Member Article

On 5 May 2020 the German Federal Constitutional Court (Bundesverfassungsgericht or BVerfG) issued amuch-noted ruling in a case involving the Public Sector Asset Purchase Programme of the European Central Bank. The judgment has caused agreat stir, as the BVerfG expressly refused to comply with aruling by the Court of Justice of the European Union. It was the first such instance in history, but its significance is the opposite of what is attributed to it by opponents of European integration.

The case has resonated strongly because commentators expect it to serve as aprecedent that member states violating EU law may cite as abasis for failing to comply with unfavourable rulings by the Court of Justice—particularly Poland or Hungary.

But acloser analysis of the judgment by the BVerfG (judgment of the Second Senate, 2 BvR 859/15) belies these predictions. Essentially, the BVerfG acted as aguardian of the complex constitutional order of the EU, which in light of the peculiar nature of the EU is anew-generation constitutional order. Undoubtedly, governments infringing the EU’s laws and values will interpret the judgment in bad faith to draw conclusions from it favourable to themselves. But at heart, this judgment makes asignificant contribution to the European constitutional order now forming, and in no measure can the judgment justify actions by member states conflicting with the foundations and fundamental values of EU law. To the contrary, it expressly confirms that even when they donot agree with CJEU rulings and dispute them, member states are obliged to act loyally, in compliance with the spirit of European integration and the EU’s fundamental principles and values, and are obliged to comply with these rulings even when the interpretation of law adopted in them does not suit them.

Dispute

The case in which this judgment was issued involves complicated issues of European economic and monetary policy. In short, it has to dowith the legality of the programme pursued by the European Central Bank of buying up bonds of member states of the eurozone. The possibility of conducting this programme was provided for by ECB decisions, which under the Treaty on the Functioning of the European Union are asource of law in the EU. But the ECB has aright to issue such decisions only within the strict competences conferred on it. It must also respect certain fundamental principles of EU law, including the principle of proportionality and the rule that the ECB cannot make loans to member states to cover their budget deficits.

Cases reached the German Federal Constitutional Court in which the petitioners disputed the compliance of the ECB’s actions with these principles.

Ruling

The Federal Constitutional Court submitted to the Court of Justice arequest for apreliminary ruling on the validity of the ECB decisions that were the basis for the disputed programme. In the judgment responding to the question, the Court of Justice held that the decisions by the ECB were consistent with EU law and valid.

The BVerfG did not share this position. It found that the Court of Justice had not examined the issue presented to it in the request for apreliminary ruling with sufficient thoroughness, and had ignored various aspects of the case showing that the ECB had acted ultra vires, overstepping the competences conferred on it, in issuing the disputed decisions.

In the judgment, the BVerfG confirmed the principle that EU law takes precedence over national law, and that judgments of the CJEU are binding on national courts of the member states, including their courts of highest instance and constitutional courts. But the BVerfG also pointed out that the European Union is not asovereign federal state, but asupranational organisation drawing its legitimacy from decisions of sovereign member states which have conferred certain competences on it. Although as arule it is up to the CJEU to examine whether actions by EU bodies exceed the competences conferred on them by the member states, the member states are ultimately empowered to make that assessment. The CJEU is, after all, also abody drawing its legitimacy from the decision of the member states to confer certain competences on it. The member states thus retain the possibility of disputing rulings by the Court of Justice approving actions by EU bodies exceeding their conferred competences.

However, the BVerfG stressed in this respect that the specific nature of EU law consists in the member states’ undertaking of sincere cooperation in pursuing the aims of the Union, respect for shared principles and values, concern for the proper functioning of the EU, and not undermining the mutual trust that is the bond of the Union, and that these duties also remain in force when the member states are assessing the soundness of CJEU rulings. Refusal by acourt of amember state to comply with ajudgment of the CJEU must be utterly exceptional. It cannot be atool for substituting for the interpretation of EU law by the CJEU an interpretation preferred by the given state or its adjudicatory bodies. As arule, it is the Court of Justice that is competent to make binding interpretations of EU law. Refusal to accept its rulings by anational court is permissible only in instances of gross and manifest errors in rulings by the CJEU resulting from manifest oversight and failure to consider key issues. Any situations of this type must be resolved through sincere cooperation and in compliance with the spirit of European integration.

Significance of judgment

This judgment by the BVerfG is afascinating and important ruling, significantly contributing to the construction of aEuropean constitutional order.

To understand its importance, it should be remembered what apeculiar creature the European Union is. It is much more than an international organisation of sovereign states. It is not afederal state, but within its structures, bodies of the member states exercise authority within their proper areas of competence, jointly in accordance with certain principles of cooperation.

This distinct structure requires adistinct constitution, aset of fundamental principles setting appropriate limits on its bodies but also vesting them with legitimacy. To date the notion of aconstitution has functioned with respect to sovereign states and their bodies, as they exercised authority over individuals. The European Union is anew kind of creature, asupra-state organism exercising such authority, and consequently it requires anew type of constitution, capable of functioning beyond state.

This judgment from the BVerfG shows how the EU constitution is being forged in the debate between the highest judicial bodies of the member states and the Court of Justice of the European Union, based on acertain kind of precedent. It should be pointed out that aconcept similar to that applied by the BVerfG in this case—the concept of precedent that is not binding even though it derives from ahigher court, because it was issued per incuriam, i.e. through evident oversight or inattention—functions as one of the systemic principles in common-law countries. There it is an exception to the rule of the binding nature of precedent, which at the same time confirms the rule. This judgment from the BVerfG should be understood in the same light.

This judgment leaves no doubt that the axioms of the supranational constitutional order of the EU arising before our very eyes are sincere cooperation and mutual trust by the member states, as well as respect for their shared constitutional traditions. Attempts to cite the judgment of the German Federal Constitutional Court by the governments of member states seeking to avoid liability for infringing the laws and values of the EU will backfire on them.

Source: ww.inprinciple.pl