

 

(fn 1) On the Eurogroup, see generally Paul Craig and Menelaos Markakis, ‘The Euro Area, its Regulation and Impact on Non-Euro Member States’ in Panos Koutrakos and Jukka Snell (eds), Research Handbook on the Law of the EU’s Internal Market (Elgar Publishing 2017) ch 14; Paul Craig, ‘The Eurogroup, Power and Accountability’ (2017) 23 ELJ 234.

(fn 2) See further Anastasia Karatzia and Menelaos Markakis, ‘What Role for the Commission and the ECB in the European Stability Mechanism?’ (2017) 6 Cambridge International Law Journal 232.

(fn 3) Amongst the copious literature, see particularly Paul Dermine, ‘The End of Impunity? The Legal Duties of “Borrowed” EU Institutions under the European Stability Mechanism Framework’ (2017) 13 EuConst 369; Anastasia Poulou, ‘Financial Assistance Conditionality and Human Rights Protection: What Is the Role of the EU Charter of Fundamental Rights?’ (2017) 54 CML Rev. 991; René Repasi, ‘Judicial Protection against Austerity Measures in the Euro Area: Ledra and Mallis’ (2017) 54 CML Rev. 1123; Stéphanie Lauhlé Shaelou and Anastasia Karatzia, ‘Some Preliminary Thoughts on the Cyprus Bail-In Litigation: A Commentary on Mallis and Ledra’ (2018) 42 E.L. Rev. 249; Menelaos Markakis, Accountability in the Economic and Monetary Union: Foundations, Policy, and Governance (OUP 2020) ch 6.

(fn 4) Annotated by Diane Fromage, ‘The ECB and its Expanded Duty to Respect and Promote the EU Charter of Fundamental Rights after the Steinhoff Case’ (9 June 2020) <http://eulawanalysis.blogspot.com/2020/06/the-ecb-and-its-expanded-duty-to.html> accessed 12 June 2020.

(fn 5) See further the EU Law Live Weekend Edition No 21.

×

Your privacy is important for us

We use cookies to improve the user experience. Please review privacy preferences.

I agree

Check our privacy policy and cookies policy.