The Commission must bring enforcement proceedings against Germany

, by Guillermo Íñiguez

All the versions of this article: [English] [français]

The Commission must bring enforcement proceedings against Germany
The European Court of Justice. Katarina Dzurekova (Flickr).

Much has (already) been written about the German Federal Constitutional Court (FCC)’s ruling on May 5th. In assessing the European Central Bank (ECB)’s conduct during its 2015 sovereign bond-buying program (Public Sector Purchasing Program, PSPP), the Court suggested that the ECB had misapplied its powers when assessing the ‘proportionality’ of its actions. By failing to properly consider whether its actions went beyond what was strictly necessary, in other words, it had strayed beyond its powers.

The ruling’s precise legal implications are beyond the scope of this article – and of the author’s expertise. Its political consequences, however, call the European project’s very foundations into question: as Martin Sandbu writes, it has ‘set a bomb under the EU legal order’. At a time where certain Member States are using every mechanism available to them to undermine the EU, the FCC’s judgement sends the wrong message: that national courts can choose when to apply – and when to obey – EU law.

The FCC challenges two of the core principles at the heart of the EU: that EU law is supreme; that only the European Court of Justice (ECJ) is entitled to interpret it; and that Member States cannot settle disputes concerning the interpretation of the Treaties through ‘any other method’ than those in the Treaties (Article 344 TFEU). What EU law means and how it applies, in other words, is not determined by the German courts – or, for that matter, by those of any Member State –; it is solely a matter for the ECJ. Tuesday’s ruling effectively disregards this: the actions of an independent EU institution – the ECB – are scrutinized by reference to what German law considers the appropriate standard of proportionality. The FCC, furthermore, hints at disobeying ECJ case law which declares the PSPP program lawful [1] if it disagrees with the ECB’s proportionality assessment.

Of course, notes Kyriazis, ‘German courts have always had a difficult relationship with the principle of EU law supremacy, especially with its absolute and unconditional version’. Many of the leading cases in which the ECJ has developed said principle, in fact, have stemmed from German courts; and the FCC has repeatedly claimed it has the final say when applying EU law. Yet in the present political and economic context, the ruling’s consequences risk becoming particularly serious.

The timing, on the one hand, is awful. Although the FCC expressly notes that its judgement is not targeted at the ECB’s recent Pandemic Emergency Purchasing Program, (PEPP), the resemblance is uncanny, and the Court suggesting that the Bundesbank could be prohibited from participating in such programs creates huge legal uncertainty – the very uncertainty which is meant to be avoided by relying on the ECJ as the sole interpreter of EU law. Regardless of the case’s actual outcome, and with the eurozone under increasing political strain, Tuesday’s judgement undermines the ECB’s (already limited) powers, implicitly questions its independence, and casts serious doubts over the future scope of the PEPP. As writes Hendrik Enderlein writes, it has ‘shot at the PSPP, but hit the PEPP’.

More worryingly, it provides excellent ammunition for the Hungarian and Polish governments, which are engaged in an ongoing crusade with the European Commission and the ECJ. After all, if the highest court in Germany can selectively apply EU law, what impedes Hungary or Poland from deciding to ignore ECJ judgements – for example, on the independence of the judiciary (Case 192/18, Commission v Poland)? As Esteban González Pons, vice-president of the EPP, has noted, the German court’s reasoning is the same which has been employed by the Polish and Hungarian governments: the former, in fact, has already relied on Tuesday’s precedent to further its argument that ‘Member States are the masters of the Treaties’, and that it should be up to them to determine where EU law applies.

It is therefore necessary for the European Commission to step in. Article 258 of the TFEU allows the Commission to begin enforcement proceedings against a Member State if it considers that said Member State has failed to fulfil an obligation under the Treaties, in a process which is can to lead to the ECJ finding it in breach of EU law (Article 260). The Constitutional Court’s ruling, and its questioning of the supremacy of EU law, calls for such action. Doing so would not only reassert the Commission’s role as the institution in charge of implementing EU law: it would also allow the ECJ to declare what is blindingly obvious – that it is the European Court of Justice, not national courts, which interprets EU law.

The European legal order is both strong and dangerously fragile: its survival ultimately depends on Member States’ decision to play by the rules, and uphold – and abide by – the Treaties. As Poland and Hungary have repeatedly shown, it is impossible for the Commission to force a Member State to comply EU law wholly against its will. Yet enforcement proceedings are the closest it can get to doing so: they are the Commission’s main tool as a guardian of the Treaties and of the Union’s interest.

If the EU wants to send out a strong message – that Member States, cannot selectively apply EU law; and that political and economic power do not give you a right to do so –, it has to trigger the Article 258 process, and allow the ECJ to reassert its strength. The ball is in its court.

[1] C-493/17, Weiss and Others, Judgement of the Court (Grand Chamber) of 11 December 2018.

Your comments

  • On 7 May at 23:17, by Ian Beckett Replying to: The Commission must bring enforcement proceedings against Germany

    I would point out to you that firstly the German Constitutional Court (GCC) determined that the ECJ had in fact acted unlawfully (because it was ultra vires) in its original ruling regarding the ECB Bond buying program. I have yet to see any authority denying this fact.

    Secondly the GCC has allowed the ECB 3 months to respond. If the response is not forthcoming or is not sufficient then the GCC is not forbidding the program, it is simply stating that it has determined that it is against the German Constitution for the Bundesbank to partake in the program. At that point the Bundesbank will withdraw from the bond buying program but the ECB is free to continue. In fact the GCC ruled purely on an internal German matter over which it and it alone has supremacy, ie the German Constitution.

    I seriously doubt you will find many in Germany who would accept for one minute that he ECJ and the EU has the authority to amend the Germany Constitution without any reference to the German people.

    With regards to your last paragraph, political and economic power is what has allowed Germany and France to ignore EU law for decades. I suggest you look at their compliance with assorted EU requirements e.g GSP since the founding of the euro. To believe otherwise is naïve in the extreme.

  • On 10 May at 00:11, by Petrus Replying to: The Commission must bring enforcement proceedings against Germany

    Beckett the problem with your reasoning is that it does not take into account how the EU legal order is built. Primacy is not just a principle to please the ECJ or the Commission. It is a necessary principle to protect the uniformity of application of EU law. Without this uniformity there is no EU.

    Each constitutional court could decide that this or that measure is ultra vires because in their interpretation of the treaties it exceeds the competence conferred on the EU. Imagine if they did...

    That is why the ECJ is the sole authority to interpret EU law. Even when national courts disagree with its interpretation.

    In this case, the legality of a decision of the ECB was challenged. As the decision emanated from a European institution with the exclusive competence in monetary policy, only the ECJ could review this decision. The fact that the Bundesbank executes the decisions taken by the ECB does not make it a matter of national law (or else every other matter of EU law would be national because EU law is implemented by national administrations).

    When the GCC had a doubt on the interpretation of EU law regarding the ECB buying programme it asked a preliminary question and was bound by the answer regarding EU law like any other court.

    If the GCC does not comply, an infringement action is perfectly legitimate to preserve the uniformity of EU law.

    From that there are three options for the German government: 1) accept that EU law should be applied and make the necessary domestic changes 3) try to bring a change in the treaties 2) withdraw from the EU.

    And regarding your last point, many infringements actions have been brought against France and Germany and literally hundreds of them have been resolved. If you were referring to the budget deficit rules it’s true that those have been flouted for many years. But France was typically always trying to reach the target (with great difficulty). So it’s misleading to suggest that powerful Member States disregard EU law.

  • On 12 May at 22:20, by Théo Boucart Replying to: The Commission must bring enforcement proceedings against Germany

    The Bundesverfassungsgericht may have considered that the ECB had acted “ultra vires” because of the absence of a bailout clause in the TFEU. However, the jurisprudence of the EU has enabled to strengthen the European law over the decades. The 1964 Costa vs. Enel case set the principle of the supremacy of the EU law... Which has led to a harmonized implementation of the European law throughout the EU. The BVG has breached this major principle by questionning the decision given by the ECJ in 2018... which could open a pandora box. Everyone have complied with ECJ rulings so far. The German Constitutional Court must do so too.

    From an economic perspective, the BVG and parts of the German political elites could have destroyed the EU and its EMU if they had succeeded in pushing through their deadly orthodoxy during the Euro crisis. That’s another debate but if the ECJ had decided to take the same approach as the BVG’s, the eurozone would be dead in 2020.

  • On 14 May at 20:43, by Ian Beckett Replying to: The Commission must bring enforcement proceedings against Germany

    Petrus & Theo Boucart, I don’t doubt that “Primacy is not just a principle to please the ECJ….” However the ECJ, ECB and other EU institutions must act within the law themselves. If I may quote Justice Peter Huber of the GCC during an interview in Frankfurter Allgemeine Zeitung (13/05/20) “As long as we don’t live in a European state, a country’s membership will be governed according to its own constitutional law.” [1] Elsewhere this week he has stated that the ECJ ruling in 2018 over the bond buying programme was so far beyond that Court’s remit that German legal intervention was mandatory. He goes on to note that other constitutional courts have also ruled that he ECJ has exceeded it’s authority and therefore the law. These are considered views of one of the most senior judges in Germany, not the raving of some europhobic populist.

    You are mistaken when you say there is no bail out clause in the TFEU, in fact it is specifically prohibited by Articles 123 & 125 of the TFEU, and Article 21.1 of the Statute for the ESCB. As such it would be easy to argue that the GCC is requiring the Bundesbank to comply with EU legislation.

    I would also remind you that the GCC has previously already struck down EU legislation as unconstitutional in Germany, e.g. EU Data Retention Directive 2006 was struck down by the GCC in 2010. In 2007 it also stated when supplying a judgement on the Lisbon Treaty that one of the “eternal” provisions of the Constitution is the sovereignty of the Federal Republic of Germany, as well as the inability of the German Government under the Constitution to remove the authority of the GCC. The denial of the supposed supremacy of the ECJ dates back a long way before May 2020.

    The final comments of Justice Huber are clear “The suggestion that European law has absolute precedence is not compatible with the German Constitution”, he also remarked on the possibility of the EU infringement proceedings as you call for. “An infringement proceeding would trigger a considerable escalation that would thrust Germany and other member states in a constitutional conflict that would be difficult to resolve,……..In the long term that would weaken or endanger the EU.”

    For information, in 2014 (long before Brexit) the UK Supreme Court stated in the case R (on the application of HS2 Action Alliance Limited) (Appellant) v The Secretary of State for Transport and another (Respondents), that the UK had certain fundamental principles that it was for the UK courts alone to determine. Ie, the ECJ was not supreme.

    Finally “So it’s misleading to suggest that powerful Member States disregard EU law.” Since 2011 EU law requires current trade surpluses in excess of 6% to be corrected, Germany has always exceeded this level (up to 13% !) and has never faced action.

    [1] https://www.faz.net/aktuell/politik/inland/peter-huber-im-gespraech-das-ezb-urteil-war-zwingend-16766682.html

  • On 29 May at 17:59, by Théo Boucart Replying to: The Commission must bring enforcement proceedings against Germany

    Sorry for the late reply. The ruling issued by the BVG is the perfect example of Germany’s deep contradiction towards the Euro. Since the German government has always refused to set up a budgetary union as a necessary pillar for a common currency shared by very different economies (and that would have been very much needed as early as 2010 with the Eurozone Crisis), the ECB had to intervene on the financial markets to save the entire system. Thanks to OMT and QE programs, the Euro is still there and a possible destruction of the common currency would have been totally catastrophic for German citizens. So it’s a bit paradoxical to say that the BVG is protecting the interests of German citizens and taxpayers.

    I am not a legal expert, let alone a native English speaker (so my apologize for the clumsy formulations sometimes), but the BVG should also look beyond the simple words of the Treaties and the Fundamental Law to interpret the different cases in the interests of all the European citizens, which are in fine the interests of the German citizens and economy (which has benefited a lot from an underestimated currency). That’s another debate but it also shows that the whole thing cannot be summed up by the fact that the ECB has acted “ultra vires”.

  • On 1 June at 17:40, by Ian Beckett Replying to: The Commission must bring enforcement proceedings against Germany

    Theo Boucart, your English is excellent and you are to be congratulated on it.

    I agree completely with a number of the points you are making. Germany has benefited enormously from the under valuation of the euro. It has never accepted the obligations inherent in the creation of a single currency. (But then almost no state has.) The collapse of the euro would be devastating for all the members of the EZ and cause damage to economies around the World.

    But the article was about the actions of the BVG in disputing the actions of the ECB and most importantly the conflict with the ECJ. As I have already noted several TFEU articles categorically outlaw bail outs, this is precisely what the OMT process is. For that reason alone the BVG would be right to refuse the Bundesbank authority to continue in the process and to declare the actions of the ECJ ultra vires.

    But there seems to be confusion regarding the role of the ECJ. We are told it has legal supremacy. However, this is only accorded in an annex of the Lisbon Treaty. The ECJ itself has ruled annexes of treaties are not legally binding. The Commission did try to have an article conferring supremacy on the ECJ but it was rejected by the nation states.

    In 1993 and again in 2009 the BVG stated categorically that they alone had supremacy of the law in Germany. That powers had been conferred to the EU NOT ceded and that the Union had ‘no exclusive competence for jurisdictional conflicts.” The BVG had the power to overrule within Germany any matter where the BVG determined the relevant EU institution was exceeding national powers conferred to it (and they have struck down EU laws). It also stated that it would be illegal under the German Constitution for Germany to join a Bundesstaat (Federation). Perhaps most seriously (from a federalist point of view) German participation in integration is only possible as long as the Union recognises and accepts the “non transferable constitutional identity of the Federal Republic.”

    You talk about looking beyond the words and ‘interpreting cases in the interest of European citizens”. The BVG is only interested in the German Constitution not the well being of citizens of other countries. And once courts start to ignore the law and reinterpret words in an alternative way then you no longer have any claim that the EU is a rule / law based system. It is just a construct that changes laws without any democratic control based purely on what is convenient at any given moment.

    Ultimately, I suspect the OMT matter will be fudged because it suits Germany. But the doctrine of the supremacy of the ECJ has been shattered. A form of words will emerge to reduce the starkness of the message, but the ECJ will no longer pass down judgements which contravene the TFEU nor contest constitutional judgements of national courts. As for enforcement proceedings? Only if the EU wants to suffer massive damage.

    Many thanks for an interesting discussion.

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