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Decision of the Federal Constitutional Court of Germany regarding the ESM Treaty

Selma Gather , 19 septembre 2012

In its decision of 12 September 2012, the Constitutional Court refuses the applications for the issue of a temporary injunction concerning the Treaty establishing the European Stability Mechanism. It thereby authorizes the ratification of the Treaty by the Federal Republic of Germany, however with certain provisos.

On 29 June 2012, the German Bundestag and the Bundesrat adopted three draft bills containing the approval of each an Act on the European Council Decision to amend Article 136 of the FEU Treaty with regard to a Stability Mechanism for Member States whose currency is the Euro, the Treaty establishing the European Stability Mechanism and an Act on the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. These measures represent the peak of an ongoing political and legislative effort to create a permanent crisis management system since the application for financial aid of Greece in April 2010. Against the meantioned statutes, several constitutional complaints reached the Constitutional Court, in which the applicants submit the violation of, amongst others, Art. 38 para. 1, Art. 20 para. 1 and para. 2 in conjunction with Art. 79 para. 3 of the German Basic Law (GG). The complaints criticize that the German Bundestag takes on unforeseeable risks, deprives itself of its budget autonomy and denounces the transfer of decision making power to a supranational level that in their view is no longer compatible with the principle of democracy.

The Constitutional Court takes into account the right to elect the German Bundestag (Art. 38 para. 1 GG) and the principle of democracy (Art. 20 para. 1 and para. 2 in conjunction with Art. 79 para. 3 GG, guaranteeing the identity of the German Constitution). Already in its Maastricht and Lisbon decisions as well as in its decision of 7 September 2011 concerning the Euro Rescue Package, the Court accepted complaints on the basis of Art. 38 GG in order to criticize the Parliament's deprivation of decision making power due to a transfer of responsibilities on the supranational (and most recently also intergouvernemental) level. According to the Court, Art. 38 para. 1 GG is violated if the Bundestag can no longer exercise its right to decide on the budget, which represents a fundamental part of the ability of a state to „democratically shape itself“, on its own responsibility. In particular, no permanent mechanisms may be created under international treaties which have as an effect the liability for decisions by free will of other states, especially if they entail consequences which are impossible to foresee. It is the Bundestag's responsibility for integration to make sure that it remains „the master of its (budgetary) decisions“. The principle of democracy further prescribes that the Bundestag always has to be supplied with the information needed to asses the consequences of its decisions. The Court has left open the question wether and how far the principle of democracy sets justiciable limits to the overall financial commitment of the Federal Rebublic. In the meanwhile, it makes clear that the standard of examination here is that of obvious evidence; there has to be a manifest overstepping of extreme constitutional limits to accept a violation. Beyond this threshold, it is for the legislature to decide what is necessary and justifiable.

After a summary review, the Federal Constitutional Court comes to the conclusion that neither the Act concerning the approval of the amendment of Art. 136 TFEU, nor the Act concerning the Treaty establishing the European Stability Mechanism, nor the Act approving the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union is incompatible with the requirements of the Articles of the Basic Law in question.

In specific, the Court states that Art. 136 TFEU does not remodel the Union to an extent that is incompatible with the principle of democracy as the Member States' budget autonomy remains untouched and the creation of a stability mechanism under Art. 136 para. 3 TFEU still depends on ratification by the Member States.

Concerning the Treaty establishing the European Stability Mechanism (TESM), the Court sees the constitutional requirements met with certain provisos. For one, it has to be ensured under international law while ratifying the Treaty that the amount of all payment obligations arising to the Federal Republic of Germany are limited to the amount stipulated in the TESM (190 billion €) and no higher payment obligations can be established without the agreement of the German Bundestag. This proviso mainly concerns the interpretation of Art. 8 para. 5 TESM, which contains the duty to make subsequent contributions in case of insolvency of a Member. To ensure the adequate information of the German Parliament at all times, Art. 32 para. 5, Art. 34 and 35 para. 1 TESM further have to be interpreted in a manner consistent with the GG. Only with these provisos, the German Bundestag's overall budgetary responsibility is safeguarded.

With regard to the amount of Germany's obligations limited to 190 billion €, the Court also sees no extreme limits overstepped.

Likewise, the Court has no objections against the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union regarding Germany's overall budgetary responsibility. The provisions of the Treaty correspond with the brake of dept already inserted in the Basic Law and existant EU primary law. It thus contains no new competences for the EU and no irreversible commitment to specific material economic politics of the Member States. 

The decision oft he Federal Constitutional Court stands in line with its previous decisions concering the European Union and its policies in the Euro crisis. The principles already set out in the Lisbon decision and put in concrete terms in the decision of 7 September 2011 were applied to once again warrant the participation and influence of the Bundestag and Bundesrat. However, although the Court decided to do a summary review instead of a simple assessment of consequences, which is usually the case with applications for the issue of a temporary injunction, the decision is not the landmark decision it was expected to be. Furthermore, the Constitutional Court refused to occupy itself with the question concerning the European Central Bank program to buy government bonds on the secondary market, which has been subject of an urgent appeal filed shortly before the decision. This problematic remains to be treated in the principal proceedings.

Reproduction autorisée avec l’indication: Selma Gather, "Decision of the Federal Constitutional Court of Germany regarding the ESM Treaty", www.ceje.ch, actualité du 19 septembre 2012.