January 21
2021
Anjum Shabbir
Anjum Shabbir
share
22nd December 2020
Banking & Finance Institutional law Justice & Litigation

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

What is the legal nature of the Eurogroup (fn 1)? Can the EU incur non-contractual liability on the basis of the acts and conduct of the Eurogroup? On 16 December 2020, the Court of Justice delivered its judgment on appeal in Chrysostomides (joined cases C-597/18 P, C-598/18 P, C-603/18 P and C-604/18 P), which originated from the Cypriot financial crisis (fn 2). The judgment concerns two appeals brought by the Council of the European Union against two judgments of the General Court (T-680/13 and T-786/14), inasmuch as they dismissed the pleas of inadmissibility related to the actions for damages directed against the Eurogroup. The applicants at first instance also appealed, asking the Court to set aside the two judgments. The General Court had dismissed the appellants’ claims for non-contractual liability against the EU, the Council, the Commission, the European Central Bank (ECB), and the Eurogroup regarding the conditionality measures that coupled the financial assistance received by Cyprus from the European Stability Mechanism (ESM) in 2013. Furthermore, by its cross-appeals, the Council asked the Court to set aside those parts of the judgments in which the General Court dismissed its pleas of inadmissibility insofar as they related to the actions directed against a Council Decision.

It will be recalled that 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).

Six months ago, we wrote an Op-Ed for EU Law Live on Advocate General (AG) Pitruzzella’s Opinion in Chrysostomides. AG Pitruzzella opined that the General Court had erred in law when it dismissed the objections of inadmissibility raised by the Council regarding the actions for damages brought, inter alia, against the Eurogroup. In his Opinion, the Eurogroup is situated outside the EU legal order (paragraphs 91-108), and this conclusion is not called into question by considerations relating to the rule of law and the requirements of effective judicial protection (paragraphs 109-126). In what follows, it will be seen that the Court of Justice relied heavily on the AG’s Opinion in its judgment.

Analysis of the Court of Justice’s judgment regarding the legal nature of the Eurogroup

In its 16 December judgment, the Court of Justice held that the Eurogroup is not an EU entity established by the Treaties (paragraphs 80-90). Article 340(2) TFEU provides that: ‘In the case of non-contractual liability, the Union shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties’. Hence, an Article 340(2) TFEU action for non-contractual liability of the EU for actions of the Eurogroup cannot be brought against the EU, because the first condition for such an action ( that an EU institution has acted unlawfully) is not fulfilled.

The issue pertaining to the legal nature of the Eurogroup was one of several issues examined by the Court of Justice in Chrysostomides. While the AG’s Opinion, upon request by the Court of Justice (see paragraphs 56-63), focused exclusively on the question of the legal nature of the Eurogroup, the actual cases gave rise to broader issues concerning the role of the Council, the Commission, the ECB, and the Eurogroup in the decisions about the restructuring of the Cypriot banking sector. In this brief commentary, we will discuss the Court of Justice’s findings specifically regarding the actions for damages brought against the Eurogroup and how those findings proved detrimental for other points raised by the appellants (the applicants at first instance).

The Court of Justice reiterated the established case law according to which the term ‘institution’ in Article 340(2) TFEU is not limited to the EU institutions listed in Article 13(1) TEU (which does not include the Eurogroup), but includes ‘all the EU bodies, offices and agencies that have been established by or under the Treaties and are intended to contribute to the achievement of the European Union’s objectives’ (paragraph 80). The Court of Justice then found that the Eurogroup is not such an entity established by the Treaties (paragraphs 84-90), for the three reasons discussed below.

First, the Court argued that ‘the Euro Group was created as an intergovernmental body – outside the institutional framework of the European Union – intended to enable the ministers of [the Member States whose currency is the euro (MSCE)] to exchange and coordinate their views on issues relating to their common responsibilities concerning the single currency. It thus provides a bridge between the national level and the EU level for the purpose of coordinating the economic policies of the MSCE’ (paragraph 84). The Court reached this conclusion by referring selectively to the AG’s arguments to this effect. It further held that the Eurogroup’s subsequent recognition in Article 137 TFEU and Protocol No 14 annexed to the EU Treaties, ‘did not alter its intergovernmental nature in the slightest’, and that the Eurogroup cannot be equated with a configuration of the Council (paragraph 87).

Whilst the Eurogroup is indeed not one of the Council configurations according to Council Decision 2009/937/EU, the Court’s reasoning is premised on the assumption that the Eurogroup was established as an intergovernmental body outside the institutional framework of the European Union. As argued in our earlier blog post, 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.

Second, the Court of Justice argued that, as both the resolution of the European Council of 13 December 1997 and Article 1 of Protocol No 14 expressly state, and as the Court itself held in Mallis, ‘the Eurogroup is characterised by its informality’ (paragraph 88). Referring to the AG’s Opinion, the Court argued that the Eurogroup’s informality ‘can be explained by the purpose pursued by its creation of endowing economic and monetary union with an instrument of intergovernmental coordination but without affecting the role of the Council – which is the fulcrum of the European Union’s decision-making process in economic matters – or the independence of the ECB’ (paragraph 88). The Court of Justice thus implies that this informality is necessary to ensure that the Eurogroup does not affect the role of the Council, which is the formal decision-maker in economic matters, or the independence of the ECB.

Nevertheless, it is unclear how the informality of the Eurogroup is linked to (or requires) its externality from the EU institutional framework. As we had commented in our previous post, it could be questioned whether externality from EU law is necessary to maintain the group’s informality. Since the Eurogroup meetings take place before the ECOFIN meetings, it could as well have been the case that whatever is decided in the ECOFIN meetings verifies or refutes the decisions reached within the Eurogroup. In reality, insofar as the relevant Treaty provisions which confer powers on the Council in this area remain unchanged, formally recognising the Eurogroup by means of the Lisbon Treaty would not affect the role of the Council as the fulcrum of the EU’s decision-making process in economic matters. It is perfectly possible to recognise the existence of an entity within the EU institutional framework which would not (and indeed does not) encroach on the powers of the Council.

It is also unclear to us why the informal nature of the Eurogroup is necessary to preserve the ECB’s independence. The single paragraph devoted to this aspect of the judgment by the Court of Justice does not provide any further clarity on this point than the AG’s Opinion. Taken to its logical conclusion, this argument would mean that further fiscal integration (possibly accompanied by the creation of a 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 (namely, the ‘institutional loneliness’ of the ECB) as a danger to the ECB’s independence.

The third argument advanced by the Court of Justice is that ‘the Euro Group does not have any competence of its own in the EU legal order, as Article 1 of Protocol No 14 merely states that its meetings are to take place, when necessary, to discuss questions related to the specific responsibilities that the ministers of the MSCE share with regard to the single currency – responsibilities which they owe solely on account of their competence at national level’ (paragraph 89). Though the Court of Justice does not refer to the AG’s Opinion on this point, it seems that it endorses the AG’s argument that finance ministers are participating in the Eurogroup in their capacity as national ministers. According to the argument, the finance ministers are exercising their own national powers in the Eurogroup and are not acting as members of an EU body. We have previously expressed our view that it does not follow from the wording of the relevant Treaty provisions that the participants are acting in their national capacity as ministers. Furthermore, unless the word ‘competence’ as used by the Court is interpreted in a very narrow manner, it is clear that the finance ministers of the Euro area are given tasks in EU law, as was also acknowledged by the AG in his Opinion.

From the above three brief arguments, the Court of Justice concludes that the Eurogroup is not an EU body established by the Treaties and that an action to establish non-contractual liability of the EU could not be brought against it by the applicants at first instance, on the basis of Article 340(2) TFEU (paragraph 90). The Court of Justice then takes issue with the General Court’s position that the Eurogroup should be subject to judicial scrutiny inter alia because of considerations relating to a ‘Union based on the rule of law’ and specifically the requirement of observance of the principle of effective judicial protection (paragraphs 91-96).

The Court of Justice’s line of argument was as follows. The Eurogroup does not have any competence of its own in the EU legal order and it does not have the power to punish a failure to comply with the political agreements concluded in its meetings. Those agreements are given concrete expression and are implemented by acts and actions of the EU institutions. As such, individuals may bring before the EU courts an action to establish non-contractual liability of the EU against the Council, the Commission and the ECB in respect of the acts or conduct that those EU institutions adopt following such political agreements, as was shown here by the actions brought at first instance by the applicants in these cases (paragraph 93) (fn 3). Furthermore, the Court recalled that the Ledra Advertising principle applies, such that any failure on the part of the Commission to check that the political agreements concluded within the Eurogroup are in conformity with EU law is liable to result in non-contractual liability of the EU being invoked under Article 340(2) TFEU (paragraph 96) (fn 4).

We have previously expressed our opinion that 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). Most importantly, such implementing measures may not exist at all or they may not include the impugned terms that litigants wish to challenge. A further issue is demonstrated by Chrysostomides itself: the terms of those measures may be vague, such that the national authorities concerned may have, according to the Court, a margin of discretion for the purpose of laying down the impugned rules (paragraphs 114-118). What is more, private individuals may have no standing to challenge the said EU measures. It should also be noted that private persons 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). The draft revised ESM Treaty has not enlarged standing. Nor could such non-EU acts be challenged before the CJEU under the EU Treaties.

The legal ramifications for the remainder of the arguments put forward by the appellants

As we mentioned above, the judgment of the Court of Justice also proved detrimental for some of the arguments made by the individuals (the applicants at first instance) in the case. For example, the appellants complained that the General Court was wrong in finding that the Eurogroup statement of 25 March 2013 did not require the Republic of Cyprus to adopt the decrees that gave effect to the conditionality measures. The appellants had also complained against the General Court’s finding that the agreement between representatives of the MSCE on the conditionality attached to the financial assistance to the Republic of Cyprus was concluded by the finance ministers as members of the ESM Board of Governors and not as members of the Eurogroup (paragraph 120). The Court of Justice swiftly dismissed these arguments on the basis of its prior finding that the Eurogroup is not an EU body established by the Treaties (paragraph 122). As such, it did not provide any insights into the distinction between the role of the finance ministers in the ESM as opposed to their role in the Eurogroup. Following the same rationale, the Court of Justice dismissed the appellants’ argument that the defendants’ collective conduct was a ‘continuum’ in which each action was a necessary condition for the maintenance or continued implementation, by the Republic of Cyprus, of the banking restructuring measures (paragraph 129).  Since the appellants considered the conduct of the EU institutions to be a continuum, they also argued that the bail-in of one of the Cypriot banks (Laiki) was required both by the Eurogroup statement of 25 March 2013 and recital 5 of Council Decision 2013/236. Accordingly, they contended that the General Court erred in law in dismissing their actions as inadmissible in so far as they had not proved the link between the unlawfulness behind Decision 2013/236 and the harm that the appellants suffered (paragraphs 136-139). The Court of Justice dismissed this argument, once again reiterating its finding that the Eurogroup is not an EU body (paragraph 140).

Concluding remarks

The Court of Justice’s approach is detrimental not only for the case at hand – which was dismissed in its entirety – but also for any future cases against the Eurogroup. Unlike the AG’s Opinion, the text of the judgment falls short of explicitly declaring that the Eurogroup falls outside the EU legal order. Yet its effects are apparent; the judgment provides the Eurogroup with full immunity against actions for damages. What is more, by virtue of the Court of Justice’s earlier judgment in Mallis, actions for annulment (Article 263 TFEU) against the Eurogroup are also inadmissible. The combined effect of the Court’s case law in this area is to exempt the Eurogroup from two key mechanisms of judicial accountability established in the Treaties.

The Court of Justice’s judgment (as well as the AG’s Opinion) renders the Eurogroup virtually indistinguishable from the ESM’s Board of Governors, since neither of them is currently an EU entity established by the Treaties. The only remaining difference is, 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). In our opinion, it is peculiar that an entity situated outside the EU institutional framework is involved in the accountability mechanisms in the Banking Union (as was also noted by AG Pitruzzella). It is further worth noting that the Eurogroup, together with the Euro Summit, has been actively involved in crafting the EU’s response to the ongoing pandemic (discussed earlier in this Long Read), as well as in reforming the Eurozone more broadly (fn 5). It seems rather odd that the future of the EU is decided in fora which operate outside the EU’s legal and institutional framework.

 

Menelaos Markakis is Assistant Professor at Erasmus University Rotterdam. He is the recipient of the EUR fellowship and 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 recently Achilles C. Emilianides and Christina Ioannou, ‘A Financial Crisis as Limitation to a Fundamental Right to Protection of Deposits under European Union Law?’ in Kerstin von der Decken and Angelika Günzel (eds), Staat – Religion – Recht (Nomos 2020) 937-54.

(fn 3) 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 4) 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; Francesco Pennesi, ‘The Accountability of the European Stability Mechanism and the European Monetary Fund: Who Should Answer for Conditionality Measures?’ (2018) 3(2) European Papers 511; Menelaos Markakis, Accountability in the Economic and Monetary Union: Foundations, Policy, and Governance (OUP 2020) ch 6.

(fn 5) Paul Craig and Menelaos Markakis, ‘EMU Reform’ in Fabian Amtenbrink and Christoph Herrmann (eds), The EU Law of Economic and Monetary Union (OUP 2020) ch 42.

×

Your privacy is important for us

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

Accept all Settings

Check our privacy policy and cookies policy.

Cookies