VIII - ESM Treaty

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. 
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What political/legal difficulties
did Malta 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.

For the Maltese Government, it was important to make sure that even a small and economically less important country such as Malta will be able to receive financial assistance in the case of financial difficulties. This is why the Maltese government in collaboration with the government of Cyprus had introduced an interpretation of Article 136 (3) TFEU in the meeting of the Council of the European Union (see question V.1).

How has the ESM Treaty been ratified in Malta and on what legal basis/argumentation?

The ESM Treaty has been ratified by an Act of Parliament (Act XII of 2012; Chapter 523[1] ) on 6 July 2012 by unanimous vote, published on 17 July 2012. It entered into force the same day.[2] The title of the Act is ‘Participation and Granting of Financial Stability Support under the European Stability Mechanism Act’. Annexed and forming part of the law is the European Council Decision of 17 December 2010, the draft of the European Council Decision on amending Article 136 TFEU, the Eurogroup Statement of 28 November 2010, the Statement by the Heads of State or Government of the Euro Area and the EU Institutions (Annexed to the European Council Presidency Conclusions of 16/17 December 2010), the European Council Decision of 25 March 2011, the Euro Plus Pact, the Term Sheet on the ESM, the ESM-Treaty and the letter of the European Commission on the Interpretation of Article 3 ESM-Treaty.

Ratification difficulties   
What political/legal difficulties
did Malta encounter during the ratification of the ESM Treaty?

The discussion, in particular during the second reading of the bill in a plenary session of the House of Representatives on 27 June, 2 July and 4 July 2012[3] , about the ESM Treaty was linked to the discussion about the amendment of Article 136 (3) TFEU. The political and legal difficulties mentioned there are also valid for the discussion about the ESM Treaty (see question V.3).

In addition, Alfred Sant, member of the Labour Party, then in opposition, emphasised that the involvement in the ESM created doubts whether this would lead to a higher influence from economically powerful countries such as Germany, which could be able to put pressure on Malta changing its system of taxation. This would result in the destruction of the significantly important financial sector in Malta.[4]

Furthermore, it was discussed whether Malta will get some financial assistance in case of need, which does not seem to be clear, because of its low importance for the Eurozone. Charles Mangion from the then in opposition Labour Party emphasised the fact that the four biggest countries (France, Germany, Italy and Spain) can adopt every decision they want to in the Board of Governors and in the Board of Directors of the ESM because they possess more than two thirds of the voting rights.[5] This is seen as a threat to the Maltese interest. He relativises his statement by saying that the decision about financial aid to one of the ESM members cannot be made by the majority voting, but he made it clear that the 72%-majority of these countries allows them to adopt important decisions within the ESM. The government did not react to this statement. Several members of the Labour Party (opposition) emphasised that there is the fear that the sovereignty of the parliament will be annulled. The interpretation, that the ESM has to grant financial assistance to a country, even if only this single country and not the whole Eurozone has difficulties of financial stability, is laid down in Article 4 of Act XII of 2012. The Act also contains the interpretation of the Commission DG ECFIN of Article 3 ESM contained in a letter of 3 July 2012 which reads as follows:

“The Commission services have drafted and negotiated the text of the ESM Treaty (in liaison with the EFSF) and are therefore in a position to explain its content and rationale. The reference in several sections of the Treaty (Article 3, 12 and 13) to the need that the financial stability of the ‘euro area as a whole and of its member states’ is at stake to warrant an intervention from the ESM is to be interpreted as allowing ESM actions both in case of difficulties affecting the euro area as a whole or one of its Member States in isolation, whatever its size. This wording aims specifically at allowing the coverage by the ESM of countries like Malta, whose case has been repeatedly mentioned in the discussions.”

Moreover, the opposition (Labour Party) is not convinced that all the different rescue mechanisms and early warning systems work as promised by the ‘European elites’. There is a general mistrust against the actions of the European anti-crisis policy. Amongst others, the lack of transparency and accountability is criticised.

In order to guarantee sufficient influence from the Maltese parliament, the Act contains a clause which says, that:

“The persons appointed by the Government of Malta to represent it on the governing and administrative organs of the European Stability Mechanism shall appear at least once a year and preferably during the month of March before the Public Accounts Committee or before another committee of the House of Representatives which from time to time may be tasked with the economic and financial scrutiny of Government for the purpose of rendering account of the workings of that Mechanism and of the European Financial Stability Facility insofar as this is in conformity with their duties and with the obligations of Malta.”

This shall make sure that the executive predominance can be restricted and effectively controlled by the legislative organ.

The government (Nationalist Party) emphasised that the potential burden of Malta decreased in comparison to the EFSF from Euro 700 million to Euro 512 million.[6]

Case law  
Is there a (constitutional) court judgment on the ESM Treaty?

No such Court judgment exists with reference to the ESM Treaty.

Capital payment         
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?      

The parliament authorised the Maltese government to disburse all the payments laid down in the ESM Treaty in an Act of Parliament (‘Participation and Granting of Financial Stability Support under the European Stability Mechanism Act’, see question VIII.2). There is no further participation of the Parliament in the payment process.

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.

The Government of Malta makes the disbursement via the Public Treasury.

Parliament only has to approve by resolution any participation and stability assistance granted by the Maltese Government beyond the purpose specified in Article 3 (2) Act XII of 2012.[7] Article 3(2) contains the purpose of the ESM which is to provide stability support under strict conditions, appropriate to the financial assistance instrument chosen, to a Member of the European Stability Mechanism which is experiencing or is threatened by severe financial problems, for which support is indispensable to safeguard the financial stability of the euro area as a whole and of its Members States – a purpose which is also laid down in Article 12 ESM-Treaty. Therefore, Article 3 (2) of Act XII of 2012 only makes it clear that the approval of the Maltese Parliament goes as far as laid down in this Act of Parliament (there is no carte blanche for the government).

However, Parliament has the right to demand answers to questions sent to the government and the newly established Standing Committee on Economic and Financial Affairs (for more information on this new Committee see question IX.3) can request that the representative of Malta at the ESM Council appears before the Committee and answers questions of its members.

Application difficulties     
What political/legal difficulties
did Malta encounter in the application of the ESM Treaty?

See the answer given to question II.7, in particular concerning Spain.


Have there been any relevant changes in national legislation in order to implement or to comply with requirements set by the ESM-Treaty?

No information known.         

What other information is relevant with regard to Malta and the ESM Treaty?

Not applicable.


[2]                       See Legal Notice 232 of 2012,

[3]              See Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 687 et seq.,; Transcript of Sitting 496 of the Plenary Session of the House of Representatives on 2 July 2012, p. 734 et seq.,; Transcript of Sitting 498 of the Plenary Session of the House of Representatives on 4 July 2012, p. 828 et seq.,

[4]              Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 687 et seq.,

[5]              Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 697,

[6]                       See the report in Times of Malta, ‘ESM: Malta’s €58m bill’, 28 June 2012,

[7] Article 5 of Act XII of 2012