This month’s digest of CJEU case law includes judgments concerning the application of the Charter of Fundamental Rights in respect of EFTA nationals and extradition proceedings relating to third states; aspects of the application of the principle of equal treatment, both in relation to the free movement of workers and employment discrimination on the grounds of sexual orientation; and the obligations of air carriers to consumers.
It also features AG opinions in relation to the Asylum Directive and international jurisdiction in civil law matters.
This month we also feature some German court decisions in relation to the effects of Brexit on cases involving British litigants, as well as a digest of yesterday’s German Federal Constitutional Court judgment in relation to the ECB’s flagship bond-buying programme.
When ruling on an extradition request by a third state concerning an EFTA state national, member states must verify that the accused will not be subject to the death penalty, torture, or other inhuman or degrading treatment or punishment
Case C-897/19 In re I.N., Ruska Federacija
Date of Judgment: 2 April 2020
EU Member State: Croatia
This case concerned an Interpol international wanted persons notice issued in Russia in respect of I.N., an individual who had successfully sought asylum in Iceland and acquired Icelandic nationality on the basis of the Russian criminal proceedings against him, which he claimed left him at risk of torture or other inhumane or degrading treatment. The present Croatian proceedings arose out of his arrest in Croatia on the basis of the international wanted persons notice. In response to his arrest, the Russian authorities issued an extradition request to Croatia and the responsible Croatian court considered that the legal conditions necessary for his extradition were satisfied.
I.N. then sought to have this decision permitting his extradition set aside by the Croatian Supreme Court (Vrhovni sud), arguing that an extradition from Croatia to Russia in these circumstances would infringe his rights under Article 19(2) of the Charter of Fundamental Rights of the European Union to not be extradited to a state where there is a serious risk of being subjected to torture or other degrading or inhumane treatment. He also argued that the proposed extradition would infringe his rights as a national of an EFTA member state established by analogy from the court’s judgment in the Petruhhin case, in which it was held that where it was proposed to extradite a national of another EU member state, the extraditing member state must inform the former member state and must surrender the individual concerned where the former member state so requests, in line with the Framework Decision on the European Arrest Warrant.
The Court held EU law to be applicable on the basis that the EEA Agreement forms an integral part of EU law; thus, it held that the Charter applied. Article 19(2) of the Charter prevented extradition to third party states where a risk of subjection to the death penalty, torture or other inhumane or degrading treatment existed in the destination state. The Court held that this imposes an obligation on member states to verify, before executing an extradition, that it would not prejudice the rights laid down by that article. In that regard, it emphasised that, in this case, the fact that the person concerned was granted asylum in Iceland was a particularly substantial piece of evidence for the purposes of that verification. The CJEU held that, in these circumstances, in the ’absence of specific facts’, such as significant changes in the situation in Russia or evidence demonstrating that the person concerned had concealed those criminal proceedings at the time he applied for asylum, the decision of the Icelandic authorities granting that application must lead Croatia to refuse the extradition.
The Court held that, in circumstances where a member state court considers that a proposed extradition would not infringe the rights accorded to the accused under Article 19(2), it will be necessary to consider whether any restriction on their rights as EU citizens or nationals of EFTA member states would be proportionate to the objective which the extradition is intended to pursue. In considering the applicability of the Court’s conclusions in the Petruhhin case, the Court held that the same principles applied by analogy to the present case. The Court noted that rules of Croatian law preventing the extradition of Croatian nationals to third states gave rise to a difference in treatment between Croatian nationals and nationals of EFTA states, which was therefore liable to impede the free movement of services between EFTA states and Croatia, within the meaning of Article 36 of the EEA Agreement. Thus, any such restriction of rights must be proportionate and based on objective considerations.
The Court held that although the objective underlying the Croatian rule – namely, to eliminate the risk of impunity for non-Croatian EEA nationals who commit a criminal offence in a third state – was a legitimate one, an alternative means of satisfying the objective may exist and if so, must accordingly be given priority. The Court noted that although the Framework Decision on the European Arrest Warrant did not apply to Iceland, an agreement concluded between Iceland and the EU on a surrender procedure contained ‘very similar provisions’ and made clear in its preamble that it was intended to improve judicial cooperation in criminal matters between both parties, based on the mutual trust enjoyed by the parties in each other’s capacity to guarantee fair trials. Thus, the principle established in Petruhhin that such a procedure was to be given priority over extradition to third states was to be applied by analogy to cases involving Icelandic nationals, since it would constitute a less prejudicial means of satisfying the objective at issue. This would therefore compel Croatia to surrender the accused to Iceland in preference to executing his extradition to Russia where requested by Iceland and where the requirements set down in the agreement were otherwise fulfilled.
A measure that would make the bearing of school transport costs subject to a residence requirement constitutes indirect discrimination against cross-border workers
Case C-830/18 Landkreis Südliche Weinstraße v PF and Others
EU Member State: Germany
Date of Judgment: 2 April 2020
The case concerned a German student, attending school in the German state of Rhineland-Palatinate, but living with his family in France. His mother, also a German national, worked in Germany. Starting with the school year 2015-2016, the district in which he attended school refused to bear his school transport costs on the ground that, under the law of Rhineland-Palatinate, the obligation to organise school transport related only to students residing in that state. The Higher Administrative Court of Rhineland-Palatinate sought guidance from the CJEU as to whether a measure excluding children residing outside the state from having the costs of school transport covering by the state by virtue of their non-residence constituted indirect discrimination against cross-border workers and, if so, whether it was justified by an overriding reason in the public interest, namely the need to ensure the effective organisation of the school system.
The Court held that the applicant’s mother to be a ‘migrant worker’ within the meaning of Article 7(2) of Article 7(2) of Regulation (EU) No 492/2011 on the free movement of workers, having taken up residence in France but remained working in Germany. Accordingly, she was entitled to rely on the principle of equal treatment against Germany – notwithstanding that it was the Member State of which she was a national – where she was discriminated against by virtue of her status as a Migrant Worker rather than a resident worker. Since, the Court held, a measure that made the reimbursement of school transport costs subject to residence in the Member State concerned or a part thereof was liable to disproportionately disadvantage workers who resided in another Member State, it constituted indirect discrimination which, as a rule, is prohibited by EU law. The Court further held that such a measure constituted an obstacle to the free movement of workers, since it was liable to deter Member State nationals from leaving their Member State to exercise their free movement rights.
The Court also held that, although the pursuit of the effective organisation of the school system in Rhineland-Palatinate could constitute a legitimate objective, the measure in question was not justified by an overriding reason in the public interest because it did not enjoy a sufficiently close link to the objective. This, the Court considered, was illustrated by the fact that in the case of students residing in Rhineland-Palatine but attending school elsewhere in Germany, the costs were covered by the districts in which they resided – thus showing that the organisation of school transport within the state is not inextricably linked to the organisation of the state’s school system. Furthermore, the Court held that the residence requirement was not necessary for the planning and organisation of school transport, since alternative measures could be envisaged – an example of which was considered to be a system whereby the reimbursement of school transport costs could be calculated on the basis of the student’s notional place of residence being the place on the state’s border which intersects a straight line between their actual residence and the nearest school within the state.
The principle of equal treatment extends to family members of workers exercising free movement rights, even in respect of a child of a worker’s spouse with whom the worker has no parent-child relationship
C-802/18 Caisse pour l’avenir des enfants v FV and GW
EU Member State: Luxembourg
Date of Judgment: 2 April 2020
This case concerned a frontier worker in Luxembourg who lived in France with his wife and her child, whom he supported but for whom his wife had sole parental responsibility. Luxembourg denied the worker child benefit in respect of this child, on the basis that under Luxembourgish law, non-resident workers were only eligible for child benefit in respect of their own children. This was not the case for resident workers, who could claim child benefit for all children in their household.
The court held firstly that the benefit was a social advantage, within the meaning of the regulation on freedom of movement for workers. The Court held that the concept of a social advantage includes all advantages which, whether or not linked to a contract of employment, are generally granted to national workers primarily because of their objective status as workers or by virtue of the mere fact of their residence on the national territory. In this case it was accorded to the worker on account of the fact that he carried out salaried employment in Luxembourg and therefore engaged the former criterion.
The court further held that, since it was a social advantage within the meaning of the regulation, the principle of equal treatment applied. Since the distinction between resident and non-resident workers was liable to operate mainly to the detriment of nationals of other Member States as non-residents are in the majority of cases foreign nationals, it constituted indirect discrimination on the grounds of nationality which is permissible only if it is objectively justified, which was not the situation in the present case.
Homophobic statements relating to recruitment preferences may constitute discrimination in employment and occupation when they are made by a person who has or may be perceived as having a decisive influence on an employer’s recruitment policy
Case C-507/18 NH v Associazione Avvocatura per i diritti LGBTI – Rete Lenford
EU Member State: Italy
Date of Judgment: 23 April 2020
The case concerned a lawyer who said on a radio programme that he would not wish to recruit someone who is gay to work in his law firm, nor to use such a person’s services in his firm. Associazione Avvocatura per i diritti LGBTI – Rete Lenford are an association of Italian lawyers who advocate on behalf of LGBTI members of the Italian legal profession. They sued the lawyer, NH, who made the remarks on the basis of Italian legislation implementing the 2000 Framework Directive on equal treatment in employment. There was evidence that there was no current or planned recruitment campaign in NH’s law firm at the time of the remarks. NH was fined following a finding of direct discrimination by an employment tribunal, which determination was appealed to the regional court of appeal and then the Italian Court of Cassation, which sought a preliminary ruling from the CJEU clarifying the circumstances in which such a statement could constitute discrimination contrary to the Directive.
The Court held that homophobic statements may constitute discrimination in employment and occupation for the purposes of the Directive when they are made by a person who has or may be perceived as having a decisive influence on an employer’s recruitment policy. In particular, statements suggesting the existence of a homophobic recruitment policy were held to fall within the concept of ‘conditions for access to employment … or to occupation’, even if they come from a person who is not legally capable of recruiting staff, provided that there is a non-hypothetical link between those statements and the employer’s recruitment policy (the existence of which was left to the national court to determine, relevant criteria being the status of the person making the statements and the capacity in which he or she made them, which must establish that that person has or may be perceived as having a decisive influence on the employer’s recruitment policy).
The court also affirmed that Member States were not precluded by the Directive from according automatic standing to associations to bring proceedings for the enforcement of obligations arising thereunder.
Air carriers must indicate, from the first time their price offers are published on the internet, the VAT on domestic flights other than that in respect of optional supplements, as well as the fees charged for paying by credit card – but not check-in fees where there is at least one free check-in option
Case C-28/19 Ryanair Ltd and Others
EU Member State: Italy
Date of Judgment: 23 April 2020
In 2011, the Italian competition and market authority imposed fines on Ryanair for unfair commercial practice for having published on the internet prices for air services that did not indicate the amount of VAT on domestic flights, online check-in fees applicable and fees charged when paying by a credit card other than that approved by Ryanair, from the first time that prices for flights were indicated. The authority considered that those price elements were unavoidable and foreseeable and that the consumer therefore had to be informed of them from the first time the price was indicated. Ryanair brought an action before the Italian administrative courts for the annulment of the authority’s decision. Its action was rejected at first instance and Ryanair appealed to the Italian Council of State. That court asked the CJEU whether, in the light of the regulation on the operation of air services, the price elements in question are unavoidable and foreseeable and must, therefore, be included in the initial price offer published.
The Court recalled that air carriers are obliged, under the regulation to indicate in its online offers, from the first time that the price is shown, the air fare and, separately, the taxes, charges, surcharges and fees that are unavoidable and foreseeable. By contrast, it is required to indicate the optional price supplements in a clear, transparent and unambiguous way only at the start of the booking process. In the present case, this was held to mean that where there was at least one free check-in option, the charged options were ‘optional price supplements’ and thus need not be shown in the initial price offer.
This was also held to be the case for VAT applied to optional supplements relating to domestic flights, but not for VAT applied to the air fare itself, since the latter was unavoidable for the consumer. Lastly, it was held that fees charged if payment is made by means of a credit card other than that approved by the air carrier are unavoidable and foreseeable – and therefore must be included in the initial price quoted – since customers not already having such a credit card are required either to refuse the service that is free of charge or not to proceed with their purchase immediately and to undertake steps that may entail costs in order to satisfy the condition required, at the risk, once those steps have been completed, of no longer being able to benefit from the offer or of no longer being able to benefit from the price originally indicated.
CJEU AG Opinions
Cases C-924/19 PPU and C-925/19 PPU FMS and Others
EU Member State: Hungary
Date of Opinion: 23 April 2020
The case concerned two asylum seekers detained in the Röszke transit zone on the Hungary-Serbia border, pending their appeals against their expulsion to their countries of origin. The Hungarian authorities had refused entry to the applicants based on the fact that they had passed through Serbia before arriving in Hungary, which refusal was based on Hungarian legislation providing that Serbia was a ‘safe transit country’ and establishing passage through such a country as a ground for inadmissibility of a claim for asylum in Hungary. The Serbian authorities in turn refused to readmit them into Serbian territory. The Hungarian authorities nevertheless continued to refuse to examine their asylum applications and sought to deport them back to their countries of origin. In the Röszke transit zone, the movement of asylum seekers was heavily restricted, with detainees being unable to move freely from one part of the zone to another and unable to leave the zone by virtue of the refusal of either the Hungarian or Serbian authorities to admit them into their respective territories.
AG Pikamäe reached the following conclusions:
a) The Asylum Procedure Directive exhaustively lists the grounds of inadmissibility for applications for international protection and therefore precludes Hungarian legislation providing for a ‘safe transit country’ ground for inadmissibility.
b) The concept of a ‘safe transit country’ is similar to that of a ‘safe third country’ within the meaning of the Asylum Directive. Accordingly, since the Serbian authorities failed to readmit the applicants once they were refused admission to Hungary, the Hungarian authorities were obliged to ensure that their asylum applications were examined.
c) The Court is empowered to interpret the provisions of the EU Charter of Fundamental Rights independently of the European Court of Human Rights, notwithstanding that the Charter requires that the rights enshrined therein and corresponding to the rights guaranteed by the ECHR should be interpreted as having the same meaning and scope as those conferred by the ECHR. This is because the Court may give an interpretation to rights contained in the Charter similar in content to those enshrined in the ECHR that results in a higher level of protection than that guaranteed by the latter. Thus, notwithstanding that, in its recent judgment in Ilias and Ahmed v Hungary, the ECtHR held that the accommodation of third-country nationals in the Röszke transit zone did not constitute a deprivation of their ‘right to liberty and security’ within the meaning of the ECHR, the AG recommended that in the present case, the ECJ should interpret this accommodation as infringing the applicants’ rights under the Charter.
d) The accommodation of the applicants in the Röszke transit zone constitutes detention within the meaning of the Reception Directive and, the Hungarian authorities not having complied with the legal regime set out therein, the detention is unlawful. In reaching his finding that the accommodation constitutes detention, the AG referred to the various restrictions on the movement of the applicants into and out of – as well as within – the zone and concluded that it rendered them in a situation of isolation and with a high degree of restriction of movement.
Case C-343/19 Verein für Konsumenteninformation
EU Member State: Austria
Date of Judgment: 2 April 2020
The Plaintiff in the main proceedings is an Austrian non-profit consumer association seeking a declaration of Volkswagon’s liability in tort for as yet unquantifiable damage arising from the installation in the purchased vehicles of an engine that infringes provisions of EU law, on behalf of consumers in Austria who have suffered financial harm. The referring court sought guidance as to whether financial loss caused to consumers in Austria as a result of purchasing vehicles with manipulated vehicles could be considered to be damage ‘arising in’ Austria for the purposes of the Recast Brussels Regulation, with a view to determining whether Austrian courts had international jurisdiction to hear the case (in circumstances where the defendants were domiciled in Germany and the vehicles manufactured there).
AG Campos Sánchez-Bordona considered that, in order to identify where the damage occurred, only initial – and not consequential – damage is to be taken into account; that is, only damage sustained by the direct victim and not damage sustained by a third party ‘by ricochet’. In this case, the difference between the price paid and the value of the manipulated vehicle caused a financial loss which occurred at the same time as the purchase of the vehicle. That financial damage was considered to be initial and not consequential, since it is derived directly from the event giving rise to the damage (manipulation of the engine) and not from earlier damage. The AG took the view that the persons who purchased the cars are direct victims, given that the financial loss they allege does not follow on from earlier damage sustained by other individuals before them. That is due to the fact that the loss of value of the vehicles did not become a reality until the manipulation of the engines was made public. Persons who obtained the vehicle from another, previous buyer are therefore also direct victims; the latter did not experience any loss because, at that time, the damage was latent and was not disclosed until later when it affected the then owner.
The AG also noted that establishing jurisdiction for the resolution of a dispute in a jurisdiction other than that in which the event giving rise to the damage occurred (in this case Germany, where the manipulation of the engines occurred) is subject to the principles of foreseeability and proximity from the point of view of the defendant. Given that the location of the vehicle is unforeseeable, the Advocate General considered that the place where the damage occurred is the place where that transaction was concluded, pursuant to which the product became part of the assets of the person concerned and caused the damage. He considered that since it was foreseeable to Volkswagon that their vehicles would be sold in Austria, these principles would be likely to be complied with in the case of Austria in the present case.
National Brexit-Related Caselaw Update: Germany
UK Litigants in Germany Not Liable to Pay Security of Costs as Non-EEA Litigants
Landgericht Düsseldorf Decision 4c O 28/18
Date of Judgment: 27 September 2018
A British applicant sued a German defendant for a variety of remedies in respect of an alleged patent infringement. The defendant requested that the court make an order for security of costs, to ensure that they would not be left without recovery of their costs should they be successful in defending the claim. The basis for the defendant’s request was Section 110 of the German Code of Civil Procedure (Zivilprozessordnung), which provides that ‘Plaintiffs who do not have their habitual place of abode in a Member State of the European Union or in a signatory state of the Agreement on the European Economic Area shall provide security for the costs of the proceedings should the defendant so demand’. The defendant relied on the fact that the UK had invoked Article 50 TEU in March 2017 and was therefore on course to leave the EU in March 2019, thus likely leaving the UK outside the EU/EEA by the end of the main proceedings.
The local court in Düsseldorf held that, at the time of the decision in 2018, the defendant could not rely on a provision of the German Code of Civil Procedure to seek an order for security of costs against the applicant. Notwithstanding that the UK was on course to leave the EEA before the end of the main proceedings, the Court held that an order for security of costs could only be considered once the UK had actually left the EEA, since another provision of the Code, Section 111, allowed an application for a security of costs order to be made at any time during the proceedings and also because it would be necessary to consider whether there was another international treaty provision which would have equivalent effect, in accordance with Section 110(2) of the Code. The Withdrawal Agreement which currently governs the relationship between the UK and the EU Member States might be extended, or a new agreement might contain the same provision.
Brexit Does Not Constitute Sufficiently Significant Change to Basis of Transactions to Justify Judicial Adjustment of Contract
Landgericht Koblenz Decision 1 O 38/19
Date of Judgment: 7 May 2019
The plaintiff was an American company which had bought high-tech winches and accessories to a value of over €3,000,000 from the defendant, a German company. The defendant company had become insolvent and a liquidator was appointed, who refused to release the goods to the plaintiff. Ancillary to the contract for sale, the parties had an agreement on choice of court and governing law for the resolution of disputes, with England and Wales agreed as the jurisdiction for both. The plaintiff claimed that after Brexit, it would likely be significantly more difficult to enforce an English judgment in Germany and thus sought to invoke Section 313 of the German Code of Civil procedure – which provides that a court may adjust a contract where there is a ‘significant change’ to its underlying circumstances and where the parties thereto would not have entered into the contract under the same terms or at all had they foreseen the change – arguing that Germany should be substituted for England and Wales as the applicable jurisdiction.
The local court in Koblenz held that Brexit did not constitute a significant change to the circumstances forming the basis of a contract within the meaning of the Code. The court suggested in its reasoning that it could not be assumed that the UK would ‘rescind its ratification of the Brussels Regulation’ and thus that judgments from UK courts would be more difficult to enforce in the EU than before Brexit.
UK Not Treated as Non-EU Jurisdiction for Purpose of Granting Freezing Orders Before Future Legal Relationship Is Clear
Oberlandesgericht Frankfurt Decision 2 U 1/19
Date of Judgment: 3 May 2019
The plaintiff rented a commercial property in Germany to the defendant for use as a medical practice under a 10 year lease, beginning in 2014. The defendant was a British national. In April 2018, the defendant informed the applicant that he had closed the practice and he stopped paying rent and returned to the UK thereafter. The plaintiff sought damages for breach of contract and further sought an interim freezing order against the defendant, pending final judgment. The plaintiff based her claim for a freezing order on several arguments, one of which was that she was entitled to same, as a matter of course, under Section 917(2) of the German Code of Civil Procedure, which provides that ‘it is to be deemed sufficient grounds for a writ of seizure to be issued if the judgment would have to be enforced abroad and reciprocity has not been granted’. The plaintiff argued that, by the time a final judgment was delivered in the main proceedings, the UK would likely have left the EU and, as such, the Recast Brussels Regulation would no longer apply to it and reciprocity in terms of enforcement would therefore not be certain. A freezing order was granted to the plaintiff in respect of the defendant by the local court in Wiesbaden and the granting of this order was appealed by the defendant.
While the Court of Appeal in Frankfurt upheld the granting of the freezing order against the defendant, it opted to do so expressly and solely not on the basis of Section 917(2), but rather on the basis of Section 917(1), which provides for the imposition of a freezing order where, regardless of where the defendant is situated, the enforcement of the judgment would be frustrated or be significantly more difficult than if it were not granted. In addressing the plaintiff’s argument in respect of the application of Section 917(2) to a debtor situated in the UK, the court took the view that, at the time of its determination – which was during the first, seven-month extension to the Article 50 TEU period – it was more likely than not that the UK would leave the EU with a level of protection equivalent to the Recast Brussels Regulation in place, notwithstanding that, as it acknowledged, there was no obvious political route to ratification of a withdrawal agreement in the House of Commons at the time and that ‘no deal’ was the legal default. In so concluding, the court cited the fact that the purpose of the extension was to secure a deal and that this was the implied aim of both the EU and the UK. It also cited the belief that agreeing comparable reciprocity in the enforcement of judgments was not one of the controversial areas in the political debate.
Although this element of the judgment concerned itself with the likelihood of ratification of a withdrawal agreement, it would also presumably apply by analogy to the present transition period and the likelihood of equivalent protection being provided for in an agreement on the future relationship.
German Federal Constitutional Court Judgment on the ECB’s Flagship Bond-Buying Programme
The ECB’s Decision Establishing the PSPP Programme Was Ultra Vires in the Absence of a Sufficient Proportionality Assessment
Bundesverfassungsgericht Decision 2 BvR 859/15
Date of Judgment: 5 May 2020
This judgment concerned a challenge to the constitutionality of the European Central Bank’s Public Sector Purchase Programme (PSPP), which is part of its Expanded Asset Purchase Programme (EAPP), a framework programme of the Eurosystem for the purchase of assets on financial markets. The PSPP scheme enables Eurosystem central banks to purchase government bonds or other marketable debt securities issued by central governments of euro area Member States and other relevant bodies located in the euro area. It was launched by means of an ECB decision and is further regulated by several subsequent decisions.
The complainants claimed that the PSPP violates the prohibition on monetary financing in Article 123 TFEU, as well as Articles 119 and 127 et seq. TFEU (which set out the competences of the ECB) and the principle of conferral in Article 5(1) TEU. The German court had previously referred questions in relation to the scheme’s compatibility with Articles 119, 123 and 127 et seq. TFEU to the CJEU for preliminary ruling and the CJEU had held the PSPP to be compatible both with the prohibition on monetary financing and with the ECB’s competences.
The German court considered that, in failing to adequately assess the proportionality of the PSPP scheme as against its potential economic effects, the CJEU had exceeded its competence under Article 19 TEU to ensure the observance of EU law by ‘manifestly disregarding’ a general legal principle common to the laws of all EU Member States, namely the principle of proportionality. The German court considered that a fulsome proportionality appraisal of the PSPP with regard to its potential economic effects – beyond the ‘manifest error of assessment’ standard employed by the CJEU – was necessary in order to determine whether the PSPP was within the competence of the ECB or infringed the principle of conferral. The German court considered that the ‘manifest error of assessment’ standard of review was not ‘conducive to restricting the scope of the competences conferred upon the ECB, which are limited to monetary policy’.
Accordingly, the German court concluded that it was not bound by the CJEU’s decision but must instead conduct its own review to determine whether the ECB’s decisions on the adoption and implementation of the PSPP remain within the competences conferred upon it under EU primary law. In this vein, the court concluded that, as the ECB’s decisions with respect to the establishment and implementation of the PSPP ‘lack … sufficient proportionality considerations’, they exceed the ECB’s competences and constitute an ultra vires act. The court elaborated that a programme for the purchase of government bonds, such as the PSPP, that has significant economic policy effects requires that the programme’s monetary policy objective and economic policy effects be ‘identified, weighed and balanced against one another’. By unconditionally pursuing the PSPP’s monetary policy objective – to achieve inflation rates below, but close to, 2% – while ignoring its economic policy effects, the ECB ‘manifestly disregards the principle of proportionality’.
In light of this, the court concluded that it could not definitively determine whether the German federal government and parliament actually violated their responsibility with regard to European integration (‘Integrationsverantwortung’) by failing to actively advocate for the termination of the PSPP, at present. This was because it considered that such a determination is contingent upon a proportionality assessment by the Governing Council of the ECB, which must be ‘substantiated with comprehensible reasons’. In the absence of such an assessment, it held that it was not possible to conclusively determine whether the PSPP was compatible with Article 127 et seq. TFEU and thus whether the German federal government and parliament had violated their responsibilities under the German Basic Law in this respect.
Nevertheless, the court held that the federal government and parliament are now required, in accordance with their constitutional responsibility in respect of European integration, to actively take steps to ensure adherence to the ‘European integration agenda’ (‘Integrationsprogramm’). Specifically, this was held to compel them to ‘take steps seeking to ensure the [ECB] conducts a proportionality assessment’. The court noted that no German constitutional organ may participate in the development or implementation of an ultra vires act in any way. Thus, the court ordered that ‘following a transitional period of no more than three months allowing for the necessary coordination with the ESCB, the [German Central Bank] may … no longer participate in the implementation and execution’ of the ECB decisions at issue, ‘unless the ECB Governing Council adopts a new decision that demonstrates in a comprehensible and substantiated manner that the monetary policy objectives pursued by the ECB are not disproportionate to the economic and fiscal policy effects resulting from the programme. On the same condition, the [German Central Bank] must ensure that the bonds already purchased under the PSPP and held in its portfolio are sold based on a – possibly long-term – strategy coordinated with the ESCB’.
The court’s judgment can be accessed in English and German here.