A recent judgment from the German Federal Constitutional Court has raised a lively debate among European lawyers about its impact on the distribution of competences between the EU and its Member States and the manner in which these are determined and overseen. The case centred around whether the ECB’s flagship Public Sector Purchase Programme (PSPP) was supported by Union competence or whether the ECB had exceeded its competences under the EU Treaties, Professor Fausto Pocar explains.

In this context, the complaints also challenged the applicability of the judgment of the Grand Chamber of the Court of Justice of the EU (CJEU) of 11 December 2018 in the case 493/17, Weiss and others. Pronouncing on a preliminary ruling request submitted by the BVerfG, the CJEU accepted that the abovementioned ECB decisions fell within the sphere of monetary policy and could not be treated as equivalent to an economic policy measure for the sole reason that they may have indirect effects in the context of economic policy; it also considered that they did not infringe the principle of proportionality which requires that the acts of the EU institutions should not go beyond what is necessary to achieve the objectives pursued by the EU legislation on monetary policy, the primary one of which is to maintain price stability.

In addressing the complaints, the BVerfG agrees with the CJEU that the decisions taken by the ECB fell within the sphere of monetary policy, but diverges from its assessment as to their respect for the principle of proportionality, which requires, according to the BVerfG, that a programme’s monetary policy objective and the economic policy effects be identified, weighed and balanced against one another; where a programme’s monetary policy objective is pursued unconditionally and its economic effects are ignored, the principle of proportionality is manifestly disregarded. In the view of the BVerfG, both the ECB and the CJEU exceeded their competence: the ECB by neither assessing whether and how it balanced the monetary policy objective against the economic policy effects, nor substantiating that the measures provided in its decisions satisfied the principle of proportionality; the CJEU by failing to review the lack of explanations given by the ECB and relying in its judicial review only on the margin of discretion enjoyed by the ECB in making its decisions. These conclusions imply, according to the BVerfG that, while the interpretation of the Treaties with respect to a measure taken by a EU institution falls within the exclusive competence of the CJEU, where such interpretation is not comprehensible and must be considered arbitrary from an objective perspective, it is not binding on Germany as violating fundamental principles of democracy which are enshrined in the respect for the division of competences in the EU.

What are the consequences of this judgment for the EU? In light of the operative part of the decision they appear rather limited. The conclusion of the BVerfG is that the Federal Government and the Bundestag violated some provisions of the German Constitution “by failing to take suitable steps challenging that…..the Governing Council of the ECB neither assessed nor substantiated that the measures provided for in these decisions satisfy the principle of proportionality.” As the decisions at issue were adopted years ago and have been implemented by the Bundesbank, under EU law there should be no remedy for this omission to act, taking also into account that the CJEU has in the meantime declared that they do not infringe the principle of proportionality. Whether the complainants have a remedy under German law does not need to be discussed here.

However, some statements made in the reasoning of the judgment may have indirect positive and negative consequences. On the positive side, the ECB – which has reacted by taking note of the judgment and by declaring that it remains committed to ensure within its price stability mandate that its action to that effect is transmitted to all parts of the economy and to all jurisdictions of the euro area – will likely explain more in detail in the future how it assessed that its measures respect the principle of proportionality. The same will probably apply to the judicial review of such measures by the CJEU, which has been considered by the BVerfG as having accepted positions of the ECB ‘without closer scrutiny’. This may be the case for the measures announced by the ECB with respect to the COVID-19 emergency.

On the negative side, it is a matter of concern that the judgment states expressly that the interpretation of the CJEU can be set aside as non-binding when it is not comprehensible and must be considered arbitrary from an objective perspective. The words used allow for any kind of divergent approach and are far from leading to an objective construction. Should Member States be authorised to make such a review of the interpretation put forward by the CJEU, the unity of the EU legal order would be placed in jeopardy in the absence of any final decision ensuring the certainty of the law. While it may be accepted that a Member State can reserve not to apply EU law in exceptional cases of infringement of fundamental rights as maintained in the past by national constitutional courts, the judgment of the BVerfG goes far beyond that and adopts a language liable to undermine the unity of the EU. The danger does not lie in the judgment itself, but in the support that it offers to nationalist governments and movements to disengage, by relying on it, from the European integration. In the year of Brexit and the coronavirus pandemic, where cooperation among Member States is weak and nationalism is mounting up in many of them, pronouncing such a judgment is, to say the least, a clumsy and dangerous exercise.

 

Fausto Pocar, Emeritus Professor of International and EU Law, University of Milan

Fausto Pocar is an Emeritus Professor of International and EU Law at the University of Milan and a Judge ad hoc of the International Court of Justice since 2017, as well as a former Judge and President of the International Criminal Tribunal for the former Yugoslavia and of the Appeals Chamber of the International Criminal Tribunal for Rwanda. He was also a member and chair of the UN Human Rights Committee under the ICCPR, and a member of the Italian delegation to several UN bodies, as well as and to the EU CoJur, where he also served as rapporteur of the revised judicial Lugano convention 2007. He is President of the Italian Society of International and EU Law, a member of the International Law Institute and a doctor h.c. of the University of Antwerp and of the Kennedy University, Buenos Aires.