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Press release no. 23/2014 of 18 March 2014

Judgment of 18 March 2014
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Constitutional Complaints and Organstreit Proceedings Against European Stability Mechanism and Fiscal Compact Without Success
The constitutional complaints and the Organstreit proceedings lodged against the establishment of the European Stability Mechanism, the Fiscal Compact and the national Acts of Assent and accompanying legislation, against the Act approving Art. 136 sec. 3 TFEU, the TARGET2 system, and the so-called Six-pack are partly inadmissible and for the remainder unfounded. This was decided by the Second Senate of the Federal Constitutional Court in a judgment delivered today. Despite the liabilities assumed, the budgetary autonomy of the German Bundestag is sufficiently safeguarded. However, arrangements under budgetary law must be made to ensure that possible capital calls pursuant to the ESM Treaty can be met fully and in time within the agreed-upon upper limits, so that a suspension of Germany’s voting rights in the ESM bodies is reliably excluded. Facts of the Case and Course of the Proceedings: The Organstreit proceedings [proceedings relating to disputes between constitutional organs] and the constitutional complaints challenge German and European legislation dealing with the establishment of the European Stability Mechanism (ESM) and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (Fiscal Compact), measures of the European Central Bank (unless separated under procedural law, cf. Press Release no. 9/2014 of 7 February 2014) and, in this context, certain omissions of the federal legislature and the Federal Government. By judgment of 12 September 2012, the Senate refused under certain stipulations to issue a temporary injunction against the ratification of the ESM Treaty and the Fiscal Compact and against the national Acts approving and accompanying the Treaties. According to the stipulations, it had to be ensured that the amount of all payment obligations of the Federal Republic of Germany under the ESM Treaty remain limited to its share in the authorised capital stock of the ESM, which amounts to EUR 190.0248 billion, and that the provisions on the inviolability of all official papers and documents of the ESM and the professional secrecy of all persons working for it do not stand in the way of the comprehensive information of the Bundestag and of the Bundesrat (cf. on this issue Press Release no. 67/2012 of 12 September 2012). The ESM Members agreed on a joint declaration, which was made on 27 September 2012. At the same time, the Federal Republic of Germany issued a unilateral declaration with the same content. Essential Considerations of the Senate: 1. The constitutional complaints and the Organstreit proceedings are, in part, inadmissible. a) The constitutional complaints are inadmissible to the extent that the complainants challenge, with reference to Art. 38 sec. 1 sentence 1 GG, the unconstitutionality of the ESM Financing Act because of a violation of formal requirements for the legislative process, the functional allocation of competences between the plenary of the Bundestag, its committees and other subsidiary bodies, and the fact that no two-thirds majority is required for particularly important measures. Outside of ultra vires situations, these issues are not covered by the substantive content of the right to vote, which is protected by Art. 38 sec. 1 sentence 1 GG. b) The constitutional complaints are further inadmissible to the extent that the complaints challenge the establishment and implementation of the TARGET2 system as well as various omissions of German constitutional organs in this context. The complainants have not sufficiently substantiated how this could lead to a violation of the overall budgetary responsibility of the Bundestag and thus of their own rights under Art. 38 sec. 1 sentence 1 GG. c) The constitutional complaints are further inadmissible to the extent that they challenge the application of certain secondary legislation of the European Union (so-called Six-pack) and of the Euro Plus Pact in Germany. Their allegations neither suffice to substantiate that the right to vote is eroded because the German Bundestag loses indispensable powers to decide, nor to substantiate a possible right to a declaration that the European Union acted ultra vires. It does not follow from the complainants’ submission, which is mostly based on economic arguments, how the Euro Plus Pact, which provides no sanctions, might nevertheless take away competences from the German Bundestag to an extent that affects Art. 38 sec. 1 sentence 1 GG. d) The application in Organstreit proceedings is only admissible to the extent that the applicant asserts that through the challenged Acts, the German Bundestag divests itself of its overall budgetary responsibility; as a parliamentary group of the German Bundestag, it is entitled to make such an application. Not sufficiently substantiated is the possibility of a violation of a right with regard to the functional allocation of competences between the budget committee and the plenary stipulated in the ESM Financing Act. It is not possible in this context to assert through representative action the rights of individual parliamentarians or the German Bundestag. Finally, no violation of the parliamentary group’s own rights or of the rights of the Bundestag, which can be asserted in Organstreit proceedings, follows from the fact that no two-thirds majority is required for particularly important measures. 2. To the extent that they are admissible, the constitutional complaints and the Organstreit proceedings are unfounded. However, considering its assent to Art. 4 sec. 8 of the ESM Treaty, the legislature is obliged to make comprehensive arrangements under budgetary law to ensure that the Federal Republic of Germany can fully and in time meet capital calls that are made according to the Treaty establishing the European Stability Mechanism. a) As a right that is equal to a fundamental right, the right to vote, which is protected by Art. 38 sec. 1 GG, guarantees the self-determination of the citizens and guarantees free and equal participation in the exercise of public power in Germany. Its guarantees include the principles of the requirement of democracy within the meaning of Art. 20 sec. 1 and sec. 2 GG; Art. 79 sec. 3 GG protects these principles as the identity of the Constitution even against interference by the constitution-amending legislature. In view of this, the legislature must take sufficient measures to be able to permanently meet its responsibility with respect to integration (Integrationsverantwortung). In particular, it may not relinquish its right to decide on the budget, not even in a system of intergovernmental governance. The principle of democracy requires that the German Bundestag remains the place in which autonomous decisions on revenue and expenditure are made, including those with regard to international and European liabilities. Admittedly, it is primarily the duty of the Bundestag itself to decide up to which amount financial guarantees are justifiable, while balancing current needs against the risks of medium- and long-term guarantees. But it follows from the democratic basis of budget autonomy that the Bundestag may not consent to an intergovernmentally or supranationally agreed automatic guarantee or performance which is not subject to strict requirements and whose effects are not limited, and which – once it has been set in motion – is removed from the Bundestag’s control and influence. Furthermore, the principle of democracy requires that the German Bundestag is able to have access to the information which it needs to assess the relevant background and consequences of its decision. It is not from the outset an infringement of the democratic principle if the legislature is restricted to a particular budget and fiscal policy. This can, in general, also take place by transferring essential budgetary decisions to bodies of a supranational or international organisation, or by the assumption of corresponding obligations under international law. It is primarily for the legislature to decide whether and to what extent this is reasonable. However, the Federal Constitutional Court must ensure that the democratic process remains open, that legal re-evaluations may occur on the basis of other majority decisions, and that an irreversible legal prejudice to future generations is avoided. So far, the Senate has not had to decide whether and to what extent an ultimate limit of payment obligations or of liability commitments can be derived directly from the principle of democracy. Such an ultimate limit following directly from the principle of democracy could only be exceeded if payment obligations and liability commitments took effect in a way that the budget autonomy was not merely restricted, but suspended for at least a considerable period of time. This could only happen in case of a manifest breach of ultimate limits. b) According to these standards, the constitutional complaints and the Organstreit proceedings are unsuccessful. aa) The Act of Assent to the Amendment of Article 136 TFEU does not violate the rights of the complainants and of the applicant under Art. 38 sec. 1, Art. 20 sec. 1 and sec. 2 in conjunction with Art. 79 sec. 3 GG. In particular, Art. 136 sec. 3 TFEU does not lead to a loss of the German Bundestag’s budget autonomy, but merely enables the Member States of the euro currency area to establish a stability mechanism to grant financial assistance on the basis of an international agreement; to this effect, Art. 136 sec. 3 TFEU confirms that the Member States remain the masters of the Treaties. Considering the competent constitutional organs’ margin of appreciation, the Federal Constitutional Court must, in general, respect the decision of the legislature to supplement the monetary union with the option of active stabilisation measures, and the associated prognosis that such acts can guarantee and further develop the stability of the monetary union; it must also respect that on the basis of this decision, risks to price stability cannot be ruled out. bb) The Act approving the Treaty establishing the European Stability Mechanism also satisfies the requirements of the Constitution. (1) The provisions of the ESM Treaty are compatible with the German Bundestag’s overall budgetary responsibility. No impairment of the Bundestag’s overall budgetary responsibility can be inferred from the absolute amount of Germany’s payment obligations of presently EUR 190.0248 billion, assumed upon the conclusion of this Treaty. The respective assessment of the legislature is at any rate not evidently erroneous and must therefore be accepted by the Federal Constitutional Court. (2) To the extent that, according to the wording of the Treaty, a payment obligation whose amount is unlimited appears at least conceivable, the danger of such an interpretation was effectively precluded under international law by the joint declaration of the ESM Members of 27 September 2012, and by the unilateral declaration of the Federal Republic of Germany made on the same day. (3) With regard to decisions that affect the German Bundestag’s overall budgetary responsibility, it is ensured, at any rate at present, that they cannot be taken against the votes of the German representatives in the bodies of the European Stability Mechanism, i.e. that the legitimising relationship between parliament and the European Stability Mechanism is not interrupted. (4) If the voting rights of the Federal Republic of Germany were suspended during a failure to pay (Art. 4 sec. 8 sentence 1 TESM), the German Bundestag’s participation in the decisions of the bodies of the European Stability Mechanism, which is required under national law, would run to nothing during that time. This would possibly concern decisions which affect the German Bundestag’s overall budgetary responsibility and which therefore generally require its participation. In order to avoid a suspension of voting rights, the Bundestag must thus not only include the Federal Republic of Germany’s share in the initial capital in the budget, but must also comprehensively ensure to the extent necessary that it will be possible at any time to pay in Germany’s further shares in the authorised capital stock fully and in a time. It is not relevant in this context whether a call for payment made by the European Stability Mechanism is justified. The German Bundestag has declared through its authorised representatives that the liquidity management of the Finanzagentur GmbH (Finance Agency of the Federal Republic of Germany) was sufficiently “prudent and efficient” to ensure timely payment; this factual assessment must be accepted by the Federal Constitutional Court. As far as budgetary law is concerned, it is at present also sufficiently ensured that Germany will be able to comply with all calls for payment by the ESM – up to its portion of the authorised capital stock. Allocations must be made in the budget for foreseeable payment obligations; this follows from the principles of completeness and accuracy of the budget. The current prognosis of the legislature that the Federal Republic of Germany’s obligations are limited to the paid-in capital is not objectionable under constitutional law. (5) Art. 32 sec. 5, Art. 34 and Art. 35 sec. 1 TESM, which stipulate the inviolability of all official papers and documents of the European Stability Mechanism and the professional secrecy and immunity of the members of its bodies and its staff, ultimately do not violate Art. 38 sec. 1, Art. 20 sec. 1 and sec. 2 in conjunction with Art. 79 sec. 3 GG and the German Bundestag’s right under Art. 23 sec. 2 sentence 2 GG to be informed comprehensively and at the earliest possible date. The provisions are to be interpreted in such a way that they do not hinder sufficient parliamentary control of the European Stability Mechanism by the German Bundestag. To the extent that the possibility of a different interpretation existed, such an interpretation has effectively been precluded under international law by the joint interpretative declaration of the ESM Members of 27 September 2012, and by the identical unilateral declaration of the Federal Republic of Germany. (6) With regard to the possibility of issuing shares of the capital stock of the European Stability Mechanism on terms other than at par (Art. 8 sec. 2 sentence 4 TESM), the Bundestag‘s overall budgetary responsibility is ensured because a such a decision cannot be taken against the vote of the German representative in the respective ESM body. (7) The theoretical possibility that the European Stability Mechanism might generate financial losses also does not impair the Bundestag’s overall budgetary responsibility. It is not apparent that with its assent to the ESM Treaty, the legislature could have transgressed this margin of appreciation. (8) It is possible to extend Germany’s existing payment obligations through a capital increase; this, however, would require the assent of the legislative bodies. There is no obligation under international law to make such a capital increase. (9) Finally, the ESM Treaty does not establish an indissoluble commitment of Germany. cc) Ultimately, the provisions on the integration of the German Bundestag in the decision processes of the ESM are also compatible with the constitutional requirements. The Bundestag’s rights of participation are sufficient – at least when interpreted in conformity with the Constitution with regard to the national procedure before decisions pursuant to Art. 8 sec. 2 sentence 4 TESM. The rights of information of the German Bundestag satisfy the requirements of Art. 23 sec. 2 sentence 2 GG. Under the point of view of democratic legitimation of the ESM, which Art. 20 sec. 1 and sec. 2 GG requires, there are no concerns against Germany’s representation in these bodies either. dd) Finally, the Act of Assent to the Fiscal Compact does not violate Art. 38 sec. 1, Art. 20 sec. 1 and sec. 2 in conjunction with Art. 79 sec. 3 GG either. Its essential content goes along with the requirements of constitutional law and of European Union law. The Treaty grants the bodies of the European Union no powers which affect the overall budgetary responsibility of the German Bundestag and does not force the Federal Republic of Germany to make a permanent commitment regarding its economic policy that can no longer be reversed. This press release is also available in the original german version.
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