Netherlands

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.   
(
http://www.european-council.europa.eu/eurozone-governance/esm-treaty-signature?lang=it and http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf)

Negotiation
VIII.1
What political/legal difficulties
did The Netherlands 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.

The ESM Treaty was discussed within the House of Representatives at the same time as the 136 Treaty change. The answers in this part of the questionnaire therefore occasionally refer back to the sources mentioned in the answers of that section in the questionnaire.

Please see the answer to question V.3 for the relevant political context at the time of the negotiations. There were no major difficulties in the negotiation of the ESM Treaty.

The position of government and that of the major parties in the House of Representatives is that a cause for the crisis was the lacking of fiscal discipline of Member States. Government therefore pushed for a stricter legal framework with more possibilities to supervise and sanction Member States that did not comply with the balanced budget rules. The position of government was and is therefore strongly grounded in the idea that, to prevent future crises, it is necessary to install a strict(er) legal framework. Against this background government pushed for a stronger position of the European Commission in its supervising capacity of the fiscal discipline of Member States and also pushed for the instalment of reverse qualified majority voting mechanisms.[1]

Ratification
VIII.2
How has the ESM Treaty been ratified in The Netherlands and on what legal basis/argumentation?

The ESM Treaty has been ratified on the basis of the legal framework that applies to international Treaties. On the basis of Dutch Constitutional Law (art. 91 Grondwet) the House of Representatives has to be informed and approve such legal measures. The ‘ordinary’ legislative process as explained in the answer to question V.2 applies. The Treaty was ratified in July 2012.[2]

Ratification difficulties       
VIII.3
What political/legal difficulties
did The Netherlands encounter during the ratification of the ESM Treaty?

The main substantive points discussed in the House of Representatives concerned: the issue of parliamentary control on the ESM, the relationship with the EU legal framework, internal and external control on the functioning of the ESM and the budgetary consequences.[3]

Issues discussed with respect to parliamentary control on the ESM concerned the impact of the ESM on the budget rights of the House of Representatives. Most political parties took note of the fact that, since the ESM was concluded outside of the EU legal framework, the control of national parliaments on the functioning of the ESM was important to ensure a form of democratic control on the functioning of the ESM.[4] The government and the House of Representatives agreed to apply the same working basis as was installed with respect to the functioning of the EFSF – see further the answer to question II.1 on the specifics of this working arrangement.[5] The issue that was discussed regarding the parliamentary budget rights was to what extent the House of Representatives would be involved in financial-aid decisions when they would be required on short notice.

Government argued that in these cases the House of Representatives only has a right to be informed as soon as possible and ideally before the granting of specific aid measures. Only in cases where the total capital guaranteed by The Netherlands would change, the House of Representatives has a ‘strong’ budget right and will be asked for prior approval.[6] As said, there are currently no hard laws on these information rights but government and the House of Representatives agreed to apply the same working basis as was installed with respect to the EFSF – see further the answer to question 86 of the questionnaire on the specifics of this working arrangement.[7] Some political parties focussed on the issue to what extent the functioning of the ESM could be conflicting with the EU legal framework. The position of the government has been consistently that there is no nor was there at any point in time a conflicting with the existing EU legal framework.[8]

It was agreed in the parliamentary debate that it could be useful to investigate whether further integration within the EU legal framework of the ESM could be deemed desirable at a certain point in the future.[9]   Until that time the position of the government is that there exist no problems due to an absence of the checks and balances that are normally provided by the EU legal framework since, government argues, the primary rules of the EU framework will still apply as a matter of priority and in addition a number of checks and balances have been installed that should ensure the internal and external control on the functioning of the ESM. [10]   Emphasis was put on the importance of ‘by laws’ that would ensure the proper functioning of the ESM.[11] The internal and external control on the ESM was discussed and the existence of by laws and control of auditing committees demanded.[12]

Case law        
VIII.4
Is there a (constitutional) court judgment on the ESM Treaty?

Geert Wilders, political leader of the Party for Freedom (PVV) started legal injunction proceedings against the State for its participation in the ESM. He argued that this participation was illegal in view of the fact that – at that time – government was in a transfer period towards the new elections. According to customary Dutch constitutional law, within this interim period April-November, government can only deal with current affairs and is not allowed to decide on any ‘controversial’ affairs. Wilders considered therefore that government lacked the democratic legitimacy to start participating in the ESM and that this decision should have been postponed until after the elections. The summary judge denied this claim on the basis of the argument that this would interfere too much with the legislative process.[13]

Capital payment
VIII.5
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?

This payment had to be approved by the House of Representatives on the basis of its budget right. The discussion was part of the debates on the ESM Treaty and the 136 Treaty-amendment. The discussion focussed mainly on the extent to which the House of Representatives would be involved in future aid decisions and how that could work – see the answers to previous questions on this regard. By approving the ESM Treaty the House of Representatives has agreed with both the first payment and the remaining pledged amount.

Application & Parliament    
VIII.6
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 House of Representatives ensured through a parliamentary motion (Harbers) that every decision to grant financial assistance outside of the pledged amount of capital will be tabled in the House of Representatives because the transfer of these funds directly impacts the budget-right of the House of Representatives.[14] Government promised to respect this motion of the House of Representatives by describing in a policy note how it will involve parliament in these decisions.[15] Any application outside of the pledged amount of capital will be accompanied with the tabling of a suppletoire begroting within the House of Representatives.[16] With respect to individual applications that fall within the pledged amount the government has indicated that it shall closely inform the House of Representatives. Legal commentators have described this ‘working agreement’ as a hollow shell, arguing that in practice, the government will be bound by the obligation to pay the money, regardless of the circumstance that the House of Representatives might decide to veto the tabled budget act. As such this working agreement can only have political effects.[17] See further the answer to questions II.2.

Application difficulties 
VIII.7
What political/legal difficulties
did The Netherlands encounter in the application of the ESM Treaty?

There were no significant difficulties encountered in the application of the ESM Treaty. That is to say that all ESM applications have been approved by clear majorities within the House of Representatives. Government has meticulously informed the House of Representatives of all measure and asked for approval of each measure – on the basis of the previously agreed working basis.

That is not to say that all parties in the House of Representatives happily agreed with the aid measures. Most political parties approved the measures only because they couldn’t perceive any alternative options.[18] Relevant debates that arose in the House of Representatives focussed, for example in the case of Cyprus, on the specifics of the measures including their social effects.[19] This applies to most political parties with the exception of the Party for Freedom (PVV) (and to a lesser degree) the Socialist Party (SP) who adopted a political rhetoric capitalising on the line that taxpayers savings were no longer safe in the European Union and that government cared more about Greek, Spanish and Cypriot taxpayers than their own.[20]

Implementation
VIII.8
Have there been any relevant changes in national legislation in order to implement or to comply with requirements set by the ESM-Treaty?

No. The implementation of the ESM requirements has been done by aligning them with the existing legal framework.

Miscellaneous
VIII.9
What other information is relevant with regard to The Netherlands and the ESM Treaty?

Not applicable.

[1] 05 ESM Treaty MvT, p 5. See also 04 Six-Pack 070911 Government vision on future of EMU first letter and 04 Six-Pack 231112 Government vision on future of EMU second letter.

[2] Wet van 5 juli 2012 houdende goedkeuring van het op 2 februari 2012 te Brussel tot stand gekomen Verdrag tot instelling van het Europees Stabiliteitsmechanisme tussen het Koninkrijk België, de Bondsrepubliek Duitsland, de Republiek Estland, Ierland, de Helleense Republiek, het Koninkrijk Spanje, de Franse Republiek, de Italiaanse Republiek, de Republiek Cyprus, het Groothertogdom Luxemburg, Malta, het Koninkrijk der Nederlanden, de Republiek Oostenrijk, de Portugese Republiek, de Republiek Slovenië, de Slowaakse Republiek en de Republiek Finland (Trb. 2012, 28). See 05 ESM Treaty – the implementing Law.

[3] 05 ESM Treaty – Parliamentary debate (2e kamer 1 of 2), 05 ESM Treaty – Parliamentary debate  (2e kamer 2 of 2).

[4] 05 ESM Treaty – Report of parliamentary commission

[5] 01 EFSM&EFSF – 180112 first policy letter on parliamentary involvement efsf measures and 01 EFSM&EFSF – 130912 second policy letter on parliamentary involvement efsf measures replacing the first.

[6] 05 ESM Treaty – Parliamentary debate  (2e kamer 2 of 2), page 4, 9, 12.

[7] 01 EFSM&EFSF – 180112 first policy letter on parliamentary involvement efsf measures and 01 EFSM&EFSF – 130912 second policy letter on parliamentary involvement efsf measures replacing the first.

[8] 05 ESM Treaty – Parliamentary debate  (2e kamer 2 of 2), page 17, 18.

[9] 05 ESM Treaty – Report on the basis of parliamentary commission discussion, page 10.

[10] 05 ESM Treaty – Report on the basis of parliamentary commission discussion, page 8.

[11] 05 ESM Treaty – Parliamentary debate  (2e kamer 2 of 2), page 16.  

[12] Ibid.

[13] http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBSGR:2012:BW7242

[14] 05 ESM Treaty – parliamentary motion Harbers.

[15] 01 EFSM&EFSF – 180112 first policy letter on parliamentary involvement efsf measures and 01 EFSM&EFSF – 130912 second policy letter on parliamentary involvement efsf measures replacing the first.

[16] 01 EFSM&EFSF – 130912 second policy letter on parliamentary involvement efsf measures replacing the first, page 3.

[17] 05 ESM Treaty – Diamant/Van Emmerink ‘Het Nederlandse budgetrecht in Europees perspectief’

[18] 05 ESM Treaty – Parliamentary debate Cyprus aid.

[19] 05 ESM Treaty – Parliamentary debate Cyprus aid, page 7.

[20] For example, 05 ESM Treaty – Parliamentary debate Cyprus aid, page 2, 10.