The German Constitutional Court has not deemed it necessary to block the ESM measures taken by the European Union and has in the end requested further comments whenever relevant amounts exceed 190 billion euros

ESM, German Constitutional Court, Passing the hat onto Ireland

12.09.2012 - 11:52

The German Constitutional Court has released its decision in the Case put before it to review the Constitutionality of the European Union's European Structural Mechanism not bringing forth a block to the measures but approving them as constitutional, with a caveat stating that should sums be more than 190 billlion euros, the court would have to be newly implicated.

'The  decision on the  preserves the status quo, more or less and is the best possible outcome given the circumstances,' commented Sonny Kapoor Managing Director of Re-Define economic Think Tank advising governments on the Financial Crisis said following the decision.

The ESM is a measure which has imbedded veto powers for the countries of Germany, Italy and France, and key  decisions need an 85% weighted majority where  already has an effective veto with more than 15% of the vote, Kapoor also underlined.

Further consideration of the ESM as a sound legal provision will be considered next at the European Court of Justice (ECJ) in October where it has flagged as urgent a case that was referred to it from the Irish Supreme Court, that of Thomas Pringle ESM/EU Case C-370/12.

On 3 August, 2012 the ECJ received three questions sent to it by the Supreme Court of Ireland which go to the heart of the proposed European Stability Mechanism (ESM). These questions arose from an Irish Court action brought by Thomas Pringle TD, independent member of the Irish parliament. The case has been given exceptional priority by the ECJ which has invited Pringle, all Member States and EU institutions to make observations by 14 September, say the offices of Thomas Pringle MP and Irish Solicitor Joe Noonan on an explanatory website they have published to explain the procedures and Stability mechanisms of the EU in 2012 from a legal perspective called 'Tale of Two Treaties'.

According to the MP and solicitor, 'at stake is the extent of the power of the European Council: are the EU Heads of Government in effect above the law and entitled to rule the EU as they see fit? Or are they subject to the restraints set out in the EU Treaties?'

Joe Noonan the solicitor representing Pringle in the Supreme Court of Ireland will be present in Luxembourg at the hearing on 23 October and will be filing the Irish Naitonal written observations on 14 September, he has granted us permission to reprint his summary of the situtaiton so far here:

'The ESM Treaty would establish a new international financial institution outside the EU. Pringle asserts that the ESM Treaty will breach the ‘no bail-out’ rule contained in Article 125 of the Treaty on the Functioning of the European Union. In place since the 1992 Maastricht Treaty, this rule expressly prohibits Member States from taking on liability for the financial commitments of other Member States. Mr Pringle asked the Irish court to examine the compatibility of the ESM Treaty with the EU Treaties on this basis, among others. That question has now been placed before the CJEU,

'The establishment of the ESM outside the EU architecture is an effort to circumvent the ‘no bail-out’ rule and other provisions of the existing EU Treaties in Mr Pringle’s view. The ESM also infringes on the exclusive competence of the EU in the area of monetary policy. It is not permissible to do this by stepping outside the EU.

'ESM is Anti-Union Pringle is concerned that the ESM Treaty will divide the Member States of the EU whose currency is the euro, from the others. The ESM Treaty will drive a wedge between the 17 and the 10. The establishment of the ESM will be an anti-Union step. The European Union was intended to promote an ever closer union of its peoples. By contrast, the ESM’s priority will be the preservation of a currency.

'Pringle states that for these reasons the ESM Treaty is incompatible with the EU Treaties. The crisis facing the eurozone does not justify discarding the agreed rule book and departing from the Rule of Law which is a fundamental principle of the Union.

The Questions
'The Irish Supreme Court took the view that Mr Pringle had raised questions which it could not answer on its own. Therefore it used an EU Treaty procedure under which difficult questions of EU Treaty interpretation may be referred to the ECJ for guidance. Three questions were filed with the Court in Luxembourg on 3 August. In brief:

• Is the ESM Treaty compatible with the EU Treaties? 
• Is the amendment to Article 136 of the TFEU intended to facilitate the ESM lawful? One aspect of this question is whether it was permissible for EU Heads of Government to amend the TFEU by use of the simplified amendment procedure.
• Can Eurozone States join the ESM before the Article 136 amendment is in force?

The ECJ is treating the case as exceptionally urgent and has fixed the 23rd October 2012 for the oral hearing in Luxembourg. 14th September is the deadline for submissions to the Court by Pringle, the Irish Government, other EU Member States and EU Institutions.

The Irish Supreme Court accepted a solemn assurance from the Irish Government that if the EJC finds the ESM Treaty to be incompatible with the EU Treaties, then the ESM will cease operations and will be wound up. The Government asserted that this was so because all EU Member States would be obliged to respect the ruling of the EJC.

Difficulties have arisen but one of the toughest obstacles so far the German Constitutional Court has not demed it necessary to block the measure on the grounds of unconstitutionality. The next step remains to be seen.