The European Stability Mechanism (ESM) Treaty was signed on July 11 2011. It was later renegotiated and a new ESM Treaty was signed on February 2, 2012. The Treaty provides a permanent emergency fund that is intended to succeed the temporary emergency funds. It entered into force on September 27, 2012 for 16 contracting parties (Estonia completed ratification on October 3). The 17 contracting parties are the member states of the Eurozone, but the ESM Treaty is concluded outside EU law.
(http://www.european-council.europa.eu/eurozone-governance/esm-treaty-signature?lang=it and http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf)
What political/legal difficulties did Luxembourg encounter in the negotiation of the ESM Treaty, in particular in relation to the implications of the treaty for (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process.
No difficulties known during the negotiation of the ESM.
How has the ESM Treaty been ratified in Luxembourg and on what legal basis/argumentation?
The ratification of the ESM in Luxembourg is based on Loi du 3 juillet 2012 portant approbation du traité instituant le mécanisme européen de stabilité, signé le 2 février 2012 à Bruxelles . This law consists of one unique article, which contains the approval of Luxembourg to the ESM treaty. The complete text of the ESM Treaty is attached to the ratification law. The financial schedule (fiche financière), required by Article 9 of the Loi du 8 juin 1999 sur le Budget, la Comptabilité et la Trésorerie de l’Etat, declares that this law does not debit the national budget (because the financial contributions are seen neutral in the view of the Maastricht-criteria (ESA95)).
This law in combination with a second law on the ESM (see question VIII.6) was approved on 26 June 2012 by the Chambre des Députés, granted by the Grand Duc de Luxembourg on 3 July 2012 and published in the official gazette on 5 July 2012. In the Chamber 49 MP voted in favour, among them the then governmental party members of the CSV (Christian Democrats) and LSAP (Social Democrats) as well as the members of the parliamentary opposition from déi gréng (the Greens) and DP (Conservative Liberals). 5 MPs, members of the opposition from ADR (National Conservatives) and déi Lénk (Democratic Socialists) voted against the adoption of the law. This law had to be adopted by a qualified majority because it transfers competences to an international institution (for more information about the constitutional background see question V.2).
What political/legal difficulties did Luxembourg encounter during the ratification of the ESM Treaty?
The discussions and difficulties focussed mainly on the law containing the participation criteria for Luxembourg.
The first draft of this law from 5 March 2012 contained only the approval of the parliament to participate in the ESM capital and the exact sums. Government proposed some changes to this draft on 14 May 2012. The first amendment added a new Article to the law, which gives broad immunity to the ESM and the European Investment Bank (EIB). The debts and the goods are unseizable, cannot be put under sequestration or blocked. This immunity clause in the national law was necessary – following the reasoning of the Luxembourg government – because the ESM shall enjoy the same kind of immunity such as the IMF. For the IMF, there is a national protection clause in the law of the state of residence. Since the ESM is located in Luxembourg, Luxembourg law must contain such a provision. The wording of the text is inspired by the Luxembourg Law of the National Central Bank. The EIB is also mentioned in the clause, because it has its seat in Luxembourg und was also established in order to fulfil European goals.
The second amendment added a new Article 3 to the proposed law, which itself added a new Article 3 to the Luxembourg EFSF-law. This clause laid down the same kind of immunity for the EFSF as for the ESM (and the EIB). The main reason for this amendment was to grant equal status to both mechanisms.
The third amendment added a new Article 4 to the law, which itself added a new Article 4 to the Luxembourg EFSF-law. It laid down that the EFSF can renounce the immunity expressly or stipulate the exemption of the immunity in a contract. The next paragraphs contained clarifications of immunities. The immunity was enlarged to the archive of the ESM and to all its employees. However, the administrative council of the ESM can renounce the immunity of employees by decision. The overall immunity is valid ex ante. The reasoning of the government was again that the EFSF and the ESM have to enjoy the same degree of immunity.
The fourth amendment changed the title of the Luxembourg EFSF-law from “loi relative à l’octroi de la garantie de l’Etat dans le cadre de l’instrument européen de stabilisation de la zone euro” to “Loi relative au Fonds européen de stabilité financière”. From the point of view of the government, it was necessary to adapt the title to the proposed modifications.
The Conseil d’Etat published two opinions concerning this legislative proposal. The first opinion contained several remarks. Firstly, it referred to its opinion from 6 March 2012 on the Luxembourg approval to the amendment of Article 136 TFEU by stating that the general remarks on the ESM in this earlier opinion are also valid for this law. Secondly, the Conseil d’Etat criticised that the law does not contain when and under which conditions financial contributions of Luxembourg have to be paid. The guarantees have to be treated as financial engagements in the sense of Articles 14, 15 and 19 of the national treasury law. This means that the guarantees have to form part of the national list of budgetary expenses. Thirdly, the Conseil d’Etat was surprised by the fact that the law seems to downplay the financial risks and demanded clarification of the wording.
The Conseil d’Etat published a further opinion concerning this law on 12 June 2012 (avis complémentaire) regarding the proposed amendments by the government. The first amendment (immunity to ESM and EIB) was seen as superfluous because the respective treaties already contain such a guarantee of immunity (Article 32 ESM-Treaty). The second amendment was criticised because it violates Article 10bis of the Luxembourg Constitution (principle of equality), because it gave the ESM a degree of immunity, which is only granted to the Grand Duke of Luxembourg in Article 4 of the Luxembourg Constitution. The Conseil d’Etat explicitly opposed this amendment, a strong statement of the Conseil d’Etat.
The opinion of the Conseil d’Etat was discussed at the meeting of the parliamentary Committee for Finances and the Public Budget (Commission des Finances et du Budget) on 22 June 2012. They took Conseil d’Etat’s opinion on the first governmental amendment into consideration, but decided to keep it in the law. The second proposed amendment of the law was not passed in the form proposed by the government, but in the less far-reaching formulation of the Conseil d’Etat.
In the plenary session of the Parliament about the adoption of these laws Claude Meisch, member of the then in opposition DP (Conservative Liberals) mentioned that the structure of the ESM shows a democratic deficit, because it is not parliament, which decides, but the ESM Council. Nonetheless, he also pointed to the fact that there are still a lot of national egoisms, which make the coordination difficult. However, the DP was of the opinion that there should be a discussion about how to improve the participation of the parliament in the ESM.
Is there a (constitutional) court judgment on the ESM Treaty?
No. The opinions of the Conseil d’Etat cannot be considered as constitutional court judgments (see question II.2).
What is the role of Parliament in the payment of the (first instalment of) paid-in capital required by the ESM Treaty (article 36 ESM Treaty)? What relevant debates have arisen in relation to this payment?
Parliament approved the law, which contains the payment of Luxembourg but there is no further role of the parliament for the disbursement of the separate tranches.
Application & Parliament
What is the role of Parliament in the application of the ESM Treaty, for example with regard to decisions to grant financial assistance and the disbursement of tranches, which both require unanimous adoption by the Board of Governors composed of the national Finance Ministers.
In the framework of the ratification of the ESM-Treaty (see question VIII.2), a second law was passed which regulates the criteria to participate in the ESM. The title of the law is Loi du 3 juillet 2012 relative
(1) à la participation de l’État au mécanisme européen de stabilité;
(2) à certaines immunités du mécanisme européen de stabilité et de la banque européenne d’investissement et
(3) modifiant la loi modifiée du 9 juillet 2010 relative à l’octroi de la garantie de l’État dans le cadre de l’instrument européen de stabilisation de la zone euro,
This law contains the authorisation for the government to participate in the capital of the ESM. The financial participation is limited to Euro 200.320.000 for the paid in capital and Euro 1.552.480.000 for the financial guarantees. In addition, the law contains an overall immunity for the obligations and goods of the ESM and the EIB. The fiche financière contains the sums for the paid in capital as well as the amount of the guarantees.
The Luxembourg Government informs parliament about measures taken by the ESM. This information procedure is based on a political agreement, which is not written and signed by government and opposition or written into any Luxembourg law, but government has promised to inform parliament regularly. Assumingly, this agreement does not have any legal force but it is rather a kind of convention between political parties. Nonetheless, it seems that this agreement is respected by the government.
What political/legal difficulties did Luxembourg encounter in the application of the ESM Treaty?
No difficulties known in the application of the ESM.
Have there been any relevant changes in national legislation in order to implement or to comply with requirements set by the ESM-Treaty?
No relevant changes.
What other information is relevant with regard to Luxembourg and the ESM Treaty?
No other relevant information.