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Stefan Theil: A union of states, constitutions, administrations and judiciaries: some initial thoughts on the OMT ruling of the German Constitutional Court

Stefan TheilIn the midst of the all-consuming Brexit Referendum Debate, and the unfortunate vote by the United Kingdom to Leave the EU, one might be forgiven for having overlooked this particular piece of European integration litigation. If nothing else, this recent decision by the German Federal Constitutional Court (FCC) demonstrates that even in a difficult constitutional relationship, the spirit of cooperation and pragmatism can triumph over ideological differences. In that sense, the FCC has long been a sturdy pillar in the European constitutional order, one that the remaining member states and the EU can rely on for stability in the uncertain months and years that are sure to follow the invocation of Article 50 TEU.

Let’s make sure this doesn’t happen again… That might have might have gone through the minds of several Justices of FCC when they debated their recent decision on so-called Outright Monetary Transactions (OMT), published last Monday in German with a summary in English. The notes in parenthesis refer to the margin numbers of the German version of the judgment unless expressly stated otherwise.

I am not an expert on the policy and financial practices of the European Central Bank (ECB). Instead, I should like to focus the attention on the implications the FCC ruling has for the constitutional relationship of Germany with the EU. I will give an overview of the constitutional points and investigate to what extent the FCC has expanded on the principles expressed in its ruling on the Lisbon Treaty. Is there anything new to be found in the OMT judgment?

Initially, I was tempted to conclude that not much had changed since I last examined the relationship in 2014. Granted, the subject of investigation has changed, we are no longer talking about a new EU treaty. Instead, the FCC considered the policy of the ECB, namely two of its programmes designed to purchase government bonds of Member States of the Euro zone on the secondary market.

Nonetheless, much of the judgment dealt with the same ‘classic’ questions in the constitutional relationship between Germany and the EU that were already a feature of the Lisbon ruling:

  1. What are the limits on the transfer of sovereign competences to the EU?
  2. To what extent, if at all, does the German constitutional order accept the primacy of EU law as expressed by the European Court of Justice (ECJ)?
  3. At what point can and must the constitutional organs of the German state step in to prevent the EU from overstepping its competences?
  4. And finally, when would the FCC step in itself, and order the disapplication of EU law that runs counter to fundamental principles of the German Basic Law?

The FCC responds to these questions with two legal tests that will be familiar to anyone who has engaged with the Lisbon ruling, the subsequent decision in Honeywell, or the various precursors to the OMT decision:

  • A so-called constitutional identity review (at [136]). This grants an individual applicant the right to have the level of European integration reviewed. The FCC derives this from Articles 38 paragraph 1 in conjunction with Article 20 paragraph 1 and Art. 79 paragraph 3 (the famous eternity clause), essentially constructing a ‘right to democracy’ (at [185]) or rather, a right to meaningful democratic input. An individual’s right to vote and by extension the democratic principles it is inextricably connected with, so goes the argument, must have any meaningful influence on the entity that regulates key aspects of the law, in this case the EU. Therefore, Germany cannot transfer sovereign competences that would affect the principles laid down in Articles 1 and 20 in conjunction with Article 79 paragraph 3 Basic Law (at [136]), and individuals are entitled to seek a ruling from the FCC in order to safeguard their rights. These principles are said to include, amongst other things, Germany’s budget and defence policies. The FCC thus examines (a) whether the eternity clause of the Basic Law has been violated, or would be violated through a transfer of competences to the EU (at [138]), and (b) whether a measure taken pursuant to EU law would have the effect of violating the eternity clause (at [139]). The Court goes through some lengths to explain how this does not violate the principle of respect and cooperation, as laid down in Article 4 paragraph 3 TEU (at [140]), nor the principle of openness and friendliness of German Basic Law towards European integration (at [141]), and strives to support its reasoning with a comparative overview of constitutional orders of other European member States (at [142]). In a nod to its earlier rulings, the FCC now refers to the EU as a ‘union of states, constitutions, administrations and judiciaries’ (my translation: ‘Staaten-, Verfassungs-, Verwaltungs- und Rechtsprechungsverbund’; at [140]).

 

  • The second is a so-called ultra vires review (at [143]). With this review, the FCC investigates whether an EU measure has overstepped the competences transferred to the EU pursuant to Article 23 paragraph 1 of the Basic Law, and hence lack democratic legitimacy. However, not simply any ultra vires measure is sufficient to find a violation. Rather, the FCC requires a qualified infringement: the measure must evidently overstep the transferred competences, and must be of structural relevance to the balance of competences between the EU and the member states (at [147]). The ECJ must further be afforded a chance to pronounce itself on the EU measure, and is granted a right to ‘tolerance of error’ (at [149]). This reasoning is very much in line with the criteria laid down in the aforementioned Honeywell Interestingly, ‘evidently’ according to the FCC does not require that a legal question is necessarily clear and settled in a political or academic legal sense, but may rather merely be the result of a sufficiently evident and diligent interpretation of the law by the FCC (at [150]).

 

Up to this point, EU lawyers and those taking an interest in constitutional questions will have found little that they are not already familiar with from previous FCC decisions. The FCC acknowledges that the ECJ will generally be the primary interpreter of EU law, but through a now familiar technique reserves itself the right to review EU law where it touches on fundamental principles of the Basic Law (at [154 et seq.]).

The novelties arise in the later parts of the judgment, where the FCC elaborates on the role of the other organs of the German state. It specifically formulates an obligation of the German Bundestag and the Federal Government to monitor the exercise of transferred competences by the EU. Should the EU exceed its competences in a manifest and structurally relevant manner or violate the constitutional identity, then the German Government and Bundestag are obliged to step in and take measures to counteract these measures (at [163]). These countermeasures may include both legal and political actions, and may restrict the national effects of offending EU measures. Some commentators have rightly pointed out that this may in fact force the Bundestag into an uncomfortable role as both a monitoring and legitimizing force behind European integration.

The FCC justifies this broad ‘obligation to monitor’ with a construction that it expressly derives from domestic constitutional positive obligations under the basic rights of the German Constitution (‘grundrechtliche Schutzpflichten’) (at [166]). Namely, the FCC requires the German State to take necessary measures to protect and advance the previously mentioned rights arising from Article 38 paragraph 1 sentence 1 in conjunction with Article 20 paragraph 2 sentence 1 of the Basic Law.

In keeping with the positive obligations rationale, the FCC grants the Federal Government and the Bundestag a significant margin of appreciation in determining appropriate measures to counteract violations of the identity clause or ultra vires acts. Specifically, the FCC would only hold that the organs have failed in their (positive) obligations if no protective measures are taken at all, if measures taken are manifestly unsuitable or completely inadequate, or if they fall considerably short of the goal to counteract the overreaches of the EU (at [169]). Under certain conditions however, the FCC would prescribe specific measures from the German Government and the Bundestag (at [172]): namely, it would require an open debate in a full and public plenary session of the Bundestag in the event that a violation of the constitutional identity of the Basic Law was being considered, or had indeed been determined by the FCC (at [173]).

This obligation to monitor EU measures is arguably in line with the so-called “Integrationsverantwortung” that the FCC formulated with respect to the Bundestag in the Lisbon Judgment (Lisbon Judgment at [236]). However, it has never been expressly tied to the rights of individuals as the FCC has done here, nor has it thus far been used to derive any special responsibilities for organs of the State. This is a new quality of responsibility, but it is unclear why the FCC felt compelled to introduce it into the already complicated relationship between EU law and the German Basic Law.

It could be argued that it is a part of a broader attempt of the FCC to ensure that future conflicts between measures of EU law and the German Basic Law are identified earlier and dealt with at a political level. The FCC likely wished to avoid a situation where it is confronted with a fait accompli, a situation where the only remaining options might be to either grudgingly find the EU measure in question lawful, or to issue a judgment that would put Germany’s EU membership into jeopardy. Both outcomes represent the bad opposite ends of a spectrum of choices, and the FCC likely seeks more flexibility. Especially with a view to recent events, this ruling is a laudable attempt at defusing problematic clashes with the Basic Law before the judiciary is involved: the EU is scarcely equipped to deal with a constitutional crisis during the divorce proceedings with the United Kingdom.

Stefan Theil is a PhD candidate in Law at the University of Cambridge.

(Suggested citation: S. Theil, ‘A union of states, constitutions, administrations and judiciaries: some initial thoughts on the OMT ruling of the German Constitutional Court’ U.K. Const. L. Blog (20th July 2016) (available at: http://ukconstitutionallaw.org)).

 

One comment on “Stefan Theil: A union of states, constitutions, administrations and judiciaries: some initial thoughts on the OMT ruling of the German Constitutional Court

  1. Carol Harlow
    July 20, 2016

    You might say that the FCC barks like a German shepherd dog but bites like a mousekin

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