VIII – ESM Treaty

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Austria

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 Austria 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.

Overall, the main position of the SPÖ-ÖVP government under SPÖ-Chancellor Faymann (see also question V.1 and question I.1) was similar to that of the German government, namely that there is no alternative to a permanent stabilization mechanism, that a stable EMU is essential for the Austrian (strongly export-oriented) economy and that default of a member state of the currency union was too risky and therefore not an option. The at that time Minister of Finance (Maria Fekter, ÖVP) said in parliament that whoever votes against the ESM is voting in favor of speculators. She further made clear that the fiscal pact would be there to tackle debt issues and that the Austrian parliament would get the strongest participation rights in the ESM’s decision making procedure of all member states. The ESM would show how to handle crises and would avoid burying heads in the sand at moments of crisis. She admitted that it is not the perfect solution but the only viable solution at present.[1] A member of the SPÖ acknowledges that budgetary sovereignty might by partially at stake, but that all the commitments made have limits, which is why budgetary sovereignty is not lost. From the opposition parties, the Greens were siding with the government whereas the far-right parties FPÖ and BZÖ were strongly opposing it with arguments such as that Austrian taxpayer money was being wasted to bailout banks and speculators and that Austria had not signed up for a ‘transfer-union’. The leader of the FPÖ even said in parliament that the fact that SPÖ, ÖVP and Greens agreed on the ESM amounted to a ‘coup d’État’. The BZÖ tried to initiate a referendum about the ESM but failed to reach the necessary majorities. However, the question of why a referendum on the TESM was not held was also debated in parliament.[2]

Several debates took place in the National Council and its committees prior to the signature of the first treaty, in May and June 2011, and then in June and July 2012, prior to the ratification of the final version. The Constitutional Committee and the Budgetary Committee were both charged to write reports on the proposed legislation that included the treaty and several accompanying laws, including a constitutional amendment that would ensure the National Council’s participation in the ESM’s decision-making process. Both committees recommended adopting the treaty and the accompanying legislation. The Constitutional Committee only requested that given the extensive participation rights in the ESM’s decision-making given to the parliament through the constitutional amendment, the government would have to come up with a legislative proposition that would tackle the possible problem of insider-trading that would result from the ESM’s secondary market operations being discussed in parliament.[3]

A public expert hearing was held upon recommendation of the Constitutional Committee at the plenary meeting of the National Council on June 28, 2012[4] consisting mostly of university professors and professionals from the (central) banking sector. Despite the fact that several experts were skeptical about the ESM’s actual capacity to tackle the problems of the monetary union, none of the experts claimed that the ESM Treaty could be unconstitutional. Several of them actually pointed out once again that a small country like Austria with an open market economy and strong export-orientation needs a European solution to the crisis and cannot survive alone in a globalized world. [5] The Greens were maybe slightly more skeptical about the ESM than the governing parties, but in the end they agreed to it mainly because of the strong position the parliament got in the decision-making process of the ESM through the constitutional amendment.

After the Constitutional Committee’s final reports on the TESM[6] and on the accompanying laws (in particular the constitutional amendment that should ensure parliamentary participation in the ESM’s decision making, see question VIII.6)[7] on July 2, 2012, and after the Budget Committees report on the necessary amendments of budgetary laws[8], all issued on July 2, 2012, the TESM and the accompanying laws were approved on July 4, 2012 in the plenary meeting of the National Council after a fierce debate in which none of the parties, especially not the FPÖ and the BZÖ, changed their original positions.[9] The Federal Council gave its approval on July 6, 2012.

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

For the overall treaty ratification process, please see question V.2.

As mentioned in question VIII.1, the TESM was first discussed by the Constitutional Committee of the National Council and then approved by the National Council by a majority of 126 against 53 votes on July 4, 2012. The Federal Council gave its approval on July 6, 2012 by a majority vote of 45 against 10.[10] Although it was considered as law amending and law-completing, it was not considered to amend the treaty foundations of the European Union and it was not considered to interfere with the constitution.  However, several laws necessary for its implementation accompanied the treaty. [11] In particular, several paragraphs were added to the constitution (Art. 50a -50d B-VG) in order to ensure the role of the Austrian parliament in the ESM decision-making processes. This will be elaborated in detail under question VIII.6. Here, it is just important to note that the approval of the treaty was based on Art. 50 (1) 1 B-VG and did not therefore not need higher majorities, whereas the approval of the constitutional amendment accompanying the treaty did (124 against 51 votes).

The Federal President signed the treaty on July 17, 2012 and therewith ratified it.[12] An important difference in comparison to Germany is the weight of the Federal President’s signature in the ratification process. One can argue that the German president’s constitutional review competences go further than those of the Austrian president, the extent of the president’s review competence is disputed in Germany and sometimes even in Austria. The important difference is, however, that whereas the German president can withhold his signature and ask the constitutional court to review the constitutionality of the statute/treaty in question first, an application to verify the constitutionality of a statute/treaty can only be brought in front of the court once the president has signed it. Therefore, the case at the Austrian Constitutional Court was brought only after ratification, on October 22, 2012 (for details see question VIII.4).

The treaty was counter-signed by the Federal Chancellor and deposited at the European Council on July 30, 2012.[13] It was then been further published in the Federal Law Gazette on September 28, 2012 which states that it had gotten into force on September 27, 2012 (according to Art. 48 TESM).[14]

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

The relevant publication in the Federal Law Gazette [15] further contains the Declaration of September 27, 2012 on the interpretation of the TESM signed by representatives of the treaty parties in Brussels.[16] The declaration was made in reaction to the German Constitutional Court’s BVerfG, 2 BvR 1390/12 of September 12, 2012[17]. The German Constitutional Court had raised concerns that in several constellations, the upper limit of each member states’ financial commitment could be exceeded without each member state’s consent and further, that professional secrecy and immunity provisions would hinder members of the ESM’s board of governors to properly inform their parliaments. The declaration therefore specifies that the relevant provisions of the TESM should be interpreted in a way that the upper limit can in no case be exceeded without each member state’s representatives’ consent and that the TESM does not hinder the information of national parliaments.

The legal status of this declaration has been, however, subject to controversy in Austria. The Austrian Constitutional Court specified in its decision (see question VIII.4) that the declaration does not amount to a ‘reservation’, but that it is an interpretative explanation. It is because of this reason that the Federal President did not consider it necessary to ratify it and that it was not necessary to submit it for approval at the National Council. Given the uncertain legal status of the declaration, a major question raised in the parliament even after the Austrian Constitutional Court’s decision from March 16, 2013, was why Austria had not made – like Germany – a proper reservation under public international law.

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

The Austrian Constitutional Court (Österreichischer Verfassungsgerichtshof) rendered its judgement on the ESM on March 16, 2013. It rejected all applicant’s arguments invoking (in eventu partial) unconstitutionality and/or illegality of the TESM and the Declaration from September 27, 2012. A detailed analysis of the case can be found in Annex I.1.   

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?

According to the general budgetary process (see question II.1 and II.2), for the first instalment (and any other instalment) the Federal Financial Law (BundesfinanzG) 2012, the Federal Financial Framework Laws (BundesfinanzrahmenG) 2012-2015 and 2013-2016 and the Federal Budget Law needed to be amended. The budgetary committee of the National Council recommended the adoption of the amendments including the modifications from the original government proposition that were suggested on the same day of the discussion. The meeting of the budgetary committee took place directly following the meeting of the constitutional committee regarding (regarding the approval of the TESM and the accompanying laws) on July 2, 2012 (see question VIII.1). No specific discussion about the first instalment takes place. The debate continues to be general about the ESM.[18] However, in the general TESM-discussions in the National Council referred to in question VIII.1 and VIII.2, several speakers repeat how the capital need to be paid in. Austria’s share in the ESM’s paid-in capital is 2.78%, the amount to be paid-in is EUR 2.23 billion, to be paid in five tranches of à 20% between 2012 and 2014. Austria paid the first tranche of 890,688 million on October 12, 2012.[19] Art. 41 TESM on how the capital needs to be paid and that the first instalment needs to be paid at the latest 15 days after the entry into force of the treaty is not mentioned as specific problem anywhere.

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?

As mentioned in questions VIII.1 and VIII.2, the approval of the TESM came with a constitutional amendment that is aimed at establishing a role for the parliament in the decision-making process of the TESM. Basically, four new articles were added to the constitution.[20]The (partial) translation of the articles is the following:

Art. 50a B-VG: The National Council contributes to the subject matters of the European Stability Mechanism.

Art. 50b B-VG: The Austrian representative in the European Stability Mechanism may only agree to or abstain from

1.      a proposal for a decision to principally grant a Member State stability aid,

2.      a modification of the authorized paid-in capital and an adaption of the maximum lending capacity of the European Stability Mechanism, as well as calls of authorized but not paid-in capital and

3.      a modification of the lending instruments,

if the National Council has enabled him to do so on the basis of a proposal of the Federal Government. In cases of special urgency, the responsible Federal Minister brings this proposal in front of the National Council. Without enablement of the National Council the Austrian member has to refuse the proposal of such a decision.

Art. 50c B-VG:

§  The responsible Federal Minister has to immediately inform the National Council about the subject matters of the European Stability Mechanism according to the provisions of the federal parliamentary law. In the federal parliamentary law, rights for the National Council to make statements shall be foreseen.

§  When the National Council has made a statement on subject matters of the European Stability Mechanism in time, the Austrian representative has to take it into account in negotiations and in votings. The responsible Minister has to report to the National Council immediately about a voting and has to eventually give the reasons why it did not take the National Council’s opinion into account.

§  The responsible Minister reports regularly to the National Council about the measures taken in the framework of the European Stability Mechanism.

Art. 50d B-VG:

The details about Art. 50 (b) and 50 (c) par. (2) and (3) are determined by the federal parliamentary law [see the answers to questions VIII.1 and VIII.2].[21]

The amendment of the federal parliamentary law (Geschäftsordnungsgesetz des Nationalrats GOGNR) leads to the introduction of two permanent subcommittees to the budget committee (§ 32f GOGNR). The first subcommittee is charged with the cooperation in secondary market operations of the ESM and the second subcommittee is charged with all other subject matters of the ESM and all the pre-consultations of propositions based on § 74d (1) GOGNR (which specifies the National Council’s powers according to Art. 50b B-VG). In each subcommittees, at least one member of the parties represented in the main committee has to be present. Documentation of the activities of the second[22] subcommittee and its reports are available online.

Nota bene that the creation of sub-committees of the budget committee was precisely the issue at stake in the German Constitutional Court Decision BVerfG, 2BvE 8/11 from February 28, 2012 regarding an injunction. The German Constitutional Court had argued then that the delegation of the then-EFSF-related decisions for the sake of efficiency violated the principle of democracy which is why EFSF-related decisions had to be made by the parliament.

Application difficulties 
VIII.7

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

 For the procedure, see question VIII.6.

·         Neither the TESM treaty, nor the accompanying laws (amendment of the constitution and amendment of the Payment Balance Stabilization Law) nor the amendment of the Federal Parliamentary Law were yet in force when the measures for Spain were decided. The accompanying laws and the amendment of the Federal Parliamentary Law came into force on July 26, 2012, however, while the package for Spain was decided on July 20, 2012.[23]

Cyprus: The subcommittee recommended[24] that the National Council enabled the Austrian representative at the ESM according to Art. 50b Z 1 B-VG in connection with § 74d Abs. 1 Z 1 GOG-NR to approve the Cyprus-measures[25]. The interesting thing is that the Greens, that had always voted for ESM-related measures, voted against. Still, since only a simple majority is required, the SPÖ/ÖVP majority was sufficient.

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?

See question VIII.1, VIII.2 and VIII.5.

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

No other relevant information.

[1]              Stenographic Protocol No. 164 (cit. supra note 32), Finance Minister Fekter’s statements on pp. 117-119.

[2]              Idem, p. 107.

[3]              Entschließung” (=Decision) of the Constitutional Committee in addition to its Final Report No. 1878 (see below note 51) from July 2, 2012, at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01878/fname_258139.pdf.

[4]              Summary of the Expert Hearing in the plenary meeting of the National Council from June 28, 2012 in Press Release at http://www.parlament.gv.at/PAKT/PR/JAHR_2012/PK0558/.

[5]              Idem.

[6]              Final Report of the Constitutional Committee No. 1880 on the government’s proposition no. 1731 (TESM) from July 2, 2012 available at: http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01881/fname_258130.pdf;

[7]              accompanying explanations of the proposition are available at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01731/fname_247805.pdf

                        [7] Final Reports of the Constitutional Committee No. 1878 on several deputies’ propositions no. 1985/A regarding the constitutional amendment and the amendment of the payment balance stabilization statute from July 2, 2012, at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01878/fname_258137.pdf and No. 1879 regarding on several deputies’ proposition no. 1986/A regarding the amendment of the federal parliamentary law from July 2, 2012, at d http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01879/fname_258135.pdf.

[8]              See question VIII.6 for detail.

[9]              Stenographic Protocol No. 164 (see section V, footnote 1)

[10]             Stenographic Protocol No. 164 (see section V, footnote 1) pp. 161-162.

[11]             Constitutional Amendment and Payment Balance Stabilization Law amendment 2012 (known as “ESM-Begleitnovelle“, BGBl I 65/2012, at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_I_65/BGBLA_2012_I_65.pdf; amendment of the federal parliamentary law known as “Änderung des Geschäftsordnungsgesetzes 1975, BGBl I No. 66/2012, at: http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_I_66/BGBLA_2012_I_66.pdf.

[12]             Federal President’s Office communication from July 17, 2012, at: http://www.bundespraesident.at/newsdetail/artikel/bundespraesident-unterzeichnet-fiskalpakt-und-esm-vertrag-1/

[13] Indeed, all legislative acts are to be signed by the President and counter-signed by the Chancellor as a formal requirement for a law being enacted.

[14]             ESM Treaty and Declaration from September 27, 2012 as published in BGBl III 138/2012, at:  http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_III_138/BGBLA_2012_III_138.pdf

[15]             See note above.

[16]             Declaration from September 27, 2012 (original version), at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/132615.pdf.

[17]             Bundesversfassungsgericht BVerfG, 2 BvR 1390/12 vom 12.9.2012, at http://www.bundesverfassungsgericht.de/entscheidungen/rs20120912_2bvr139012.html; a detailed summary is available here: http://europeanlawblog.eu/?p=1057.

[18]             Press Release about the discussion in the Budget Committee of the National Council from July 2, 2012 at http://www.parlament.gv.at/PAKT/PR/JAHR_2012/PK0576/index.shtml, Report of the Budget Committee at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_01883/fname_258140.pdf.

[19]             Press release of the Finance Minister’s report on the Euro Stabilization Measures in the 4th quarter of  2012, at http://www.parlament.gv.at/PAKT/PR/JAHR_2013/PK0065/index.shtml

[20]             Bundes-Verfassungsgesetz (Federal Constitutional Statute = the constitution), available in its current version at: http://www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10000138; available in English http://www.ris.bka.gv.at/Dokumente/Erv/ERV_1930_1/ERV_1930_1.pdf (the English version is from 2010 and does not contain the latest amendments yet). The added articles are available in German at: http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_I_65/BGBLA_2012_I_65.pdf

[21]             Amendment of Federal Parliamentary Law (Gesetz über die Geschäftsordnung des Nationalrats), BGBl I 66/2012, at http://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2012_I_66/BGBLA_2012_I_66.pdf.

[22]             List of reports of the subcommittee in overall ESM Matters at http://www.parlament.gv.at/PAKT/VHG/XXIV/SA-ESM/SA-ESM_00001_00316/index.shtml#tab-Berichte

[23]             European Commission, Summary on Stabilization Measures for Spain, at http://ec.europa.eu/economy_finance/assistance_eu_ms/spain/index_en.htm.

[24]             Report of the Pemanent Subcommittee in ESM subject matters from April 16, 2013, at http://www.parlament.gv.at/PAKT/VHG/XXIV/I/I_02272/fname_300280.pdf

[25]             Discussion, vote and enablement of the Austrian Representative during the Plenary Session of the National Council from April 22, 2013, on pp. 22-89 in Stenographic Protocol of the National Council’s session no. 198, XXIV Legislative Period, at http://www.parlament.gv.at/PAKT/VHG/XXIV/NRSITZ/NRSITZ_00198/fname_308804.pdf 

Belgium

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 Belgium 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 question was debated[1] – referring to the amendment of art. 136 TFEU – whether the ESM was a mixed treaty that would need approval of the regions too.  According to the Minister of Finance, the ESM Treaty concerned only the Federal level, for three reasons:

First, the immunity of the ESM and its operational framework does not involve Belgium as such. Second, the obligation to attach a collective action-clause to all governmental debt (art. 12 ESM Treaty) only applies to federal, national, debt, and not to regional debt.[2] Third, the regions do not contribute to the financial costs of the ESM.[3]

Although the issue of budgetary sovereignty and “additional transfers of competences to the EU” was criticised, this opinion remained outside of the mainstream political consensus.[4]

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

For the internal distribution of competences, see above VIII.1.

Ratification of the ESM Treaty took place by a bicameral Act, the Law of June 20th, 2012.[5] Apparently, the Flemish Government has composed a draft decree approving the ESM Treaty in the beginning of 2014.[6] The current status of that Flemish draft is unclear; we can assume the intervening elections in May 2014 precluded further development of this draft decree. S explained under VIII.1, the argument rejecting regional approval of the ESM Treaty might be shaky, but it has not been challenged. The Flemish draft thus only had political value. At any rate, the proposal has not been taken up after the elections.

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

None. It was noted by the Minister of Finance that “Belgium has proportionally more to gain by the ESM than to lose”.[7] Given the spreads on Belgian debt during the euro crisis, this European initiative was seen as an opportunity.

The fraction of both green parties (Groen and Ecolo) proposed two additional ideas: a binding referendum approving the ESM, and a law instructing the Belgian representative in the Board of Governors to inform Parliament of his actions.[8] None of these was given effect.

A minor issue of federal division of competences arose, see VIII.1 and VIII.2.

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

Yes, in the sole case 156/2012, the law ratifying the ESM Treaty was challenged before the Constitutional Court, but the appeal was lodged after expiry of the deadline.[9]

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?

No specific role. The Belgian financial participation in euro crisis mechanisms has been executed through quarterly adjustments of the formal budgetary law.

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.

In the ratification debates, the issue of transparency and control was raised. The government’s position, supported by the majority was to exclude any instruction before the meeting of the Board of Governors, but to allow Parliament to ask for a debriefing afterwards.[10]

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

The issue was raised, but not decided, what were to happen if Belgium would apply for emergency assistance by the ESM. In that case, the federal government would conclude the memorandum, but the regions would also be bound by the objectives. As the Minister stated: “The issue how to involve the regions and communities does not pertain to this Treaty”.[11]

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.

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

No other relevant information.

[1] The Council of State merely posed the question but did not give an opinion: Parl. Doc. Senate, 2011-12, nr. 1598/1, p. 39 http://www.dekamer.be/FLWB/PDF/53/1598/53K1598001.pdf – see also K. Brams & T. Corthaut, ‘De financiering van de gemeenschappen en de gewesten na de Zesde Staatshervorming – responsabilisering in de schaduw van Europa’ in A. Alen et al. (eds.), Het federale België na de zesde staatshervorming (die Keure 2014) 608-609.

[2] Questionable though – art. 49bis of the Special Act on the Finances of the Regions and Communities explicitly confirms the competence for regions to emit debt instruments.

[3] Parl. Doc. Senate, 2011-12, nr. 1598/2, p. 17. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1598&VOLGNR=2&LANG=fr

[4] Parl. Doc. Senate, 2011-12, nr. 1598/2, p. 5. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1598&VOLGNR=2&LANG=fr

[5] Published in the Official Gazette July 9th, 2012.

[6] See the advice of the SERV of March 24th 2014, online at http://www.sariv.be/web/images/uploads/public/8639675005_20140324_Advies_SARiV_SERV_ESM-Verdrag_web.pdf

[7] Parl. Doc. Senate, 2011-12, nr. 1598/2, p. 15. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1598&VOLGNR=2&LANG=fr

[8] See proposals nrs. 1612 and 1613, submitted to the Senate. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1612&VOLGNR=1&LANG=fr

[9] Which is limited to 60 days after publication. Direct constitutional challenges to an Act assenting to a Treaty can only be brought within 60 days of publication: see article 3(2) of the Special Act on the Constitutional Court. Indirect challenges (prejudicial questions posed by ordinary judges) to assenting Acts concerning the TEU, TFEU and ECHR are not allowed (article 26, §1bis of the Special Act on the Constitutional Court)..

[10] Parl. Doc. Senate, 2011-12, nr. 1598/2, p. 16. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1598&VOLGNR=2&LANG=fr

[11] Parl. Doc. Senate, 2011-12, nr. 1598/1, p. 10. http://www.senate.be/www/?MIval=/publications/viewPub.html&COLL=S&LEG=5&NR=1598&VOLGNR=1&LANG=fr

Bulgaria

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 Bulgaria 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 is one of the international law instruments dealing with the Euro crisis in which Bulgaria is not participating as it is not a Eurozone Member State. However, in light of the resolve of Bulgaria to join the Eurozone in the future, the Bulgarian Government decided to participate in the negotiations of the ESM Treaty. This was considered important as the rules contained therein would eventually be applicable to Bulgaria, once it joins the Eurozone.

The Minister for Finance (on 4 May 2011 in the National Assembly) and his Deputy (on 30 March 2011 in the joint session of the Committees on European Issues and Budget and Finance) highlighted that with its participation in the negotiations, Bulgaria managed to secure a smoother transition with respect to the ESM contributions, once it joins the Eurozone. What they were referring to was basically the temporary correction of the contribution key set out in Article 42 of the ESM Treaty. This temporary correction allows for a Member State joining the ESM that has GDP per capita at market prices in euro in the year immediately preceding its accession to the ESM that is less than 75 % of the EU’s average GDP per capita at market prices to benefit from a temporary correction of the key which weights greatly on the gross national income. Furthermore, this temporary exception lasts for twelve years.

ratification
VIII.2
How has the ESM Treaty been ratified in Bulgaria and on what legal basis/argumentation?

Since Bulgaria participated only in the negotiations, the ESM Treaty was neither signed nor ratified by Bulgaria.

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

In light of the answer to the previous questions, this one is not applicable to Bulgaria.

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

The ESM Treaty has not been litigated at the BCC. 

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?

Not applicable to the Bulgarian National Assembly.

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?

Not applicable to Bulgaria.

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

Not applicable to Bulgaria.

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?

Not applicable to Bulgaria.

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

No other relevant information.

Croatia

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 Croatia 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.

Croatia is not a member of the Eurozone.

Cyprus

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 Cyprus 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 Minister of Foreign Affairs of Cyprus and the Cypriot government were favourable of the creation of a permanent stability mechanism and a Treaty amendment, as a last resort (necessary) solution.

All the participating parties at the plenary session of the Parliament agreed with the objectives of the ESM Treaty, whereas a few ‘leftish’ parties, both in government and opposition  (‘democratic Party’ , the ‘leftish’ coalition ‘AKEL- Left- Nees Dynameis’ together with the member of the Social Democrats’ Movement (EDEK) ‘) reserved their right to take position on the matter during the discussion of the Act at the House of Parliament. The aforementioned parties eventually voted in favour of the new Draft Bill, after pointing out, however, that they disagreed with the way the decision on the Treaty amendment and the creation of a permanent stability mechanism was taken at a European level, in particular in light of the disregard of the voices of the ‘peoples of Europe’ and the lack of any referenda that would express these voices (see also Question VI.3).

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

The ratifying Law for the ESM Treaty is Law 14 (III) of 2012 approved by the House of Representatives on 31 May 2012 and published in the Cypriot Official Gazette on 15 June 2012 (Number 4164/15 June 2012, p. 3820). According to the Constitution of Cyprus, the ratification procedure follows simple majority voting in the parliament (Art. 169(2)); whereas the President and the Council of Ministers can veto the parliaments’ decision (Art. 50(1) a). If a constitutional amendment is required the majority of 2/3 of members of parliament is required (Art. 182 (2), (3)). This however was not the case here.

The ratification was notified to the EU Council on 28/06/2012. The ratifying procedure for international agreements is provided in Article 169 (2) of the Constitution of Cyprus. Article 169 of the Cypriot Constitution stipulates that provided that Article 50 and Article 57 (3) of the Cypriot Constitution are met:[1]

(1)  Any international agreement among other states or any other international organization that concerns commercial issues, economic cooperation, payments and credits and modus Vivendi inclusive, is concluded following a Decision of the Ministerial Council.

(2)  The negotiation of any other Treaty, Convention, or International Agreement as well as the conclusion of them takes place following the Ministerial Council’s decision. They can only, however, acquire legal value and bind the Cypriot Republic if they are ratified by Law, which is enacted by the House of Parliament, upon which they are considered concluded.

(3)  Treaties, Conventions and Agreements agreed in accordance with the aforementioned provisions of the present Article are from their publication in the Official Gazette of the Cypriot Republic superior to any other national law, on condition that these Treaties, Conventions and Agreements apply respectively to the other party.

(4)  The Cypriot Republic can exercise every choice and discretion stipulated in the EC Treaty and the EU Treaty and any other Treaty the Republic concludes, that amends or replaces them (the Treaties). [2]

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

The Cypriot Parliamentary Committee of Economics and the Budget conducted a study on the suggested Draft Bill on the ratification of the ESMT. The relevant discussion took place on 21 and 28 May 2012 with the participation of the Minister of Finance and representatives of the respective Minister.[3]

The report of the Committee after reminding the purposes and the functions of the ESM, notes that the participation of Cyprus will be approximately €1.373 billion, a part of which will be disposed in installments as paid-in capital, while another will take the form of ‘blocked capital’ .  

During the discussions in the Parliament for the ratification of the ESMT, AKEL’s[4]  representative Mr. Evagorou, asked for an intervention. Among other issues, Mr. Evagorou, noted that despite the AKEL- Aristera- Nees Dinameis reservations and concerns as to the way the decision about the ESM and the ESM’s content was made at a European level, the party will vote in favour of the Draft Bill, after having taken into account the international and national facts. He, nevertheless, criticised the fact that following the Decision of the European Council, the preparations for the Treaty amendment as well as its new content were neither debated before the peoples of each State nor subject to a referendum by the peoples’ of Europe. He continued by reminding that the Treaty amendment on Art. 136 TFEU is the result of the existing differences within the EU, whereby a certain group of States interprets solidarity differently and applies it following its own special economic interests. This is particularly reflected in the countries of the South and has as a result huge deficits, differences in competitiveness among the Member States and most importantly, inability to grow, inability to create new employment posts, unemployment and poverty.

According to Mr. Evagorou (and AKEL), what the EU needs at the moment is a new Agreement for growth, which will be premised on qualitative and social criteria and will take into account the particular characteristics of each country and economy. In Mr. Evagorou’s and AKEL’s view the austerity imposed cannot possibly generate growth for the peoples’ of Europe. In the same line of argument, Mr. Evagorou notes that under the new reality decisions are not taken anymore by the peoples’ of Europe, but instead by the technocrats, such as the IMF or the European Commission. However, as Mr. Evagorou – speaking on behalf of the AKEL- concludes, if the ‘monitoring framework’ in the EU was really strict and was implemented to the benefit of the public interest and interest of the ‘workers’, it could set out the framework for an ‘equal development’ of the states.

Mr. Papadopoulos, from the opposition Democratic Party, took the floor and noted that he was convinced by Mr. Evagorou’s argument, and that he also endorsed the view that this Draft Bill goes against the interests of the peoples of Cyprus. He, hence, asked to change his vote (as not being in favour of the ratification).

Mr. Mitsopoulos of the opposition Democratic Rally (Dimokratikos Synagermos) continued, by reminding that both the Treaty amendment and the creation of the ESMT were discussed and unanimously adopted at the European Council. Thus, he pointed out, that if the AKEL party wished a referendum, it could and should have raised the issue of the adoption or rejection of the ESM before the European Council.

Mr. Perdikis, of the opposition Ecologists’ party, tabled an amendment to the Draft Bill that aimed at democratizing the participation of Cyprus in the ESM. Mr. Perdikis referred to the provision of the ratifying Law on the appointment of an administrator and a deputy administrator. Mr. Perdikis suggested that this appointment takes place through a consensus procedure within the Parliament and in addition that a cooperation mechanism is established between the Ministry of Finance and the Parliamentarian Committee for Finance.

The relevant amendment was approved by the Parliament (30 votes in favour and 18 against) on 31 May 2013 and the Draft Bill was enacted into Law.

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

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

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?    

According to the Preamble of Law 14 (III) of 2012 the Minister of Finance is delegated by the Council of Ministers of Cyprus to ‘debit’ the national budget with the relevant amounts.

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 Parliament does not have any formal role in the activities of the ESM or in determining the actions of the Minister for Finance when acting as a member of the Board of Governors of the ESM. The only obligation of the Minister of Finance is to notify every 6 months the Parliamentarian Committee of Finance and Budget on the progress or any new developments on the ESM, in accordance with Recital 4 of the Preamble of Law 14 (III) of 2012.

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

The only debate that arose in the Cypriot Parliament with regard to the application of the ESM Treaty concerned the application for financial assistance to Cyprus (see also question VIII.2).

The debate in the Parliamentarian Committee of Finance and Budget, as well as the discussion in the Parliament’s plenary session, summarize the debates that arose before Cyprus officially asked for the ESM’s financial assistance.

In the Parliamentarian Committee which convened on 29 April 2013,[5] the Minister of Finance of Cyprus noted first that the reasons that led to the imperative need to conclude the loan agreement was the exclusion of the Republic of Cyprus from the markets in May 2011 and the Greek Private Sector Involvement that brought about ‘damages’ of €4,5  billions to the Cypriot banks. He then, continued by pointing out that the Republic of Cyprus has lost part of its sovereignty from that point (ie the point of the exclusion and the damages to the banks), without however resorting to financial assistance as other countries did (ex. Ireland, Portugal and Greece). The Minister of Finance observed that this delay which was due to the efforts and attempts to find alternative lending possibilities proved to be particularly harmful, leaving Cyprus – at the (that) moment without any bargaining power and choices. At this point, he added, the main priority was the restart of the Cypriot economy through the removal of all bureaucracies and obstacles so that the country can benefit from the increased revenue from taxation. The amount of €3,4 billion from a total of €10 billion which constitutes the amount of the FFA will be used for purposes of state financing and growth. Consequently, the Minister concluded, if the State does not prove capable of raising this revenue, it will have at some point to take new fiscal consolidation measures, since the revenue will not be adequate to cover the state spending.

In the same line of argument, the Minister of Foreign Affairs pointed out that the Eurozone Member States, including Cyprus, have voluntarily delegated part of their sovereignty to the EU by becoming a member. The Minister further observed that Cyprus constitutes a different case than Greece.

The delegate of the Central Bank of Cyprus noted that at that point the first priority was the strict adherence to the fiscal target of the MoU and in particular curbing the projected fall in GDP, since otherwise the economy would enter a vicious circle of recession (see also question VIII.2).

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?

Besides the relevant ratifying and implementing law of the ESMT there have been no other legislative changes in order to implement or comply with the requirements of the ESMT (except after Cyprus signed the MoU and the FFA for which see question X.7).

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

Not applicable.

[1] Art. 50 of the Constitution of Cyprus provides that the President and the Vice-President of the Republic of Cyprus, separately or conjointly, shall have the right of final veto on any law or decision of the House of Representatives or any part thereof concerning, among other issues relating to ‘foreign affairs’, the conclusion of international treaties, conventions and agreements. Art. 57 (3) of the Constitution of Cyprus provides the deadline for the exercise of this veto which is within four days of the date when the decision has been transmitted to the President’s and Vice-President’s respective offices.

[2] Free translation of Article 169 of the Constitution of the Republic of Cyprus.

[4] AKEL is a ‘left-wing’ party that at the time was in government. It was succeeded in government after the presidential elections of 2013 by the ‘Dimokratikos Synagermos’ (Democratic Rally) party. The presidential election in Cyprus leads to a new government, as the President appoints and dismisses the members of the Ministry of Councils of the Republic (see also Question I.1) . 

Czech Republic

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 Czech Republic 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.
CR is not a party to the ESM Treaty. During the negotiations on the EC Decision on Art. 136 Amendment, CR announced its general position on the ESM:

  1. “Mechanism shall be activated in the case of a threat to the Eurozone as a whole,
  2. shall be considered ‘assistance of last resort’ (ultima ratio),
  3. on the request of the affected Member State of the Union,
  4. strict conditionality of the financial assistance,
  5. involvement of private sector and IMF, and
  6. an option for a voluntary involvement of a MS that is not member of the Eurozone, on an ad hoc basis.”[1]

All these main characteristics were included in the ESM Treaty.

CR followed the preparation of the ESM Treaty closely given its obligation to join the Euro; therefore I will shortly describe the situation regarding the current debates on the issue. Given Art. 2/1 of the ESM Treaty, a potential accession of CR is dependent on abrogation of the derogation from adopting euro. Although in theory, a MS with derogation, except Denmark and the UK, are under obligation to join Euro once they fulfil the convergence criteria, in reality (especially given the criteria of participation in ERM II for at least two years) the accession to the Eurozone is dependent on a political will of a MS with derogation. Despite the Czech Republic discussing a possibility to join the Eurozone for a decade, there has not been a target date set yet. After the tenure of the Eurosceptic President Klaus (who was supported by Civic Democrats and the Czech National Bank, whose all members of the Banking Council he has appointed during his tenure), the new President Miloš Zeman has profiled himself as pro-European by signing Art. 136 Amendment in April 2013, shortly after his inauguration. In an interview for Passauer Neue Presse, President Zeman mentioned he could imagine CR joining the Eurozone in five years, a move denied by then PM Nečas (leader of rather Eurosceptic Civic Democrats), as well as by then Finance Minister Kalousek (deputy leader of pro-European TOP 09) as unrealistic. Successful monetary policy of the Czech National Bank in the last decade and the Eurocrisis only add arguments for not changing the status quo. There are also doubts about the Czech Republic obligation to join the Eurozone based on the on-going transformation of the Eurozone governance. The argument goes that given that CR could not participate in majority of these changes (due to not being a member of the Eurozone), its obligation to join the Eurozone, the Czech Republic agreed to by the fact of its accession to the EU in 2004, is not valid anymore as the content of this obligation has transformed considerably. This leads to an argument that an accession to the Eurozone must be subject to a nation-wide referendum. The last poll has shown that 77% of the respondents were against the adoption of the Euro.[2]

During the ratification debates on the European Council Decision on Art. 136 TFEU Amendment, the Government emphasized that the consent to the Decision and the position of CR towards the ESM are separate issues. It indirectly admitted that it is not given that CR will join Euro and even if that happens, CR will negotiate the terms of its accession to the ESM.[3] In early 2014, with new centre-left government and with new President, who, as mentioned above, publicly announced his support to the Czech membership in the Eurozone and who on a first occasion appointed a supporter of Euro accession to the Czech National Bank’s Banking Council, the situation has started to change. In February 2014, the Czech Prime Minister Sobotka has pledged to accede to the Fiscal Compact and the Banking Union.[4]

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

CR is not a party to the ESM Treaty.

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

CR is not a party to the ESM Treaty.

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

No.

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?

CR is not a party to the ESM Treaty.

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 Parliament does not have any formal role in the activities of the ESM or in determining the actions of the Minister for Finance when acting as a member of the Board of Governors of the ESM. The only obligation of the Minister of Finance is to notify every 6 months the Parliamentarian Committee of Finance and Budget on the progress or any new developments on the ESM, in accordance with Recital 4 of the Preamble of Law 14 (III) of 2012.

CR is not a party to the ESM Treaty.

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

CR is not a party to the ESM Treaty.

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?
CR is not a party to the ESM Treaty.

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

It was calculated that CR, if it joins ESM right away, would contribute in the first five years by the amount of 32 bn CZK (cca 1.2 bn Euro).[5] According to an opposition party Public Affairs, CR would pay additional 40 bn CZK in 12 years and 310 bn CZK in guarantees. This potential burden will become an important factor in whether to join the Euro or not.[6] According to a fraction within Civic Democrats (in line with then President Klaus), through the ESM, CR would burden future generations beyond any reasonable measures; the ESM incites moral hazard of debtors; and the creditors are obliged to “irrevocably and unconditionally undertake to pay on demand any… capital call made on them, within seven days” (Art. 9/3 in fine of the ESM Treaty).[7] 

[1] See “Czech Government and Parliament position on Draft Council Decision on Art. 136 Amendment”, p. 4-5.

[2] Centrum pro výzkum veřejného mínění Sociologický ústav AV ČR, Občané o přijetí eura – duben 2013 (Citizens on Euro adoption – April 2013), May 3, 2013, available at: http://cvvm.soc.cas.cz/media/com_form2content/documents/c1/a7005/f3/pm130503.pdf. A graph showing long-term view of citizens on the adoption of Euro indicates that until 2006 there was a majority support for the adoption of Euro, since 2006 the negative view prevailed with 2010 being the decisive turning point towards strong opposition to the Euro adoption. While the shift between 2006 and 2009 can be assigned to the successful monetary policy of the Czech National Bank and the increasing Euroscepticism of then President Klaus, fully revealed after his reelection in 2008 (that made him a lame-duck President given that he could not been reelected), the radical shift in 2009 and later must be assigned to the perception of the Eurocrisis and its management. Ibid.

[3] Foreign Minister Karel Schwarzenberg, stenographic protocol, Chamber of Deputies of the Parliament, May 9, 2012, available at: http://www.psp.cz/eknih/2010ps/stenprot/038schuz/s038123.htm#r4.

[4] Oliver, C., New Czech prime minister vows to ratify EU fiscal compact, Financial Times, Feb. 20, 2014, http://www.ft.com/intl/cms/s/0/c413ca0c-9a4f-11e3-8e06-00144feab7de.html#axzz2ttcsndWl.

[5] MP Jan Bauer, chairman of the Chamber of Deputies Committee for EU affairs, stenographic protocol, Chamber of Deputies of the Parliament, May 9, 2012, available at: http://www.psp.cz/eknih/2010ps/stenprot/038schuz/s038124.htm.

[6] MP Kateřina Klasnová (Public Affairs), stenographic protocol, Chamber of Deputies of the Parliament, June 5, 2012, available at: http://www.psp.cz/eknih/2010ps/stenprot/040schuz/s040017.htm.

[7] MP Michal Doktor (Civic Democrats), stenographic protocol, Chamber of Deputies of the Parliament, June 5, 2012, available at: http://www.psp.cz/eknih/2010ps/stenprot/040schuz/s040018.htm.

Estonia

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 Estonia 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 were encountered during the negotiations. The Estonian Government supported bringing the entry into force of the ESM forward in time because of the greater operational effectiveness of the ESM compared to the EFSF as well as the more favourable size of commitment for Estonia in the former. Estonia’s primary preference was to establish a ceiling to cumulative loans granted by the ESM and EFSF to 500 billion euro. Following the decisions adopted at the meeting of the Heads of State and Government of the eurozone on 9 December 2011, Estonia was willing to raise the cumulative assets of the EFSF and ESM should this prove essential for maintaining the stability of the eurozone. In exceptional circumstances, Estonia was willing to forgo decision-making by unanimity in the adoption of aid programmes and adopt decisions by qualified majority vote (85%). Similar voting majority is in use in the IMF. Estonia supported the principle by which countries who wish to receive assistance from the ESM have to join the fiscal agreement.[1]

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

Pursuant to § 20 clause 6 of the Foreign Relations Act, a treaty shall be ratified in the Riigikogu if ratification is prescribed in the treaty. Since the acts of ratification and implementation of the ESM Treaty regulate the internal fulfilment of fiscal obligations taken by the state, the ratification act must be adopted by a majority of the membership vote pursuant to § 104 clause 15 of the Constitution.

Pursuant to § 106 of the Constitution, issues regarding the ratification and denunciation of international treaties shall not be submitted to a referendum.

The ESM Treaty was ratified by the Riigikogu on 17 October 2012 with 59 votes in favour, 34 votes against, 1 abstention.

Both the ratification of the ESM Treaty and its implementation are provided in the Act on Ratification and Implementation of Treaty Establishing European Stability Mechanism.

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

On 12 March 2012, the Chancellor of Justice initiated Constitutional Review Procedure at the Supreme Court on the basis of § 6 subsection 1 clause 4 of the Constitutional Review Court Procedure Act with a request to declare Article 4(4) of the signed Treaty providing for a 85 per cent majority for decisions on granting aid from the ESM to be in conflict with the principle of parliamentary democracy arising from § 1(1) and § 10 of the Constitution, and with § 65 10) and § 115 of the Constitution.[2]

In the parliamentary debates, the following issues were touched upon:

          Whether the ESM will solve problems;

          Whether financial centralization can lead to a loss of national sovereignty;

          The role of the plenary of the Riigikogu versus the European Union Affairs Committee of the Riigikogu in the ESM application procedures. The arguments for participation of the membership were related to the question exercising parliamentary control whereas the arguments against highlighted the inflexibility the membership in convening for matters requiring speedy decision-making as well as the lack of necessity of burdening the institution of membership with questions on implementation of an act. A comparison with the procedures relating to the IMF and other international organizations was made.

2301 votes were gathered in support of organising a referendum on the ESM Treaty. The petition however was of marginal importance and the numbers relatively low. In any event, Article 106 of the Constitution prohibits a referendum on this issue (see also question VIII.2).

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

Estonian Supreme Court judgment of July 12, 2012

1.      Name of the Court

Supreme Court of Estonia

2.      Parties

Chancellor of Justice, the Government of the Republic

3.      Type of action/procedure

Constitutional review procedure, regulated by the Constitutional Review Court Procedure Act. Pursuant to the Act, the Supreme Court adjudicates, i.a. requests to verify the constitutionality of legislative act or refusal to issue a legislative act, and of international agreements. The Court can do so on the basis of a reasoned request, court judgment or court ruling. Requests to the Supreme Court can be submitted by the President of the Republic, the Chancellor of Justice, a local government council or the Riigikogu. The procedure can take place both prior and after the entry into force of the legislative act in question.  

4.      Admissibility issues

The Supreme Court en banc held the request of the Chancellor of Justice to be admissible.

5.      Legally relevant factual situation

Excerpt from the Judgment:

“At a meeting of the European Council on 16–17 December 2010 the European Union (EU) Member States agreed about the need to establish for EU Member States where the single currency euro is in use a permanent stability mechanism for ensuring the financial stability (of the euro area). At the same meeting the EU Member States also agreed on amendment of Article 136 of the Treaty on the Functioning of the European Union (TFEU) in such a manner that the euro area Member States would have a clear authorisation to establish a stability mechanism. On 11 July 2011 the Minister of Finance signed the Treaty establishing the European Stability Mechanism (ESM) (the Treaty). On 9 December 2011 at a meeting of the European Council the Heads of Government of the euro area Member States agreed on the amendment of the Treaty.

On 26 January 2012 the Chancellor of Justice addressed the Minister of Finance with a memorandum concerning the amendments to the Treaty. The Minister of Finance replied to the Chancellor of Justice on 1 February 2012.

On 2 February 2012 the Government of the Republic adopted an order no. 60 “Approval of the Draft Treaty establishing the European Stability Mechanism and grant of authorisation”. By the order the Draft Treaty was approved and the permanent representative of Estonia to the EU was authorised to sign it. On 2 February 2012 the representative of Estonia in Brussels signed the amended Treaty which the Member States are required to ratify.

On 12 March 2012 the Chancellor of Justice had recourse to the Supreme Court, relying on § 6(1)4) of the Constitutional Review Court Procedure Act (CRCPA), with a request to declare Article 4(4) of the signed Treaty to be in conflict with the principle of parliamentary democracy arising from § 1(1) and § 10 of the Constitution, and with § 65 10) and § 115 of the Constitution.

By a ruling of 22 March 2012 the Constitutional Review Chamber of the Supreme Court referred the case to the Supreme Court en banc. The Supreme Court en banc asked the opinion of experts on the constitutionality of Article 4(4) of the Treaty. Opinions were submitted to the Supreme Court en banc by Dr Anneli Albi, the Department of Economics of the Estonian Business School, the Tallinn University Law School, the Faculty of Social Sciences of the Tallinn University of Technology and the Faculty of Law of the University of Tartu.”[3]

6.      Legal questions

Is Article 4(4) of the ESM Treaty in conflict with the principle of parliamentary democracy arising from § 1(1) and § 10 of the Constitution, and with § 65 10) and § 115 of the Constitution?

7.      Arguments of the parties

Chancellor of Justice:

The main claim of the Chancellor of Justice is that Article 4(4) of the Treaty interferes with the principles of parliamentary democracy and reservation by the parliament, and the budgetary powers of the Riigikogu. The nominal value of the capital stock to be subscribed by Estonia in the Treaty – about 8.5% of the GDP – is an extremely vast proprietary obligation, which significantly reduces the discretionary powers of the Riigikogu in making choices about the state budget – one of the most central elements of parliamentary organisation. The Chancellor of Justice does not consider the declarative condition that the ESM will exercise its right to grant financial assistance on strict and appropriate conditionality to suffice in legitimising all subsequent decisions of the ESM. This is particularly so because of Article 4(4) of the Treaty, which enables the ESM to approve financial assistance by a qualified majority of 85% of the votes cast and, thus, potentially only on consent of the six largest Member States. Since the benefit accompanying Article 4(4) of the Treaty to the financial stability of the euro area does not outweigh the interference with the principles of parliamentary democracy and reservation by the parliament, and the budgetary powers of the Riigikogu, the Chancellor of Justice considers the provision to be in conflict with the Constitution.[4]

Government of the Republic:

The Government of the Republic considers the request of the Chancellor of Justice to be inadmissible. Should the Court consider the application admissible, it is the opinion of the Government that Article 4(4) of the ESM Treaty is formally and substantively in conformity with the Constitution. Moreover, the Government perceives Article 4(4) of the Treaty to sufficiently secure the control function of the Riigikogu. This is particularly so because of the possibility to require, in the act ratifying the ESM Treaty, the representative of Estonia to act according to the guidelines provided by the Parliament when adopting decisions in the ESM.[5]  

8.      Answer by the Court to the legal questions and legal reasoning of the Court

Summary of the opinions of the Supreme Court en banc (excerpt from the Judgment):

“204. The Supreme Court en banc addressed the Treaty and obligations arising therefrom for Estonia. First, the Supreme Court en banc came to the conclusion that with the contribution key the Treaty determines the upper limit of the obligations of the Member States. Estonia undertakes to contribute 0.1860% of the authorised capital stock of the ESM and Estonia’s contribution amounts to 1 302 million euros. The Treaty sets out when and how the capital to be paid in must be paid in – for Estonia it is 148.8 million euros within five years. The Treaty determines the conditions as to how the ESM can make a call for callable capital to a Member State which for Estonia is 1 153.2 million euros.

205. The Supreme Court en banc held that the request of the Chancellor of Justice is admissible. The Treaty is an international agreement which the Chancellor of Justice is competent to challenge based on § 123(1) of the Constitution and § 6(1)4) of the CRCPA. The Supreme Court en banc was of the opinion that the Treaty is not part of the primary or the secondary law of the European Union. The Chancellor of Justice is not challenging in his request the constitutionality of the entire Treaty, but merely the constitutionality of Article 4(4) of the Treaty. Therefore, the Supreme Court en banc is in this case competent to review said provision only.

206. The Supreme Court en banc found that Article 4(4) of the Treaty interferes with the financial competence of the Riigikogu provided for in § 65 6) of the Constitution in conjunction with § 115(1) of the Constitution and in § 65 10) of the Constitution in conjunction with § 121 4) of the Constitution, and is related to the principle of a democratic state subject to the rule of law. By ratifying the Treaty the Riigikogu exercises the right arising from its financial competence and assumes financial obligations for Estonia. The Riigikogu’s possibility to make political choices is thereby restricted, because the choices already made have decreased the state’s financial resources. It also interferes with the financial sovereignty of the state of Estonia arising from the preamble to and § 1 of the Constitution, because the people’s right of discretion is thereby indirectly restricted. Article 4(4) of the Treaty interferes with the financial competence of the Riigikogu, as well as the state’s financial sovereignty related thereto and the principle of a democratic state subject to the rule of law due to the possibility that at the request of the ESM the callable capital must be paid in the future (up to 1 153.2 million euros).

207. In order to assess the constitutionality of the contested provision, the Supreme Court en banc weighed up the interference with principles and its objectives. The Supreme Court en banc is of the opinion that the purpose of Article 4(4) of the Treaty is to guarantee for the ESM in an emergency the efficiency of the decision-making mechanism to eliminate a threat to the economic and financial sustainability of the euro area. The Supreme Court en banc held that this objective is legitimate for interfering with the financial competence of the Riigikogu arising from § 65 6) of the Constitution in conjunction with § 115(1) of the Constitution and from § 65 10) of the Constitution in conjunction with § 121 4) of the Constitution, with the principle of a democratic state subject to the rule of law arising from § 10 of the Constitution, and with the principle of sovereignty arising from § 1 of the Constitution.

208. The purpose of Article 4(4) of the Treaty is related to the purpose of the Treaty to safeguard the financial stability of the euro area. The financial instability and closely related economic instability of the euro area also endanger the financial and economic stability of the state of Estonia, because Estonia is a part of the euro area. Economic and financial stability is necessary in order for Estonia to be able to fulfil its obligations arising from the Constitution. Consequently, the interference arising from Article 4(4) of the Treaty is justified by substantial constitutional values – the need arising from the preamble to and § 14 of the Constitution to guarantee the protection of fundamental rights and freedoms.

209. The Supreme Court en banc assessed the constitutionality of the interference arising from Article 4(4) of the Treaty by way of review of proportionality, and found that Article 4(4) of the Treaty provides for an appropriate, necessary and reasonable measure for the achievement of the objective. In weighing up reasonableness the Supreme Court en banc deemed it necessary to distinguish the interference occurring on the ratification of the Treaty and the interference which may occur later in implementing the Treaty when, at the request of the ESM, the callable capital must be paid. The Supreme Court en banc held that the interference occurring on ratification is not in itself very serious; however, the interference is based on weighty constitutional values – the need to guarantee the protection of fundamental rights and freedoms. On the basis of the aforesaid, the Supreme Court en banc assumed the position that Article 4(4) of the Treaty does interfere with the financial competence of the Riigikogu and thereby also the principle of the financial sovereignty of the state and of a democratic state subject to the rule of law, but the objectives justifying the interference are sufficiently significant.

210. In keeping with the aforesaid, the Supreme Court en banc found that Article 4(4) of the Treaty is not in conflict with the Constitution, and dismissed the request of the Chancellor of Justice.”

Ten judges submitted five dissenting opinions.

9.      Legal effects of the judgment/decision

The request of the Chancellor of Justice to declare Article 4(4) of the ESM Treaty in conflict with the Constitution was dismissed.

For a discussion of this case, see: Carri Ginter, ‘Constitutionality of the European Stability Mechanism in Estonia: Applying Proportionality to Sovereignty’, 9 European Constitutional Law Review (2013) p. 335-354.

10.  Shortly describe the main outcome of the judgment/decision and its broader political implications.

The ESM Treaty was ratified by the Riigikogu.

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?      

The Parliament approved the payment by § 2 subsection 1 of the Act on Ratification and Implementation of Treaty Establishing European Stability Mechanism. No separate debates took place.

Pursuant to § 3 subsections 1 and 2 of the Act on Ratification and Implementation, the representative of the Republic of Estonia in the Board of Governors and the Board of Directors of the ESM requires a prior resolution of the Riigikogu in order to participate in a vote and to vote on changes in the ESM authorised capital stock on the basis of Article 10(1) of the Treaty, maximum lending volume and financial assistance instruments on the basis of Article 19 of the Treaty. If amendments to the Treaty arise from decisions to change the maximum lending volume or financial assistance instruments, or the ESM authorised capital stock is increased, the Government of the Republic shall submit the amendments to the Treaty to the Riigikogu for ratification.

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 national proceedings regarding draft decision specified in Article 13(2) of Treaty on Act on Ratification and Implementation of Treaty Establishing European Stability Mechanism are regulated by § 4 subsections 1-4:

          The Government of the Republic shall, pursuant to subsection 1521 (2) of the Riigikogu Rules of Procedure and Internal Rules Act, submit to the European Union Affairs Committee of the Riigikogu for an opinion a draft decision of principle on grant of financial assistance specified in Article 13(2) of the Treaty. The representative of the Republic of Estonia is required to adhere to the opinion of the Committee upon voting on a decision of principle on grant of financial assistance.

          Proprietary obligations shall not be assumed with regard to the Republic of Estonia and the representative of the Republic of Estonia shall not be authorised to define the conditions of the financial obligation by the forming of an opinion specified in subsection (1) of this section.

          The European Union Affairs Committee may decide that, in order to participate in a vote and to vote on a decision of principle on grant of financial assistance, the representative of the Republic of Estonia requires a prior resolution of the Riigikogu. In such case the Government of the Republic shall submit the corresponding draft resolution of the Riigikogu.

          The Government of the Republic shall submit a decision of principle on grant of financial assistance to the Committee for an opinion at the earliest opportunity after receipt of the agenda and materials of the meeting of the Board of Governors and the Board of Directors of the ESM where the specified issue is discussed.

The national proceedings regarding the memorandum are regulated by § 5 subsections 1-3 of the Act on Ratification and Implementation:

          In order to participate in a vote and to vote on a draft memorandum, the representative of the Republic of Estonia requires a prior resolution of the Riigikogu.

          The Government of the Republic may submit a draft memorandum, except a draft memorandum specified in Article 14(2), Article 16(2) and Article 17(2) of the Treaty, to the Committee for an opinion instead of the Riigikogu pursuant to subsection 1521 (2) of the Riigikogu Rules of Procedure and Internal Rules Act if the publication of the draft memorandum may threaten the purpose of the provision of stability support by the ESM. The Government of the Republic shall justify the submission of the draft memorandum to the Committee.

          The provisions of the second sentence of subsection 4 (1) and subsections (3) and (4) of this Act on apply to the proceedings regarding the draft memorandum:

o   The representative of the Republic of Estonia is required to adhere to the opinion of the Committee upon voting on a draft memorandum;

o   The European Union Affairs Committee may decide that, in order to participate in a vote and to vote on a draft memorandum, the representative of the Republic of Estonia requires a prior resolution of the Riigikogu. In such case the Government of the Republic shall submit the corresponding draft memorandum of the Riigikogu;

o   The Government of the Republic shall submit a draft memorandum to the Committee for an opinion at the earliest opportunity after receipt of the agenda and materials of the meeting of the Board of Governors and the Board of Directors of the ESM where the specified issue is discussed.

The national proceedings regarding amendments to memorandum are specified in § 6 of the Act on Ratification and Implementation:

          In order to participate in a vote and to vote on amendments to the memorandum, the representative of the Republic of Estonia requires a prior resolution of the Riigikogu.

          The Government of the Republic may submit draft amendments to the memorandum specified in subsection (1) of this section to the Committee for an opinion instead of the Riigikogu pursuant to subsection 1521 (2) of the Riigikogu Rules of Procedure and Internal Rules Act if:1) publication of the draft amendments to the memorandum, except to the memorandum specified in Article 14(2), Article 16(2) and Article 17(2) of the Treaty, may threaten the purpose of the provision of stability support by the ESM, or2) the memorandum is amended to an insignificant extent and the amendments are not related to increasing the amount of stability support.

          The Government of the Republic shall justify the submission of draft amendments to the memorandum specified in subsection (2) of this section to the Committee.

          The provisions of the second sentence of subsection 4 (1) and subsections (3) and (4) of this Act apply to the proceedings regarding draft amendments to the memorandum:

o   The representative of the Republic of Estonia is required to adhere to the opinion of the Committee upon voting on a draft amendment;

o   The European Union Affairs Committee may decide that, in order to participate in a vote and to vote on a draft amendment, the representative of the Republic of Estonia requires a prior resolution of the Riigikogu. In such case the Government of the Republic shall submit the corresponding draft amendment of the Riigikogu;

o   The Government of the Republic shall submit a draft amendment to the Committee for an opinion at the earliest opportunity after receipt of the agenda and materials of the meeting of the Board of Governors and the Board of Directors of the ESM where the specified issue is discussed.

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

No particular difficulties in the application.

During the debates on the Draft memorandum of Cyprus the following issues prevailed:

          whether it is realistic for Cyprus to be able to implement the reform programme;

          whether Cyprus is transparent and trustworthy partner;

          interest rate on the aid package.

The Resolution approving the draft MoU to be entered into between the Commission and Cyprus was adopted by the Riigikogu on 18 April 2013 by 54 votes in favour, 21 against, no abstentions.

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.

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

Not applicable.

[1] White book, supra note 6, p. 14.

[2] Estonian Supreme Court Judgment of 12.07.2012 No. 3-4-1-6-12, para. 4.

[3] Ibid., paras. 1-5.

[4] Ibid., paras. 9-16.

[5] Ibid., paras. 17-22.

Finland

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 Finland 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 Finnish Government informed the Parliament about the Treaty negotiations on 11 April 2011(E 190/2010 vp, memorandum about the negotiations and the contents of new Treaty). The memorandum was considered by the Parliament and for example the Constitutional Law Committee discussed the issue during this process. The Government argued that a new permanent mechanism is of a major importance. However, according to the Government, the Treaty proposal required clarification. During the negotiations for the Government it was important that the Treaty would include private sector involvement and that the mechanism would have preferred creditor status.

The core challenges in the negotiations related to the size of lending capacity, provisions on private sector involvement, the inclusion of Collective Action Clauses (CACs) in operative articles and the provisions on decision-making, which in the Finnish view presumed unanimity. The question of collaterals was not a fundamental problem, since the question relating to preferred creditor status was settled rather early (December 2010). The question relating to the position of the ESM loans was settled by para 13 of the preamble to the ESM Treaty, stating that the “Heads of State or Government have stated that the ESM loans will enjoy preferred creditor status in a similar fashion to those of the IMF, while accepting preferred creditor status of the IMF over the ESM. This status will be effective as of the date of entry into force of this Treaty. In the event of ESM financial assistance in the form of ESM loans following a European financial assistance programme existing at the time of the signature of this Treaty, the ESM will enjoy the same seniority as all other loans and obligations of the beneficiary ESM Member, with the exception of the IMF loans.” While there was clearly a preference for an operative article, this preambular paragraph was deemed to offer satisfactory guidance for the interpretation of the Treaty.

The government interpreted its own program in the way that collaterals would be necessary as regards the ESM in case the latter had no preferred creditor status. Based on the preamble, when ESM financial assistance in the form of ESM loans followed a European financial assistance programme existing at the time of the signature of the ESM Treaty, the ESM enjoys the same seniority as all other loans and obligations of the beneficiary ESM Member. As regards the Cypriot ESM program there was no need to require a collateral, since the ESM enjoyed preferred creditor status.

After the initial memorandum the Government informed the Parliament about the Treaty negotiation in several memoranda, the most important ones being memoranda of 12 May 2011 (E 13/2011 vp) and 20 May 2011 (U 6/2011 vp), discussing the requirements and limits Finland would have for participation in the forthcoming Treaty. These negotiations took place after the general elections, but before the appointment of Prime Minister Katainen’s Government.

The memorandum of 20 May 2011 was handled in the Constitutional Law Committee too. In its statement (PeVL 1/2011 vp), the Committee underlined that the new Treaty would require the approval of the Parliament under Section 94.1 of the Constitution (see also question VIII.2). According to the Committee, the Treaty impinged upon the legislative and budgetary powers of the Parliament and thus the approval by the Parliament was required. The Committee also required that in the Finnish system the preparation of the national positions considering the ESM Treaty would fall under the competence of the Council of State/Government (not the President) as being a matter which is to be juxtaposed with the European Union affairs, yet formally being outside the Union system, thus simultaneously giving the Parliament itself an exceptionally strong position in the preparation of the Treaty (which as to its form constitutes an international agreement) based on Sections 96 and 97 of the Constitution which concern the rights of participation and information of the Parliament.

Renegotiation ESM Treaty

Later, the Prime Minister informed the Parliament (20 July 2011 and 2 August 2011) about the preparations for the Treaty. Subsequently, a new set of memoranda was sent for the Parliament on 25 August 2011 (U 27/2011 vp, memorandum concerning the new Treaty on ESM). When discussing the Treaty under preparation the Constitutional law Committee (PeVL 22/2011 vp) re-assessed the Treaty, establishing that the Finnish liabilities based on the Treaty could increase under the emergency voting procedure by the envisaged qualified majority decision making against the will of Finnish member, which would be against the principle of sovereignty and contrary to the Parliament’s budgetary powers. If the Treaty in its final form would include this kind of possibility, it had to be approved according to the Sections 94.2 and 95.2 of Constitution, contrary to what the Committee had previously established.

At the time, there might not have been the required qualified majority in the Parliament in favour of the ratification of such a Treaty. During the following negotiations the Government underlined the need of unanimous decision making within the Mechanism and further clarifications and limits for the so called emergency decision making in the Mechanism, since they enabled a lighter national procedure in the Finnish Parliament.

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

The Government proposal relating to the ratification of the ESM Treaty (No 34/2012 vp, Euroopan vakausmekanismin (EVM) perustamisesta tehdyn sopimuksen hyväksymisestä ja laiksi sen lainsäädännön alaan kuuluvien määräysten voimaansaattamisesta) was presented to the Parliament on 26 April 2012. It was announced in the Parliament on 27 April 2012 and sent to the Committees of the Parliament on 3 May 2012. After Committee consideration it was returned to the Plenary following the relevant procedures, and was discussed there on 13, 19 and 21 June 2012. The relevant Act was approved on 21 June 2012 (aye 104 – no 71). The President signed the law (No 402/2012) on 29 June 2012 and it entered into force on 4 October 2012 based on a Decree of the Government (No 534/2012).

The Treaty was approved by the Parliament according to Section 94.1 of the Constitution of Finland. (Sec. 94.1, first sentence: “The acceptance of the Parliament is required for such treaties and other international obligations that contain provisions of a legislative nature, are otherwise significant, or otherwise require approval by the Parliament under this Constitution.) The provisions of the Treaty, in so far as they were considered to be of a legislative nature, were brought into force following the general practice through an Act (No 402/2012) and the remainder through a Government Decree (No 534/2012).

This procedure is based on the findings of the Constitutional Law Committee of the Parliament when assessing the relationship of the Treaty with the Constitution. The Constitutional Law Committee issued a statement on the new Treaty (PeVL 13/2012 vp). Like when considering the EFSF Treaty earlier, the Constitutional Law Committee assessed the amount of Finnish capital investment in the ESM and the risks related to it against the so-called Constitution-based obligations of the state. It required the financial liabilities and investments in the various parallel mechanisms to be calculated in toto. In the ESM, the Finnish part of the paid-in capital (EUR 1.4 billion) and callable capital (EUR 11 billion) were found extensive by the Constitutional Law Committee for example, when compared for example with the annual State budget. In order to establish the applicable procedure for approval and bringing the Treaty into force, the Committee considered the total amount of public debt and risks to the investment.

Of major importance for its conclusion was the interpretation that the Parliament has, due to the participation and information rights based on Sections 96 and 97 of the Constitution, possibilities to genuinely control and influence the Finnish member of the ESM Board of Governors, where for example decisions on the capital payments are made unanimously. According to the Constitutional Law Committee, the State’s current liabilities did not even in this case endanger its possibilities to take responsibility for its Constitution-based duties. When evaluating the possible risks to the investments made, operations within the ESM provided greatly improved possibilities for risk management when compared with the previous situation.

Especially the emergency decision procedure (Art. 4 and 5(6) of ESM Treaty) was discussed in the Committee statement – both ex ante and ex post its conclusion -, in particular as regards the scope of decision-making by qualified majority in the ESM Board of Governors. As said above, in the ex ante scrutiny, based on the draft agreement, it seemed that the financial liabilities of Finland could also grow by a qualified majority decision of the Board of Governors over the maximum limit defined in the agreement, even if Finland opposed such a decision. This possibility was considered to affect national sovereignty and the budgetary competence of the Finnish Parliament, and led to demands concerning a need to specify the agreement in this respect. When Finland ultimately approved the agreement, this matter was no longer problematic, as it had been solved through changes to the agreement during negotiations, for example as regards the situations in which the emergency voting procedure could be used and by limiting the relevant liabilities. Also the insertion in Article 4(4) – “Where the emergency procedure referred to in the first subparagraph is used, a transfer from the reserve fund and/or the paid-in capital to an emergency reserve fund is made in order to constitute a dedicated buffer to cover the risks arising from the financial support granted under that emergency procedure. The Board of Governors may decide to cancel the emergency reserve fund and transfer its content back to the reserve fund and/or paid-in capital.” – was relevant for this consideration.

The transfer of powers to the ESM was not considered significant with regard to Finnish sovereignty. Thus the instrument was accepted in the Parliament and brought into force nationally in accordance with the ordinary legislative procedure pertaining to an Act of Parliament.

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

The drafts of the ESM Treaty were repeatedly scrutinized ex ante by the Parliament according to the Sections 96 and 97 of the Constitution. Thus the Constitutional Law Committee had the possibility to discuss the constitutionality of the new Treaty before it was submitted to the Parliament for final approval, and various amendments were successfully proposed by the Government following its findings during the negotiations (see also question VIII.2).

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

See in general about the absence of a constitutional court in Finland and about the ex ante consideration of crisis measures by the Constitutional Law Committee of parliament, question IV.5. For the Constitutional Law Committee’s findings on the ESM Treaty, see questions VIII.1 and VIII.2.

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?

Funds for this purpose were included in the second supplementary budget in 2012, which presumed the participation of the Parliament in its adoption process. Subsequently the Government decided on 4 October 2012 to subscript the shares.[1]

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 Constitutional Law Committee and the Audit Committee of the Parliament have set demands on the participation and information rights of the Parliament when decisions are made in the ESM. Part of the argumentation at the time when the Treaty was approved was based on the possibilities of the Parliament via its participation and information rights based on Sections 96 and 97 of the Constitution, to control and influence the Finnish member of the ESM Board of Governors, when for example decisions on the capital payments are made unanimously. Thus the Government has to keep the Parliament informed about the decisions to be taken under the Mechanism and to consult the Parliament before the decisions are taken. The Audit Committee of the Parliament, one of the Parliament’s specialist committees further insisted on being informed under Section 97 of the Constitution about the annual reports of both the ESM and the ESM audit committee, and about the EFSF, in order to enable a discussion of the risks involved.[2]

The Parliament is involved in the functioning of the mechanisms. As regards decision-making within the ESM, the Parliament has based the requirement concerning its participation in national decision-making on Sections 96 and 97 of the Constitution. The arrangements made in the context of the ESM rely on the need to safeguard the Parliament’s central role in the exercise of budgetary and financial powers. Decisions relating to the granting of loans are as to their nature and their financial implications considered to be so significant that they require the provision of relevant information by the responsible Cabinet minister prior to decision-making within the ESM in order to safeguard the prerogatives of the Parliament. The Constitutional Law Committee has required that these constitutional aspects for participation of national parliaments through the national representative have to be reflected in its decision-making rules, arrangements and practices within the mechanism (PeVL 13/2012).

In case the ESM Treaty is to be amended in order to raise the ESM capital, the matter would – since it involves an amendment of an international agreement – need to be approved by the Parliament on the basis of Section 94 of the Constitution.

Application difficulties   
VIII.7

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

Direct recapitalisation

The discussion concerning the additions to the list of ESM financial tools (Article 14 of the ESM Treaty) with the perspective of enabling direct recapitalisation of financial institutions through the ESM has been somewhat problematic. Additions to the list have presumed unanimous decision in the Governing Board, but the Constitutional Law Committee has in general considered that enabling direct recapitalization operations should be made by amending the ESM Treaty and not based on Article 19 (PeVL 3/2013 vp, PeVP 108/2013 vp, PeVP 18/2014 vp). This is linked to a need to control the overall amount of commitments and the rights of information and participation of the Parliament under Sections 96 and 97 of the Constitution. Even in the case the addition of direct recapitalization were approved, these considerations should be taken fully into account.  Therefore the use of this tool should be limited, and be possible to use only after bail-in and national back-stops. Direct recapitalization of financial institutions through the ESM should come into the picture as the last instance, after all the other ESM instruments have been exhausted.

Transparency

A different matter that is traditionally of interest for the Finnish Government and Parliament is the transparency regime, and the Finnish footprint can be found in Article 17(1) of the By-Laws, which states the following:

Article 17 Disclosure of Documents

1. This Article 17 sets forth the conditions under which the ESM may communicate documents drawn up or held by the ESM to other persons or entities or otherwise disclose such documents externally.

This Article 17 does not concern:

(a) the flow of information within the ESM, including to the Board of Governors, the Board of Directors, the Board of Auditors or the external auditors;

(b) the flow of information within and between the national governments and parliaments of ESM Members, it being understood that this Article 17 is without prejudice to applicable legal provisions governing such information exchanges.

The key issue from the Finnish point of view has been to ensure that the ESM arrangements do not prevent the Government or Finnish members in the ESM Governing Bodies from sharing information with the Parliament, or from applying the national access to documents regime, which is more generous than the European one.

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.

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

Not applicable.

[1] The Government took the decision in its plenary session on 4 October 2012. For further details, see http://valtioneuvosto.fi/ajankohtaista/tiedotteet/tiedote/fi.jsp?oid=366457.

[2] Report of the Audit Committee 2/2013 vp.

France

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 France 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.

France and Germany appear to have been the initiators of the acceleration of the process leading to an earlier adoption of the ESM, out of concern for a worsening of the rating of France’s debt[1].

The French government declared that a consensus existed among European leaders over the replacement of the EFSF by the new mechanism. The government said it pushed for and obtained, in particular, three elements during the negotiations. First, an association of the national and European parliaments in the mechanism, through their organisation in a “conference” of parliaments[2]. Second and third, the introduction of two complementary parts of the ESM Treaty: on the strengthening of economic governance in the Eurozone, and on coordination of economic policies aiming at growth[3].

One main disagreement between the heads of states and governments appears to have born on the introduction or not, in the ESM Treaty, of a disposition requiring that the Fiscal Compact be signed by any State asking to benefit from the Mechanism. France was in favour of keeping a margin of manoeuvre on the matter and it obtained, with the support of other Member-States, that this requirement be mentioned only as a political one in the preamble of the ESM Treaty[4].

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

The ratification of the ESM Treaty was submitted as an Act, through an “accelerated procedure”, by the President of the Republic Nicolas Sarkozy to the vote of both Houses of Parliament. The same Act authorised the approval of the amendment of article 136 TFEU.[5] The government submitted the proposal of Act to Parliament for ratification, as required under article 53 of the Constitution[6].

Under article 53 of the Constitution, “Peace Treaties, Trade agreements, treaties or agreements relating to an international organization, those committing the finances of the State, those modifying provisions which are the preserve of statute law, those relating to the status of persons, and those involving the ceding, exchanging or acquiring of territory, may be ratified or approved only by an Act of Parliament”..

An “accelerated procedure” (see annex) was used, which shortens the procedure of adoption of the Act, in particular by limiting the number of readings of the Act to one in each Houses[7]. Adopted by both Houses after one reading, the Act authorising the ratification the ESM Treaty was published in the Official Journal on March 8, 2012 (the same day as the approval of the article 136 TFEU amendment)[8].

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

See also question V.3.

The debates which arose during the ratification process of the ESM Treaty were tightly intertwined with more general arguments over the French and European response to the crisis, in particular the Fiscal Compact.

The context of ratification facilitated this connection. The participants to the debates underlined that the ESM Treaty contained a political commitment to make the benefit of the Stability Mechanism dependent on the ratification of the Fiscal Compact, debates over the ESM Treaty also involved considerations over the Fiscal Compact. Thus, justifications given for abstention votes (mainly PS and associates) and votes against (mainly far left GDR[9] and CCRC[10], and ecologists) the ratification of the ESM Treaty drew on more varied and comprehensive issues.

These issues included: the opportunity to renegotiate the Fiscal Compact; the focus on austerity of the current instruments in comparison with concerns over growth; the brutality of the conditionality imposed on bail-out countries, in a process leading to the subordination of sovereign States to other States or bureaucrats; sovereignty and democratic issues, in particular the role of the national and European Parliament(s); wishes for more ambitious EU Treaty reforms; the Franco-German relationship, and different assessments of the German role in the management of the Eurozone crisis.

These more comprehensive issues constituted the background to the main obstacles to the Act in both Houses of Parliament. The PS and its associates abstained from voting on the Act, in both Houses – including the Senate where a PS led coalition had won a small majority in September 2011 (see question I.1 on the political context for more information on majority changes). The far left and ecologists voted against the Act. A prior “rejection proposal” was introduced before the National Assembly, as well as an “objection of inadmissibility” in the Senate. Both had been lodged by the far left, and both were rejected. In the end, the draft law was adopted after the first reading by both Houses[11], with the support of centre and right-wing votes, in virtue of an “accelerated procedure” that had become common use under President Sarkozy even before the crisis[12]. The parliamentary debates show that it was important to the French government to be the first to ratify these instruments, so as to set an “example” and give momentum to a process of ratifications that could face difficulties across Europe[13].

While the ratification procedure of the ESM Treaty implied wide-ranging debates over the Euro-zone crisis as a whole, the focus will here be on the arguments dealing directly with the ESM itself (for the other parts of the see also questions V.3 and IX.3).

The main opponents to the ESM were MPs from the far left, who voted against the Law proposal. They argued that the ESM Treaty actually increased the powers of the EU, at the expenses of national sovereignty. To the argument that the intergovernmental nature of the ESM Treaty empowered individual Member States, it was answered that the involvement of the European Commission, of the ECB and of the European Court of Justice actually enhanced EU powers and pertained to a disguised federalism[14].

The absence of accountability of the ESM before the European Parliament and national parliaments was criticised by the far left. Article 35 of the ESM Treaty was also targeted, underlying the immunity of the ESM officials against prosecution, which was perceived as insulating them from the peoples of Europe and undermining the legitimacy of the instrument[15].

People’s sovereignty was also said to be encroached upon by the involvement, in the case of France, of 16 billion euros and potentially 142 additional billion euros in the Mechanism. Indeed, the “offshoring” of the control of such amounts of public money appeared as a renunciation of budgetary control by the Parliament[16].

The Socialist Party also criticised the ESM, but only abstained from voting on the ratification Act[17]. Given that, at that time, the left had a potential majority at the Senate, it seems that the choice of a simple abstention allowed the Act to be finally adopted by the Senate on the basis of support by the right-wing MPs and their allies.

The PS criticised more generally the architecture of the Euro-crisis measures, arguing that they were not balanced, too much focused on fiscal discipline and did not take enough into account growth and steering measures for the economy. The political link between the ESM and the Fiscal Compact was especially criticised as enshrining the mechanism of stabilisation in this discipline-only perspective. The toughness of the conditionality imposed on Greece and its social consequences were presented as an example of the wrong outcomes entailed by such perspective, and as harming European cohesion[18].

The link between the ESM and the Fiscal Compact was also criticised as it was considered less certain that every relevant Member State would find the political resources to ratify the Fiscal Compact and introduce changes in its Constitutional law[19].

Moreover, the intergovernmental nature of the ESM was criticised by the PS as it escaped a framework where the European Parliament and national parliaments could have a substantial role[20].

Although the principle of a permanent stability mechanism was not put into question, the PS also considered that the ESM should be able to access the liquidities of the ECB in order to be fully efficient[21]. The government answered that the ECB was already playing an important role of stabilisation, although it was not yet directly linked with the ESM – but that such a development would however be conceivable in the future[22]. The PS also stressed  that France’s participation to the ESM would still have an impact on public finances, even though it would not be accounted as a public deficit for the purposes of budgetary balance[23].

Finally, the PS raised concerns over the compatibility with the Constitution of what could be considered as a State guarantee granted outside a Budget Act (see also question VIII.4)

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

There is no decision by the Constitutional Council on the ESM Treaty. However, the French Government has sought and received advice from the Council of State (Conseil d’Etat), highest administrative court in the French legal system, on the legality of the ESM Treaty[24].

The point of possible constitutional difficulty evaluated by the Council of State, and which was raised[25] by the main party of opposition at the time (PS), bore on the non-inscription, in a Budget Act, of [the “paid in capital” and ] “on call capital”[26] allocated to the ESM. Yet, as such allocation could in certain cases be assimilated to a form of guarantee of the State, it could appear to violate the Organic Law on Budget Acts (the LOLF; see also question II.1), which provided that guarantees from the State must be authorized by the vote of a Budget Act.

In other words, the issue at stake seems to have been that the amending Budget Act for 2012[27] (that would become Loi n° 2012-354 du 14 mars 2012), examined in Parliament around the same time in February 2012, only provided for authorization by Parliament of the “paid-in capital” (up to 16 billion euros for France, with a first installment of 6 billion euros)[28], and not for France’s commitment on the “on call” capital (of 142 billion euros)[29].

The answer from the Council of State, drawing on precedent, apparently meant that, as long as Parliament was informed on the “on-call capital” commitment, its formal acceptance in a Budget Act was not necessary[30]. This analysis was then endorsed by the government.

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?         

See also question VII.4.

Parliament voted the first instalment of paid-in capital in an amending Budget Act (Loi n° 2012-354 of 14 March 2012). Debates were similar to the more general ones that took place at the occasion of the ratification of the ESM Treaty: the Socialist Party welcomed the principle of the Mechanism but considered it should have come earlier and with lending capacity[31]. The far left called for a referendum on the main crisis instruments and condemned firmly the course taken by the crisis management. It criticised the ESM in the broader landscape of measures (especially the Fiscal Compact) that, they argued, abusively limited the social function of the States, placed France under tutelage, and durably imposed austerity on Europe[32].

However, if the amending Budget Act was opposed by both the PS and the far left, it was mainly because of its other provisions. The Act was eventually adopted despite the opposition of the Senate (now with a left-wing majority), because of the prevalence of the National Assembly (still dominated by the right-wing coalition) in cases of disagreement between the Houses of Parliament[33].

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 ESM Treaty provided for national parliaments (and the European parliament) to be informed by annual reports on the activities and accounts of the Mechanism. According to the government, it is France that obtained that both the European parliament and national parliaments would be associated to the ESM, by setting up a parliamentary conference[34] – although they would not have decisional powers[35]. Instalments for the ESM are voted by Parliament in Budget Acts, as was the case with the amending Budget Act of 14 March 2012 (Loi n° 2012-354)[36]. However, it seems that the commitment on “on call capital” made by the government for the ESM, did not require a ratification by Parliament – only that it be informed (see question VIII.4).

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

It seems first of all that rather than difficulties the application of the ESM has encountered enthusiasm in France. Indeed, its ever growing importance was underlined and positively assessed by the Finances Committee of the Senate in June 2013[37], while its possibility to recapitalize banks directly was also welcomed[38].

In fact, the French contribution to the ESM was used as an argument for good administration since during the debate on the Accounting act (loi de règlement) for 2013 the fact that France had reduced its public expenditure in spite of its contribution to the ESM was assessed positively.

The positive reaction provoked by the ESM can seem somewhat surprising given the fact that the French parliament is in no strong position in the application of the ESM Treaty: it does receive a letter from the Minister for Finances on the financial situation of the ESM every three months[39] but its only intervention takes place when the yearly Financial Act is approved. At that point, the Parliament is led to vote on the financial participation of the French State to the ESM[40]. As a consequence, debates regarding the use of the ESM only take place during hearings organized by the Finances Committee at their request so that the political attention is not much attracted on this issue.

When the ESM was used to rescue the Cypriot banks, though, several parliamentary questions were submitted to the Government. A written question was posed by deputy Jacques Bompard (not registered to any particular group) as to whether European and French taxpayers’ money had not been used to save money which lawful origins could be doubted[41]. The foreign minister answered repeating its engagement to fight for transparency and against money laundering and stating that an external audit on this question had been requested for Cyprus. GDR deputy Jean-Jacques Candelier also strongly criticized the blackmailing dynamic vis a vis the Cypriot people[42] and RDSE senator Jean-Pierre Chevènement questioned the way in which the restructuration of Cyprus was achieved[43].

There has not been any particular legal difficulty in the application of the ESM Treaty: the Treaty was regularly ratified after the approval of an act authorizing such ratification of 8 March 2012 and credits were regularly approved in Finance Acts.

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?

It doesn’t seem so, except for the changes pertaining to the ratification of the Fiscal Compact as part of the same architecture as the ESM Treaty (see section IX on the Fiscal Compact).

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

France, together with other European and non European States, continued to raise its contribution to the IMF while setting up the ESM[44].

[1] http://www.senat.fr/rap/l11-395/l11-3953.html#toc178

[2] http://www.assemblee-nationale.fr/13/cri/2011-2012/20120122.asp.

[3] http://www.assemblee-nationale.fr/13/cri/2011-2012/20120122.asp Minister of the Economy François Baroin (UMP) : « Avec l’implication des parlements nationaux, la France a œuvré pour l’ajout de deux volets complémentaires au traité. Ils sont consacrés, d’une part au renforcement de la gouvernance économique au sein de la zone euro, d’autre part à la coordination des politiques économiques vers la croissance. »

[4] http://www.senat.fr/rap/l11-395/l11-3953.html#toc178.

[5] http://www.senat.fr/dossier-legislatif/pjl11-393.html

[6]http://www.assemblee-nationale.fr/13/projets/pl4337.asp ; http://www.senat.fr/rap/l11-395/l11-3954.html#toc182

[7] http://www.assemblee-nationale.fr/connaissance/fiches_synthese/septembre2012/fiche_32.asp

[8] http://www.legifrance.gouv.fr/jopdf/common/jo_pdf.jsp?numJO=0&dateJO=20120308&numTexte=8&pageDebut=04314&pageFin=04314

[9] http://www.assemblee-nationale.fr/14/tribun/xml/effectifs_groupes.asp

[10] http://www.senat.fr/grp/index.html

[11]For the details of the votes: http://www.assemblee-nationale.fr/13/scrutins/jo0860.asp; http://www.senat.fr/scrutin-public/2011/scr2011-108.html; http://www.senat.fr/scrutin-public/2011/scr2011-109.html

[12] http://www.lemonde.fr/politique/article/2009/03/04/assemblee-le-gouvernement-abuse-t-il-de-la-procedure-d-urgence_1163251_823448.html

[13] http://www.assemblee-nationale.fr/13/rapports/r4348.asp; http://www.assemblee-nationale.fr/13/cri/2011-2012/20120133.asp

[14] Public Session of the Assemblée Nationale, 21 February 2012 –  http://www.assemblee-nationale.fr/13/cri/2011-2012/20120133.asp

[15] Idem.

[16] Idem.

[17] Idem.

[18] Idem.

[19] http://www.senat.fr/rap/l11-395/l11-39510.html#toc374

[20] Public Session of the Assemblée Nationale, 21 February 2012 –  http://www.assemblee-nationale.fr/13/cri/2011-2012/20120133.asp.

[21] Idem.Intervention of Marietta Karamanli (PS). See also http://www.assemblee-nationale.fr/13/cri/2011-2012/20120130.asp , where MP Elizabeth Guigou (PS) suggested that the ESM sould be guaranteed by the ECB. 

[22] Idem, answer by Minister of European Affairs Jean Leonetti.

[23] Comptes-rendus de la Commission des Finances du Sénat, 21 Ferbuary 2012:http://www.senat.fr/compte-rendu-commissions/20120220/fin.html#toc2

[24]http://www.conseil-etat.fr/fr/dossiers-thematiques/finances-publiques-red.html. However, I was not able to find the text of this advice online.

[25] http://www.senat.fr/compte-rendu-commissions/20120220/fin.html#toc2

[26] Senator Nicole Bricq (PS, opposition), General rapporteur to the Finances Commission of the Senate, on 21 February 2012: “Je souhaite que vous nous éclairiez sur une difficulté constitutionnelle portant sur le MES : il est question d’un capital libéré et d’un capital appelable, qui s’apparente dans certains cas à une garantie d’État. La Lolf dispose que seule une loi de finances peut autoriser l’octroi d’une garantie dans le cadre d’engagements internationaux. Que vous ne l’ayez pas inscrite dans le projet de loi de finances rectificative pourrait donc poser un problème de constitutionnalité.” – http://www.senat.fr/compte-rendu-commissions/20120220/fin.html#toc2 ; see also : http://www.senat.fr/rap/l11-395/l11-3958.html#toc335

[27] http://www.senat.fr/dossier-legislatif/pjl11-389.html

[28] The proposal of amending Budget Act « permet, en application du traité instituant le Mécanisme européen de stabilité (MES) du 2 février 2012, dont la ratification est soumise au Parlement dans un projet de loi distinct déposé ce 8 février 2012, l’engagement de la dotation en capital apportée par la France, soit 16,3 Md€ (total du capital appelé), dont 6,5 Md€ décaissés en 2012. Ce dispositif est complété d’un article assurant le relèvement du plafond des prêts accordés par la France au FMI. » http://www.assemblee-nationale.fr/13/projets/pl4332.asp

[29] http://www.assemblee-nationale.fr/13/projets/pl4332.asp#P1210_94061

[30] M. Ramon Fernandez (Director General of the General Direction of the Treasury), at the Finances Commission of the Senate, on 21 February 2012 : « Lorsqu’il a examiné ce texte, le Conseil d’État a estimé que si le capital appelable devait être porté à la connaissance du Parlement, son approbation formelle n’était pas exigée. Il y a des précédents, comme le capital appelable des banques régionales de développement. Nous nous sommes fondés sur l’analyse juridique du Conseil d’État. » – http://www.senat.fr/compte-rendu-commissions/20120220/fin.html#toc2

[31] http://www.assemblee-nationale.fr/13/cri/2011-2012/20120130.asp

[32] http://www.assemblee-nationale.fr/13/cri/2011-2012/20120126.asp

[33] http://www.senat.fr/dossier-legislatif/pjl11-389.html

[34] http://www.assemblee-nationale.fr/13/rapports/r4348.asp See intervention of Jean Leonetti, Minister of European Affairs :  « Enfin, la France a insisté – le président de l’Assemblée nationale au premier chef – pour que les parlements nationaux participent au contrôle du dispositif. Nous avons obtenu à cet effet la création d’une conférence parlementaire associant des membres des commissions compétentes du Parlement européen et des parlements nationaux ».

[35] Idem. Jean Leonetti : « On n’envisage pas que l’association des membres des commissions compétentes du Parlement européen et des parlements nationaux soit délibérante ni qu’elle vote une décision sanctionnant ou validant des décisions prises par les chefs d’État et de gouvernement. Pour autant, cette association est une étape, qui doit nous conduire à nous demander si, au-delà des missions de délibération et de vote, le parlement n’est pas surtout une instance de contrôle – l’indépendance d’esprit des parlementaires étant précieuse à cet égard ? »

[36] http://www.senat.fr/dossier-legislatif/pjl11-389.html

[37] http://www.senat.fr/commission/fin/pjlf2014/np/np32/np324.html

A Senator even saw there in June 2013 “les prémisses d’une direction générale du Trésor de la zone euro » (the premises of a DG Treasury for the eurozone), although some improvements are still needed.

[38] Debate on a resolution proposal addressing the progress of the banking union and the economic integration. Plenary session. National Assembly, 30 January 2014.

[39] Compte rendu nº76 de la Commission des Finances, de l’économie générale et du contrôle budgétaire. Thursday, March 28 2013, p.2. Unfortunately, these letters are not made public.

[40] In 2012 and 2013, the French Republic opted to pay the amount corresponding to two years into the System and in 2014 it paid the last 5th of its contribution so that already in 2014 the French State had paid what it had to pay by 2017.

[41] Question published on 21 May 2013.

[42] Written question published on 2 April 2013.

[43] Question to the government published on 29 March 2013.

[44] http://www.assemblee-nationale.fr/13/projets/pl4332.asp#P1323_107854

Germany

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 Germany 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.

See question V.1 and IX.1.

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

As outlined in question V.3, the Bundestag adopted the ESM Treaty through three federal laws on 29 June 2012. The first law, the ESM-Ratification Law only required a simple majority but the Federal Government aimed for a 2/3 majority in order to prevent possible constitutional problems. Finally, the ESM-Ratification Law was adopted on the basis of Article 59 (2), sentence 1 GG. Pursuant to Article 105 (3) GG the consent of the Bundesrat was also necessary as revenues were concerned that are usually entitled for the Länder according to Article 106 (2), (3) and (6) GG.[1]

 

In order to authorize the payment of capital to the ESM, the ‘Act on Financial Participation in the European Stability Mechanism’[2] (ESMFinG) was adopted on 29 June 2012 as well. As a federal law it only required a simple majority. This law was based on Article 115 (1) GG according to which “[t]he borrowing of funds and the assumption of surety obligations, guarantees, or other commitments that may lead to expenditures in future fiscal years shall require authorisation by a federal law.“ (see also question VIII.5)

 

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

See question V.3 above.

 

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

See question V.4 above.

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?

In order to authorize the payment of capital to the ESM, the ‘Act on Financial Participation in the European Stability Mechanism’[3] (ESMFinG) was adopted on 29 June 2012. The ESMFinG, the law that authorizes the German share of paid-in and callable capital to the ESM Fund, underwent most modifications. During the Budget Committee negotiations, four paragraphs on the involvement of the Bundestag were added, which were in total longer than the bill itself. The amendments were either introduced together by the Christian Democrats (CDU/CSU) and the Liberals (FDP) from the government as well as from the Social Democrats (SPD) and the Greens (Bündnis 90/Die Grünen) or separately by the parliamentary groups.[4] These amendments were consented to by all parliamentary groups (except the parliamentary group of the Left (Die Linke and some members of the Social Democrats).[5]

On 14 June 2012 the Bundestag adopted the ‘Supplementary Budget Law for 2012’ (hereinafter NHG 2012), through which the acquisition of new debt (necessary for the German shares of the ESM Fund) was allowed (see also question V.3).

 

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?

See also question V.3.

 

§ 4 of the ESMFinG guarantees that ESM-decisions affecting the budgetary responsibility of the Bundestag always require the approval by the Bundestag in its plenary composition. Three major fields are identified in which ESM matters touch upon the budgetary responsibility of the Bundestag: first, the issuance of rescue measures pursuant to Article 13(2) TESM; second, matters and agreement about the EFSF; third, changes of the guarantee volume of the ESM-Treaty.[6] In the report of the Budget Committee, this amendment was justified by reference to the Bundesverfassungsgericht’s judgment from 28 February 2012, in which the Court highlighted the specific position of the plenum (see also question IV.5).[7]

 

§5 of the ESMFinG determines that all other ESM-measures that concern the Bundestag and in which the consent of the plenary is not intended according to § 4 of the ESMFinG have to be adopted in consent with the Budget Committee of the Bundestag. This relates to issues such as changes in how capital can be retrieved from the ESM or the acceptance of changes in the guidelines for the implementation conditions of financial rescue measures.[8]

 

One of the most important (and in the media controversially discussed)[9] amendments of the ESMFinG concerned the establishment of the so-called special-body (‘Sondergremium’). Different from the Committee of Nine (“Neuner-Gremium”) in the StabMechÄndG (see Question, II.4) the ESMFinG dedicated a separate paragraph to this special body and explained its role in detail. Paragraph 6 specified that in cases of special confidentiality, such as the purchase of government securities on the secondary market pursuant to Article 18 TESM, the ‘Sondergremium’ is supposed to take a decision instead of the Bundestag in its plenary composition.[10] In the report of the Budget Committee the establishment of the ‘Sondergremium’ was explained by reference to the judgment of the Bundesverfassungsgericht from 28 February 2012. In this judgment, the Court had declared the Committee of Nine to be unconstitutional, except for instances in which the Bundestag has to consent to confidential matters such as the ESM-purchase of government securities.[11] (see also question VI.5) 

 

§ 7 of the ESMFinG strengthened the information requirements of the Federal Government towards the Bundesrat and the Bundestag which has been of specific interest of the Greens (Bündnis 90/Die Grünen) and of the Social Democrats (SPD).[12] The amendment explicitly obliges the Federal Government to inform the Bundestag about ESM-matters at “the earliest possible point in time.”[13]

 

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

See question V.3.

 

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?

See question V.3.

 

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

No relevant information.

 

[1] See Deutscher Bundestag. Gesetzesentwurf der Fraktionen der CDU/CSU und FDP. Entwurf eines Gesetzes zu dem Vertrag vom 2.Februar 2012 zur Einrichtung des Europäischen Stabilitätsmechanismus. Drucksache 17/9045. 20.03.2012, p.4.

[2] The German title of the law is: ‘Gesetzes zur finanziellen Beteiligung am Europäischen Stabilitätsmechanismus (ESM-Finanzierungsgesetz – ESMFinG)’

[3] The German title of the law is: ‘Gesetzes zur finanziellen Beteiligung am Europäischen Stabilitätsmechanismus (ESM-Finanzierungsgesetz – ESMFinG)’

[4] 17(8)4442 was introduced by BÜNDNIS 90/DIE GRÜNEN, 17(8)4410 by CDU/CSU and FDP and 17(8)4549 by the coalition parties and the SPD

[5] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss). Drucksache 17/10172. 27.06.2012, p. 9.

[6] See Law of May, 13 1012, Bundesgesetzblatt Teil I, 2012, Nr. 43, 18.09.2012 S. 1918.

[7] Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss). Drucksache 17/10172. 27.06.2012, p. 11.

[8] See Law of May, 13 1012, Bundesgesetzblatt Teil I, 2012, Nr. 43, 18.09.2012 S. 1918.

[9] See e.g. Heribert Prantl, ‘Neun Hansel sind nicht das Parlament’, in: Süddeutsche.de, 28.10.2011. http://www.sueddeutsche.de/politik/euro-rettungsschirm-neun-hansel-sind-nicht-das-parlament-1.1175819.

[10] See Law of May, 13 1012, Bundesgesetzblatt Teil I, 2012, Nr. 43, 18.09.2012 S. 1918.

[11] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss). Drucksache 17/10172. 27.06.2012, p. 13.

[12] See Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss). Drucksache 17/10172. 27.06.2012, p. 6-8.

[13] Deutscher Bundestag. Bericht des Haushaltsausschusses (8. Ausschuss). Drucksache 17/10172. 27.06.2012, p. 13.

Greece

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 Greece 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 major political and legal difficulties were encountered by Greece in the negotiation of the ESM Treaty. PA.SO.K. (the Government party during most of the time of the negotiations, namely until the 11th of November 2011) sees the creation of a permanent support mechanism as a success against the hesitations of European partners, especially Germany, as a proof of the tough negotiations carried out by Greece at the European level, and as a personal success of the Prime Minister, Giorgos Papandreou, who was the first to propose such a mechanism.[1] More precisely, PA.SO.K. presents the ESM as a political victory, and as a step towards the completion of the deficient EMU and European integration. ESM is perceived as a mechanism of protection of Eurozone countries from asymmetric risks, as the admission of the European dimension of the financial crisis, and as a reorientation of Europe towards a more political union. It shows recognition of the sacrifices of the Greek people, and the decisiveness of the Eurozone partners to support Greece after 2012.[2] In the negotiations, the official position of the Government was thus positive about the creation of the ESM, a discussion which has been connected with the creation of Eurobonds, with the buying of national bonds by the ECB, and with the taxation of financial transactions. The Government, however, has been negative about the imposition of political sanctions to members with a high debt, a German proposal that was in the end not adopted.[3] However, the deputies of PA.SO.K. have emphasized their hope for more courageous decisions by Europe and criticized the political indecisiveness and hesitation of European leaders.[4] Moreover, the negotiations of the ESM Treaty have provoked the criticism of certain members of the Government party, who perceived the ESM as a default mechanism for the protection of creditors.[5]

N.D., which participated in the Government coalition during the final negotiations of the treaty and during its ratification, namely since the 11th of November 2011, also sees the ESM as a progress. However, it criticizes the participation of the IMF and the fact that the ESM has been created too late.[6] In addition, the deputies of N.D. criticize the strict conditionality under which financial support is given by the ESM and emphasize the need for growth.[7]

The most virulent criticism against the ESM came from the parties K.K.E. and SY.RIZ.A. Indeed, for these left wing parties the ESM is seen as a continuation of the EFSF, the Memorandum, and the austerity measures. More precisely, Alexis Tsipras has strongly criticized the implication of the IMF in the Eurozone, institutionalized through the ESM Treaty. He accused the Government of not effectively negotiating and of not listening to the propositions of the Left.[8] He also underlined that the ESM does not bring about any substantial changes to the deficient structure of the Eurozone, but consists only in an admission that Greece will not be able to borrow from the markets in 2013. According to SY.RIZ.A., the decision to create the ESM has as a major goal to protect creditors and is positive only for them and not for the Greek people.

K.K.E. follows a more radical line of reasoning. According to its members, the participation of Greece in imperialistic organizations such as the EU serves only the capital and business groups, and not the lower classes. The ESM is a proof of the unpopular character of the EU and the Eurozone, as it is an imperialistic mechanism of bankruptcy, which cannot counter the real causes of the crisis of capitalism, and which only protects creditors. The activation of the ESM is submitted to strict conditionality which undermines social and labor rights. Moreover, this conditionality entails considerable limitations to national sovereignty.[9]

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

Things have been complicated as far as the ratification procedure is concerned, the debates for which took place during the campaign for the elections of the 6th May 2012. The ratification of the ESM treaty was part of a more general draft bill, which also contained the amendment of article 136 TFEU and the ratification of the Fiscal Compact (see questions V.3 and IX.3). The bill ratifying the ESM treaty was drafted on March 15th, 2012 and was debated and voted in Parliament on March 28th, 2012.[10] It was voted in one day, with a majority of 194 deputies out of the 253 present voting in favor (total of deputies is 300). The deputies of PA.SO.K. and N.D., the two parties of the government coalition at the time, voted in favor. The members of SY.RIZ.A., DIM.AR., LA.O.S., and DI.SY. voted against. It is interesting to note that LA.O.S. had participated in the government at the time of the decision of 9 December 2011 for the (the political decision leading to the 136 TFEU amendment and the Fiscal Compact).[11]

The statute was voted according to the regular parliamentary procedure of articles 70 f. of the Constitution. The constitutional basis invoked by the Government for the following of this procedure was article 28 paragraph 1 of the Constitution, which states that “The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.[12] An interpretive statement added with the constitutional reform of 2001 declares that “Article 28 is the basis for the participation of the Country in the procedures of European integration.” Although the ESM has been characterized by the government as “an inter-state mechanism that does not expand the competences of the EU”,[13] its concrete legal status has not been discussed and the terms “Eurozone stability mechanism”, “European Stability Mechanism” and “stability mechanism of the European Union” are used as synonymous in the parliamentary debates. During the negotiations of the ESM treaty in the past, PA.SO.K. defended that it possessed the status of EU primary law.[14] The article invoked by the Government as a basis for the ratification, however, does not specify the majority required for the vote of the statute ratifying the treaty.[15]

During the parliamentary debates on the 28th of March 2012, the deputies of the opposition accused the PA.SO.K./ND Government of hiding these treaties from the Greek people, through the concise parliamentary procedure mobilized for their ratification. In general, especially the deputies of SY.RIZ.A. and LA.O.S., repeatedly criticized the functioning of the Parliament and the negligence to the parliamentary procedure and monitoring by the Government. In response, the deputies of PA.SO.K. claimed that they were “not acting in absentia of the Greek people because, by voting these treaties, [they were] supporting the basic choice of the Greek people, which is that the country remains in the Eurozone.”[16]

More precisely, deputies of LA.O.S. objected that the statute in question, because of its crucial importance for Greece and for Europe in general, and because of the fact that it attributes constitutional competences concerning fiscal and budgetary policy to organs of international organizations, should be voted according to the procedure defined in paragraph 2 of article 28 of the Constitution. According to this paragraph, “Authorities provided by the Constitution may by treaty or agreement be vested in agencies of international organizations, when this serves an important national interest and promotes cooperation with other States. A majority of three-fifths of the total number of Members of Parliament shall be necessary to vote the law sanctioning the treaty or agreement.[17] (180/300). The members of LA.O.S. argued that it was the Fiscal Compact that imposed a qualified majority for ratification in order to enter into force. They argued that the treaties under ratification were changing the structure and the decision-making procedure inside the Eurozone, and thus they constituted a concession of constitutional competences to the Eurozone organs.[18] Thus, in order to preserve the validity of the voting procedure and to prove that the statute had been adopted with the qualified majority required, they demanded the procedure of nominal vote, which was followed at the end.[19]

The members of SY.RIZ.A. rejected the competence of Parliament to amend the treaties of the European Union. Reiterating objections already raised during the negotiation of the amendment of article 136 TFEU for the creation of a stability mechanism (see question V.1),[20] they argued that the treaty amendment, as well as the ESM and Fiscal Compact entailed an amendment of the Constitution. Thus, a constitutional reform or a referendum was required, following the example of other European countries, like Ireland. In order to support the argument, the deputies invoked article 3 paragraph 2 of the Fiscal Compact. Thus, they invited the government to proceed to a referendum for the ratification of these provisions, or, at least, to wait for the elections, which were scheduled for the 6th of May. In any case, they argued that the government did not want to follow the special procedure of article 28 paragraph 2 of the Constitution, even though it possessed the qualified majority needed, because it did not want to create a precedent for future voting procedures.[21] Mobilizing these arguments, the deputies of SY.RIZ.A. raised an objection of unconstitutionality before the Parliament, which was rejected by a raising vote, according to article 100 paragraph 2 of the Standing Orders of Parliament.[22]

Finally, the deputies of DIM.AR. emphasized the fact that the majority required was the absolute majority of the total number of deputies (151/300), according to paragraph 3 of article 28 of the Constitution. According to this paragraph, “Greece shall freely proceed by law passed by an absolute majority of the total number of Members of Parliament to limit the exercise of national sovereignty, insofar as this is dictated by an important national interest, does not infringe upon the rights of man and the foundations of democratic government and is effected on the basis of the principles of equality and under the condition of reciprocity.[23] The deputies of DIM.AR. alleged that paragraph 1 of article 28 of the Constitution, invoked by the government, was only concerning the place of international treaties in relation to domestic law and did not require a specific procedure for the ratification of European treaties, which have been always voted according to the third paragraph of this article. Indeed, according to them, the European Union is not an international organization but a union which they would like to be federal.[24]

The deputies of the governing parties (PA.SO.K. and N.D.) argued, however, that the Treaty amendment, the Fiscal Compact and the ESM do not expand the competences of the European Union. To support their argument they invoked the simplified procedure of Treaty revision followed.[25] In addition, the deputies of N.D. argued that European Union is not an international organization, according to the terms of article 28 paragraph 2 of the Greek Constitution, but a sui generis state organization.[26]

The Greek constitutional doctrine has been divided on the subject.[27] Most scholars, however, before the Eurozone crisis, considered that for the ratification of European Treaties and their amendments in general (and not with the simplified procedure followed), the Constitution requires a combined application of the procedural conditions of paragraph 2 and the substantial conditions of paragraph 3. Nevertheless, they emphasized that “the solution will not become definitive, until the broad until now parliamentary majority for the support of the European course of the country breaks.”[28]

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

Despite the virulent criticisms that the ESM Treaty provoked from the part of the opposition, there were no major difficulties during its ratification, because of the broad parliamentary majority that supported the Government at the time. The legal statute ratifying the Treaty, as well as the amendment of article 136 TFEU and the Fiscal Compact, was debated and voted in one day, on the 28th of March 2012, with a majority of 194 deputies out of the 253 present voting in favor (the total of deputies is 300). The deputies of PA.SO.K. and N.D., the two parties of the government coalition at the time, voted in favor. The members of K.K.E., SY.RIZ.A., DIM.AR., LA.O.S., and DI.SY. voted against. It is interesting to note that LA.O.S. had participated in the Government at the time of the decision of 9 December 2011 for the (the political decision leading to the 136 TFEU amendment and the Fiscal Compact).[29]

According to the deputies of PA.SO.K. and N.D., the institutionalization of the ESM is an extremely positive development for Greece, even though the conditionality of the application of the ESM Treaty is very strict. In the parliamentary debate of 28 March 2013, the deputies supporting the Government defended that there is a need for economic stability in Europe. Moreover, claiming that Greece will be autonomous only if it does not need to borrow money, they maintained that there is no other way but to ratify the treaty. Finally, they admitted that Europe is oriented to neoliberal policies and they expressed hopes that, in case the socialist Hollande would win the French Presidential elections of May 2012, together with other politicians, they would work in order to change this. They emphasized the need for growth in the EU and especially in countries struck by the financial crisis and they criticized the one-sided character of the treaty ratified, focused only on competitiveness.

In general, the ESM Treaty has been criticized more because of the conditionality that it sets, than for the creation of the ESM itself. The Government has been also accused by the opposed parties of hiding the conventions ratified from the Greek people, through the mobilization of opaque procedures. A deputy of the majority responded that “[they] are not acting in absentia of the Greek people because, by voting these treaties, we are supporting the basic choice of the Greek people, which is that the country remains in the Eurozone.”[30]

The Communist Party (K.K.E.) claimed during the parliamentary debate of 28 March 2012 that the treaties under ratification showed the real face of the EU, which is an imperialist organization, against labor and social rights. In response to other parties’ claims on the unconstitutionality of the parliamentary procedure, they defended that the matter is not procedural and that inside the EU there is no possibility of democracy. They emphasized that the treaties ratified are limiting national sovereignty for the benefit of an imperialist organization and that there is no possibility of renegotiation of the Euro-crisis measures; instead, there is a need to exit the Eurozone and the EU, because the crisis is a crisis of capitalism. Concerning the ESM in particular, they stressed that this mechanism is not enough and that it is full of incoherences. They claimed that, at the end, the ESM Treaty, because of the asymmetry in the EU, benefits strong Germany and serves the capital against the working class. They characterized the ESM as a mechanism of controlled bankruptcy, which will bring about new memoranda and anti-popular measures, in the effort to protect creditors and the banking system at the European level.

During the same parliamentary debate, the deputies of LA.O.S criticized the time-consuming action of the EU, and expressed their hope that the socialist François Hollande would renegotiate the treaties under ratification, in order for them to contain growth provisions. Concerning the ESM in particular, they emphasized the incoherence of the treaty because of the need for countries with financial problems to participate in the saving of their own economy. They stressed that it would be difficult for the Greek government to find the money that it has to contribute to the ESM. Moreover, they claimed that the ESM Treaty raises sovereignty problems, among others because of the governance rules of article 4 of the Treaty, and provokes an “abdication of the Ministry of Economics”,[31] in the profit of Germany.

According to SY.RIZ.A., the ESM Treaty, together with the Fiscal Compact, demonstrate the commitment of the Greek Government to the neoliberal policy of Germany, which leads inevitably to economic decline. The ESM is a mechanism of controlled default, under conditions which benefit only the creditors and Germany. Indeed, an eventual uncontrolled default would have an immense cost for the European North. Furthermore, the deputies of SY.RIZ.A., invoking also press publications in internationally well-known journals, observed that the capital provided for the ESM is not enough in order to face the debt crisis of Eurozone Member States. They emphasized the need for taxation of financial transactions, and for a mechanism of financial redistribution between countries of the European North and South. Moreover, they stressed the fact that the ESM Treaty involves the IMF as an institutional counterpart of EU integration. According to them, the ESM Treaty undermines the equality between Member States, because the participation of each Member State in the decision-making procedure of the mechanism depends on the number of stakes it holds. Finally they highlighted that the ESM constitutes an admission of the failure of the monetary union and a turn to a permanent search of competitiveness, through austerity.

The deputies of DIM.AR. held a rather moderate position, accepting the ESM, but not the conditionality which complements it. They emphasized the need for a change of policy in the EU and the need for a political and social union.

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

No, there is no court judgment on the ESM Treaty. Indeed, in Greece there is no general possibility to directly attack legal statutes before the court.[32] Instead, judicial review of the legislator is diffused among all jurisdictions of the civil and administrative order, and is finally concentrated in the Supreme Administrative and Judiciary Courts (Council of State – “Symvoulio tis Epikrateias” and Areios Pagos respectively). Each justiciable possessing a legitimate interest, in the occasion of a litigation before a judge, can raise an objection of unconstitutionality of a legal statute applied in the case, both in case this statute is applied directly, and in case it is the legal basis of another act. According to article 93 paragraph 4 of the Constitution, “The courts shall be bound not to apply a statute whose content is contrary to the Constitution.[33] Courts apply the same constitutional basis, in combination with article 28 paragraph 1, in order to monitor the compatibility of ordinary law with international conventions. Indeed, article 28 paragraph 1 declares: “The generally recognised rules of international law, as well as international conventions as of the time they are sanctioned by statute and become operative according to their respective conditions, shall be an integral part of domestic Greek law and shall prevail over any contrary provision of the law. The rules of international law and of international conventions shall be applicable to aliens only under the condition of reciprocity.[34] The result of unconstitutionality/uncoventionality is the non-application of the statute in the concrete case before the judge. Courts in general refuse to examine the respect of the rules of parliamentary procedure, which is considered interna corporis of the legislator.[35] In any case, given that the TFEU amendment was approved in 2012 and given the time-consuming character of Greek judicial procedures, there is no court judgment on the ESM Treaty.

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?      

Parliament has a marginal role in the payment of the installments of paid-in capital required by the ESM Treaty. This payment, prefigured to 450.672.000 euros per year in five installments,[36] is included in a chapter of the national budget, which has not at all been discussed during the parliamentary debates for the approval of the budget.[37] Thus, with the approval of the national budget, Parliament has habilitated the Government to take the necessary measures in order to assure the payment of this capital. That is because the application of the ESM Treaty is rather seen from the point of view of the beneficiary than that of a creditor to the ESM. The financial contribution of the country to the capital of the ESM has only been underlined during the parliamentary debates for the ratification of the ESM Treaty. In these debates, deputies of LA.O.S. objected that it would be difficult for the Government to provide the resources needed and that this would lead to new austerity measures against the Greek people.[38]

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.

Parliament has a marginal role in the application of the ESM Treaty, which is a competency of the Government. Indeed, the application of the ESM Treaty is rather seen from the point of view of the beneficiary than that of a creditor to the ESM. However, during the parliamentary debates, parliamentary monitoring is exercised to the position of the Government in the negotiations for financial assistance to third countries and the disbursement of tranches.[39] In general, there is not much transparency concerning the position of the Minister of Finance in the Eurogroup and the negotiations on the application of the ESM Treaty. Nevertheless, after the demand of the President of the Special Permanent Commission of European Affairs together with the Permanent Commission of Economic Affairs of the Parliament, a procedure of information of the Commission by the Minister of Finance concerning Eurogroup meetings has been institutionalized, albeit informally.[40]

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

As far as the application of the ESM Treaty is concerned, Spain and Cyprus are perceived by the press and the political world as suffering from the same problems as Greece, as cases that demonstrate the generality and the systemic nature of the Euro-crisis problem. The financial assistance to these countries is perceived and discussed more in a comparative perspective to the Greek case. Thus, the examples of Spain and Cyprus are used by all political parties in order to show errors in the financial assistance programs for Greece, the weakness of the negotiating capacities of Government officials or, on the contrary, in order to demonstrate the success of the negotiations effectuated by the Greek Government.

Concerning the financial assistance to Spain, it is important to note that a part of the negotiations coincided with the transitional period between the two Greek elections of 2012. The discussions in Parliament show that the Greek Government was not perceived as participating and having a say in the discussions at the European level. Even when European decisions have been criticized, it is Europe itself and rarely the position of the Greek government that is considered. After the elections of the 17th of June, all political parties expressed their hopes for the renegotiation of the Greek debt in order to obtain a solution similar to the one that was to be adopted for Spain, and thus, a transfer of part of the Greek debt (corresponding to 25% GDP) to the European financial support mechanism. Deputies from PA.SO.K. and DIM.AR. defended that the Greek case is similar to the Spanish one, and that this solution would be a result of an equal treatment of Eurozone Member States.[41] The Communist Party (K.K.E.), however, objected that the buying of state bonds by the ESM would be combined with memoranda and austerity measures.[42] In general, at the beginning, the deputies of SY.RIZ.A. and AN.EL. were criticizing the Government for not negotiating a similar solution for Greece as the Spanish did.[43] N.D. responded to the criticisms that this solution was conditioned by onerous measures, notably the control of Spanish banks by the EFSF.[44] After the adoption of the final solution for Spain, SY.RIZ.A., lamenting the lack of political union in the EU, criticized the fact that, at the end, it was the Spanish people that would be held responsible for the debts of banks, through the imposition of austerity measures.[45]

Concerning the case of Cyprus, the matter was a more sensible one because of the strong national, historic and cultural bonds between Greece and Cyprus. Almost all political leaders criticized the solution adopted with the first decision of the Eurogroup on the 15th of March.[46] During the debates on the 19th of March 2013, deputies from all parties characterized the rejection of the Eurogroup decision by the Cypriot Parliament courageous and expressed their solidarity to the Cypriot people. More precisely, deputies from PA.SO.K. (participates in the Government) characterized the Eurogroup decision as a “crime”,[47] and said that neoliberal policies in Europe are exclusively based on political decisions, emphasizing the need for change of orientation for Europe. They defended that the Greek Parliament should respect every decision of the Cypriot Parliament. Finally, they said that the Eurogroup decision was a wrong decision, which put Euro and Europe into danger, and which provoked division inside the Eurozone and has been criticized by the press. However, they maintained that the Greek government could not but accept this decision, which was already approved in the Eurogroup of the 15th of March, stressing out the need for more information on the position of the Government during the formation of the decision. DIM.AR. (participates in the Government) also condemned the decision of the first Eurogroup, which it characterized a “historical mistake”[48] that expresses the neoliberal forces prevailing in Europe.

N.D. and the Government tried to justify their position by saying that the agreement on the taxation of bank deposits was a sovereign political decision of the President of the Cypriot Republic together with the IMF, the ECB, the Commission and the Eurogroup partners. Indeed, they explained that in the Eurogroup a concrete decision is presented, on which the state representatives have to express themselves. Given the European correlation of powers, Greece could not oppose to the Eurogroup decisions by itself. They defended that, by agreeing to this decision, they showed their support and solidarity to Cyprus, and they maintained a responsible position. They held that the Greek Government could not intervene in the internal matters of another state. Also, they emphasized that, with the Eurogroup decision for Cyprus, Greece is protected from eventual consequences of the Cypriot crisis, through the transfer of the branches of the Cypriot banks operating in Greece to a Greek bank. Even though they admitted that this decision is a step back from the banking union and a turnover of the previous flexibilization of the position of the ECB, they pointed out that Cyprus is a particular case, because of its huge and problematic banking sector.[49] Finally, the Minister of Finance imputed the adoption of this onerous solution to the inexistence of a banking union between the Member States of the Eurozone.[50]

However, the deputies of the opposition exercised virulent criticism to the position of the Government during the negotiations and they demanded further explanations. They emphasized that the Greek Minister of Finance participated to the unanimous Eurogroup decision, showed no solidarity to the Cypriot people, and supported the disastrous decision on the “haircut” of bank deposits.[51] More precisely, deputies from SY.RIZ.A., using the term “colonization”,[52] criticized the role of the Eurozone and of Germany, who only promote the interests of bankers. They stressed the incoherence of the Eurogroup decision, causing leak of capitals and instability to the profit of banks owned or controlled by German banks, with the foundations and the justification of the existence of the monetary union itself. Moreover, SY.RIZ.A. representatives demanded the resignation of the Government. They emphasized that the “no” of the Cypriot Parliament is a proof that there is an alternative to austerity and economic recession as a way to face the crisis, that negotiation is possible. They added that Greece needs to support the European South and, as long as it does not, it undermines its own economy because of the insecurity provoked. Finally, they pointed out the consequences that the economic crisis in Cyprus may have at the level of the exploitation of the natural resources of the island, which are close to the ones belonging to Greece.

The rest of the opposition parties also criticized the Government. On the one hand, the deputies of AN.EL. held a similar position to SY.RIZ.A., saying that the Eurogroup decision destroys the confidence in the EU, that it is a crime, and that it violated the right to privacy and the Charter of Fundamental Rights. They emphasized the political responsibility of the Government because of its participation to such an illegal decision. Further, they demanded either the resignation of the Minister of Finance, or the resignation of the whole Government that supported the decision for Cyprus. On the other hand, the deputies K.K.E. defended that the first Eurogroup decision on Cyprus is a demystification of the role of Europe and of capitalism as a whole, as it shows the character of EU and the policies it promotes.[53]

The second Eurogroup decision on Cyprus on the 25th of March 2013 also provoked intense reactions by the political parties. The President of the Republic went as far as to characterize this decision as “intolerable”, because it constituted a discrimination against Cyprus.[54] The opposition talked about a “German hegemony”.[55] SY.RIZ.A. criticized the Greek Government for not supporting the decision of the Cypriot Parliament. They accused the Government of participating in the “attacks” to Cyprus for borrowing from a non EU state (Russia), and in the “blackmailing” by the ECB, the IMF and the Commission.[56] Moreover, they emphasized the geopolitical matters at stake. They said that the second Eurogroup decision undermines the European Union and creates problems to all Member States, including Germany. The deputies of AN.EL. defended that the new disastrous decision of the Eurogroup shows that European partners do not respect the European values of democracy, solidarity, and human rights. Invoking press publications, they emphasized that this decision undermined the confidence of deposit holders in the whole Europe and mined the image of Germany. They added that it was absurd that the EU morally condemned a model of economic growth of a Member State, and they imputed this model to the incidents between Cyprus and Turkey, and thus the division of the island, which did not permit any other economic growth. Finally, they accused the Greek Government for not participating in a “plan B” for Cyprus, even though the Cypriot crisis is largely caused by the Greek one. The deputies of K.K.E. criticized the decision for Cyprus, and they defended that no negotiation that would be beneficial for the people is possible inside the neoliberal European Union. They also expressed fears about eventual evolutions concerning the problem with Turkey and the exploitation of natural resources of the island.

The Government parties, even though they recognized that the Eurogroup decision was very onerous for Cyprus, emphasized the need for Cyprus to remain Member of the Eurozone. PA.SO.K. and DIM.AR. however criticized the lack of political union in the EU and expressed hopes for a reorientation of European policies to this objective. Finally, the Government parties used the disastrous consequences of the Cypriot “no” to the first Eurogroup decision as a proof of the negotiation power of the Eurozone partners.[57]

Greece was particularly concerned by the decision on the bailout of Cyprus because of the agreement between Cyprus and Greece on the Greek branches of Cypriot banks.[58] “In order to protect the stability of the Greek and the Cypriot banking sector”, the “troika” set as a condition the sale of these branches to a Greek bank in order to approve the financial support programme for Cyprus.[59] The Greek parties of the opposition doubted the promotion of the public interest and of the interests of Cyprus by this decision, they accused the Government of serving the interests of Pireus bank, which is the buyer, and demanded further information on the subject. The Minister of Finance alleged that it was the only solution. The Government claimed that it acted with the exclusive goal of the guarantee of deposits, the maintaining of working posts and the stability of the Greek financial sector. [60] For the transfer of the branches of the Cypriot banks to Pireus bank, an amendment of a legal statute was inserted at first on the 11th of April 2013. However, because of its irrelevance to the content of the bill in which it was added, and after the objections of many deputies provoked by the lack of information from the part of the Government, the latter retired the amendment[61] and inserted it into another –still irrelevant– bill on the 17th of April 2013.

The statute regulates ad hoc the transfer of the Cypriot banks, providing that the increasing of the Greek bank’s property is not included in the calculation of the capital needs of the bank, the 10% of which must be covered by private parties’ contribution for the recapitalization of the bank. Also, it excludes the transaction from taxes.[62] During the parliamentary debates, SY.RIZ.A. and AN.EL. alleged that the transfer under consideration was increasing the property of the Greek buyer bank. Thus, it had to be done according to the already existing legal framework, with transparency concerning the value of the branches and following the rules concerning banks’ capital and recapitalization. Also, it should be submitted to taxes. The Government responded that a special rule was necessary because no framework for the improvement of foreign banks existed at the time. They claimed that the existing legal framework was respected in principle and that the benefits accorded to the Greek bank were a result of the agreement with this bank. Besides, these benefits were justified by the fact that no other buyer was found for the Cypriot branches, which needed to be saved in order to assure deposits of Greek people and of social security funds. However, the opposition did not finally vote the amendment, fearing that the privileged treatment of the Greek private bank would become a general practice in the future.[63]

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, there are no changes in national legislation for the implementation of the ESM Treaty in particular. Relevant legislation has been adopted for the implementation of measures concerning the financial assistance to Greece and the EFSF.[64]

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

What is interesting is precisely the lack of information concerning the role of Parliament in the application of the ESM Treaty. After its ratification, its application seems to be an exclusive competency of the executive branches, whose exercise is not transparent and is rarely debated in Parliament.

[1] See the parliamentary debates on the national budget of 2011, on December 2010: Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ME’, Σάββατο, 18 Δεκεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101218.pdf ; Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση MΣΤ’, Κυριακή, 19 Δεκεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101219.pdf ; Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση MΖ’, Δευτέρα, 20 Δεκεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101220.pdf ; Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση MΗ’, Τρίτη, 21 Δεκεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101221.pdf ; Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση MΘ’, Τετάρτη, 22 Δεκεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101222.pdf ; see also the debates after the European Council of the 11th of March, where the ESM is discussed: : Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση P’, Τετάρτη, 16 Μαρτίου 2011, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110316%20%28proi%29.pdf ; Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση PΑ’, Τετάρτη, 16 Μαρτίου 2011, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110316%28apog.%29.pdf . Cf. also the debates on the 14th of July 2011, after the signing of the first ESM Treaty, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση PΟΣΤ’, Πέμπτη, 14 Ιουλίου 2011, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110714.pdf. Finally, cf. the debates on the 7th of February 2012, after the signing of the final version of the ESM Treaty, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση OH’, Τρίτη, 7 Φεβρουαρίου 2012, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120207.pdf;

[2] Debates on the national budget and the debates on the 14th July 2011. See also the debates on the 16th of March 2011, and on the 7th of February 2012.

[3] See the parliamentary debates on the 18th of November 2010, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση KB’, Πέμπτη, 18 Νοεμβρίου 2010, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101118.pdf , esp. 1367. See also the debates on the national budget of 2011, cited above, and the debates on the 14th of July 2011.

[4] Debates on the national budget of 2011, and debates on the 19th of October 2011, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΙΔ’, Τετάρτη, 19 Οκτωβρίου 2011, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20111019%20%28apog%29.pdf .

[5] See the speech of Pantelis Oikonomou, in the debates on the 21st of December 2010, cited above, 3131.

[6] Cf. the debates on the national budget of 2011 date? Reference?.

[7] See the debates on the 16th of March 2011.

[8] Cf. the debates on the national budget of 2011 date? Reference? and the debates on the 16th of March 2011.

[9] Cf. the debates on the national budget of 2011. Date/reference?

[10] Legal Statute 4063/2012, ΦΕΚ Α’ 71, published on 30 March 2012.

[11] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030.

[12] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[13] See the same parliamentary debates, 8022.

[14] See the speech of Evangelos Venizelos, in Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΟΣΤ’, Πέμπτη, 14 Iουλίου 2011, 13728, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20110714.pdf.

[15] Ibid. 8030.

[16] See the speech of Konstantinos Geitonas in the parliamentary debates, 8043.

[17] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[18] See the parliamentary debates, 8020, 8030, 8037, 8057.

[19] Ibid, 8063.

[20] See the question of Alexis Tsipras in the parliamentary debates of the 10th of December 2010,  in Πρακτικά Βουλής, Συνεδρίαση ΛΘ’, Παρασκευή 10 Δεκεμβρίου 2010, 2732 available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20101210.pdf

[21] See the parliamentary debates of the 28th of March 2012, cited above, 8020, 8032, 8050, 8058, 8063.

[22] Ibid, 8035. Traditionally there is no judicial review of the procedure followed by the Parliament, which is considered interna corporis. However, especially concerning the application of article 28 of the Constitution, the Supreme Administrative Court (Council of State), in its decision 668/2012 accepted to review the ratification of the Memorandum of Understanding by the Parliament. Cf. the relevant question.

[23] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[24] Ibid., 8033, 8038, 8060, 8063.

[25] See the parliamentary debates.

[26] Ibid. 8037. See also the parliamentary debates of the 25th of October 2006, in the Commission for the Constitutional Reform, in Πρακτικά Επιτροπής Αναθεώρησης του Συντάγματος, Συνεδρίαση ΣΤ’, Τετάρτη 25 Οκτωβρίου 2006, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/25102006.pdf. In fact, the vagueness of article 28 concerning the European Treaties has led to discussions on its amendment in 2006. However, also because of the disagreement between parties, the amendment was abandoned.

[27] It is interesting to note that constitutional lawyers are very often political personalities in Greece. For example, the president of PA.SO.K. is Professor of Constitutional Law in the University of Athens. Similarly, the Minister of Administrative Reform and Electronic Governance is Professor of Constitutional Law in the University of Thessaloniki.

[28] See Cf. Antonis Manitakis and Lina Papadopoulou (eds.), Η προοπτική ενός συντάγματος για την Ευρώπη, [The Perspective of A Constitution For Europe] (2003 Athina-Thessaloniki: Ant. N. Sakkoulas) 160 ff., esp. 173. See also citations for the relevant literature. In the same direction are the arguments of Theodora Antoniou, especially as far as the TFEU amendment is concerned, in

«Η απόφαση της Ολομελείας του Συμβουλίου της Επικρατείας για το ΜνημόνιοΜια ευρωπαϊκή υπόθεση χωρίς ευρωπαϊκή προσέγγιση [The Decision by the Plenum of the Council of State on the Memorandum – A European Affair Without A European Approach]», ToΣ, 1/2012, 197.

[29] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030.

[30] See the debates cited above, 8043.

[31] See the speech of the leader of LA.O.S., Georgios Karatzaferis, in the parliamentary debates cited, 8039.

[32] There is, however, the High Special Court, instituted according to article 100 of the Constitution, which can monitor the constitutionality of a statute, in the case of contrary decisions on the matter by the two supreme courts, Council of State (administrative) and Areios Pagos (judiciary).

[33] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[34] Source of translation: http://www.hellenicparliament.gr/UserFiles/f3c70a23-7696-49db-9148-f24dce6a27c8/001-156%20aggliko.pdf

[35] However, in the case concerning the ratification of the Memorandum of Understanding, the judge accepted to enter into the examination of the procedure of ratification. See the relevant question.

[36] See the Preamble of the Legal Statute 4063/2012, ΦΕΚ Α’ 71, published on 30 March 2012, available at http://www.hellenicparliament.gr/UserFiles/2f026f42-950c-4efc-b950-340c4fb76a24/k-slee-eis.pdf.

[37] See the Preamble to the national budget for 2013, available at http://www.minfin.gr/content-api/f/binaryChannel/minfin/datastore/23/78/55/23785536b0ff793c788edcb81129a634e74727d7/application/pdf/%CE%95%CE%B9%CF%83%CE%B7%CE%B3%CE%B7%CF%84%CE%B9%CE%BA%CE%AE+%CE%88%CE%BA%CE%B8%CE%B5%CF%83%CE%B7+2013.pdf

[38] See the parliamentary debates of the 28th of March 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΙΣΤ’, Τετάρτη, 28 Μαρτίου 2012, 8004 available at http://www.hellenicparliament.gr/Praktika/Synedriaseis-Olomeleias?search=on&DateFrom=28%2F03%2F2012&DateTo=28%2F03%2F2012, 8030, 8032.

[39] See the next question.

[40] See the video of the session of the Commission on the 15th of May 2013, available at http://www.hellenicparliament.gr/Vouli-ton-Ellinon/ToKtirio/Fotografiko-Archeio/#3b32b0de-43dd-41f2-b7f6-5a489117fa6a.

[41] See the parliamentary debates on the 7th of July 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση E’, Σάββατο, 7 Ιουλίου 2012, 50, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120707.pdf

[42] See the parliamentary debates on the 8th of July 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΣΤ’, Κυριακή, 8 Ιουλίου 2012, 103, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120708.pdf.

[43] See the parliamentary debates on the 8th of July, cited above and on the 12th of September 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΚΕ’, Τετάρτη, 12 Σεπτεμβρίου 2012, 886, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120912.pdf.

[44] See the parliamentary debates on the 11th of September 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΚΔ’, Τρίτη, 11 Σεπτεμβρίου 2012, 832, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20120911.pdf.

[45] See the parliamentary debates on the 8th of November 2012, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΞΣΤ’, Πέμπτη, 8 Νοεμβρίου 2012, 4272, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20121108.pdf.

[46] See the reactions of political parties to the decision of the Eurogroup, at http://www.megatv.com/megagegonota/article.asp?catid=27371&subid=2&pubid=30809493

[47] See the parliamentary debates on the 19th of March 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΜΖ’, Τρίτη, 19 Μαρτίου 2013, 9151, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130319.pdf, 9166.

[48] See the parliamentary debates on the 19th of March 2013, cited above, 9174.

[49] See the parliamentary debates on the 19th of March 2013, cited above.

[50] See the information meeting on the 20th of March 2013 between the Minister and the Special Permanent Commission of European Affairs and the Permanent Commission of Financial Affairs of the Parliament, available at http://www.hellenicparliament.gr/Vouli-ton-Ellinon/ToKtirio/Fotografiko-Archeio/#5ae38d11-7e8f-4470-9ad3-1c01cd2adb55.

[51] See the parliamentary debates on the 19th of March 2013, cited above.

[52] See the parliamentary debates on the 19th of March 2013, cited above, 9197.

[53] See the parliamentary debates on the 19th of March 2013, cited above.

[54] “The reactions of the political world to the Eurogroup decision on Cyprus”, skai.gr, 25 March 2013, http://www.skai.gr/news/politics/article/227369/oi-adidraseis-tou-politikou-kosmou-gia-tin-apofasi-eurogroup-gia-tin-kupro/

[55] See the parliamentary debates on the 27th of March 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΝΒ’, Τετάρτη, 27 Μαρτίου 2013, 9614, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130327.pdf, and on the 28th of March 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΝΓ’, Πέμπτη, 28 Μαρτίου 2013, 9667, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130328.pdf.

[56] See the debates on the 28th of March 2013, cited above, 9701.

[57] See the parliamentary debates on the 27th and 28th of March, cited above.

[58] See press release of the Eurozone on the agreement: http://eurozone.europa.eu/newsroom/news/2013/03/eg-statement-cyprus-25-03-13/.

[59] See the press release of the Central Bank of Cyprus on this transaction: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=12677&lang=en.

[60] See the parliamentary debates on the 8th of April 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΞ’, Δευτέρα, 8 Απριλίου 2013, 10122, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130408.pdf.

[61] See the parliamentary debates on the 11th of April 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΞΓ’, Πέμπτη, 11 Απριλίου 2013, 10667, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130411.pdf.

[62] See the amendment concerning the transfer of the Cypriot branches to Greek banks, available at http://www.hellenicparliament.gr/UserFiles/bbb19498-1ec8-431f-82e6-023bb91713a9/%CE%88%CE%B3%CE%B3%CF%81%CE%B1%CF%86%CE%BF%20%288035923%29.pdf.

[63] See the parliamentary debates on the 17th of April 2013, Πρακτικά Βουλής (Ολομέλεια), Συνεδρίαση ΡΞΖ’, Τετάρτη, 17 Απριλίου 2013, 10845, available at http://www.hellenicparliament.gr/UserFiles/a08fc2dd-61a9-4a83-b09a-09f4c564609d/es20130417.pdf.

[64] For this legislation, cf. the relevant questions in the section “Members receiving financial assistance” and the EFSF section. For the implementation of article 12 paragraph 3 of the ESM Treaty, at the administrative level, there has been a ministerial decree which defines certain “Rules of Collective Action concerning titles issued by the Greek State, with initially determined date of maturity in more than one year.” ΥΑ 2/25248/0023Α, ΦΕΚ Β’ 583, 13 March 2013.

Hungary

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 Hungary 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.

Not relevant for Hungary, since it is not a party to the ESM Treaty.

Ireland

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 Ireland 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.

Outside statements made in Parliamentary debates the position of the government in negotiations are not known. 

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

Under the Irish Constitution the Government is vested with executive powers in relation to external relations including the conclusion and ratification of international agreements.[1] All international agreements, except those of a technical and administrative character,[2] must be laid before the Dáil (lower house) and those implying a charge on public finances require approval by the Dáil in order to bind the State.[3] Ireland operates a dualist system and international agreements have no formal legal standing unless incorporated into domestic law. This is usually done through an Act of the Oireachtas (Parliament). Its provisions were implemented in Irish law through an act of the Oireachtas, namely the European Stability Mechanism Act 2012 (the ESM Act 2012). The ESM Act 2012 was debated before the Dáil on 7 June 2012 and before the Seanad on 26 June 2012. It was signed by the President on 3 July 2012. The ESM Treaty was subsequently ratified by the Government and the instrument of ratification was deposited on 1 August 2012.[4] In Pringle v Ireland the ESM Treaty was deemed not to require an amendment of the constitution and hence a referendum. It did not involve a delegation of policy making power to an international institution per Crotty. Rather it was a clear and limited commitment to participate in an international organisation for a specified purpose (see further answer to question VIII.4 below).[5]

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

No significant political or legal difficulties were encountered during the ratification of the ESM Treaty with the exception of the constitutional challenge initiated by Thomas Pringle and independent member of the Dáil (lower house) (see next questions).

The Government (Fine Gael and the Labour Party) and the largest opposition party (Fianna Fáil) were in favour of the ESM Treaty and the ESM Act 2012 and voted in favour of the act. Sinn Féin and the United Left Alliance were opposed to the Treaty and the Act. The Act was published during the referendum on the Fiscal Compact and was passed by the Oireachtas (Parliament) shortly after a positive result in that referendum. In the Parliamentary debates on the Act a number of contributors made reference to that context and the link between the Fiscal Compact and the Act.  A number of contributors also raised the possibility of the ESM being used to directly recapitalise banks rather than the current method of routing such funds through national Governments.

Those in favour of the Act saw it as a credible funding mechanism for Ireland in the event that it would be forced into a second programme of financial assistance. Thus ‘[the] Government believes the availability to Ireland of a credible funding backup as provided by the ESM treaty will be very important in terms of market re-entry and leaving the EU-IMF programme of support. There is no clear answer to the question as to where else financial assistance could be found were a situation to evolve in which we require further assistance. Enacting the ESM Bill 2012 and ratifying the ESM treaty will ensure that Ireland has access to this funding safety net if our efforts to re-access the market are delayed in any way and we need to resort to further assistance.’[6]

Those opposed to the Act focused on a number of issues. A number of contributors opposed the Act on the grounds that it, through its conditionality, would further the policies of austerity. In the opinion of Sinn Féin ‘at the core of the fund are the failed policies of unlimited bailouts and crippling austerity.’[7]  Similarly the ESM was described as ‘a sinister Trojan horse being driven into the heart of Europe to impose more poisonous austerity on ordinary citizens and further dismantle democracy within the European Union. It is a permanent austerity mechanism, not a stability mechanism.’[8] A number of contributors also objected to the immunities and privileges of the ESM and its officers.[9] The question of Ireland’s contribution was also raised both before the Dáil (lower house) and the Seanad (upper house) and was dealt with extensively before the Dáil sub-committee on finance.[10]

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

Thomas Pringle v Ireland and others contained a challenge to the constitutionality of the ESM Act.[11] It was tried at first instance in the High Court before Justice Laffoy who rejected those aspects of the challenge based on Irish law. For an assessment of the High Court judgement see question V.4. This judgement was appealed to the Supreme Court. The below description summarises the Supreme Court judgment with respect to the ESM Treaty. The claim relating to Decision 2011/199/EU amending Article 136 TEU is detailed in question V.4 above.

Thomas Pringle v The Government of Ireland, Ireland and the Attorney General

  1. Name of Court:Supreme Court of Ireland
  2. Parties:Thomas Pringle TD (appellant) vs Government of Ireland, Ireland and the Attorney General (defendants).
  3. Appeal

Citation:[2012] IESC 47

Date of Judgment:19October 2012

 

4        Admissibility Issues:N/A

1.      Legally Relevant factual situation: N/A

2.      Legal questions: The Appellant raised various questions that were grouped by the Court under the following headings:

1.      That the ESM Treaty (the Treaty) represented a delegation of sovereignty to an international institution that was prohibited under the Irish constitution as interpreted in Crotty (the “sovereignty claim”).

2.      That the ESM Act, implementing the ESM Treaty in Irish law, represented an unconstitutional delegation of legislative authority to the Government (the “transfer of powers claim”).

3.      That the ESM Treaty breached Union law (the “ESM claim”).

4.      European Council Decision amending Article 136 TFEU breached Union law (the “Council Decision claim”)

5.      The appellant argued that the breach by the ESM of Union law implied a parallel breach of the Irish constitution due to the special status that Union law enjoys under Article 29 of the Irish Constitution.

6.      That an injunction should be granted restraining the Irish government from ratifying the ESM Treaty.

7.   Arguments of the Parties:

The appellant argued that the Treaty breached Union law. It was pointed out that in the recital to Decision 2011/119/EU that the European Council considered a treaty amendment was “required” for the entry into force of the ESM. This, according to the appellant, was evidence that the European Council itself considered the ESM incompatible with the TFEU as it then was. More specifically he argued that the ESM breached the Treaty’s provisions on EMU, namely Articles 122, 123, 125 and 126 TFEU, both in their substance and with regard to the objective and spirit of those provisions. The ESM also conferred competence for monetary and economic matters to a non-Union body, the ESM, and conferred new competences on Union institutions, namely the ECB and the Court of Justice. Finally, the principle of sincere cooperation prohibited Ireland from ratifying a Treaty that was incompatible with its obligations under Union law.

The appellant argued that the ESM Treaty and the ESM Act breached the Irish constitution. The Treaty, particularly when read in combination with the Fiscal Treaty went beyond the mere provision of aid but was intended to be an instrument of a more general policy of economic and financial stability and solidarity within the Eurozone. As such it represented an unconstitutional delegation of sovereignty to an international institution per Crotty. He argued that the Treaty was a permanent commitment and surrendered to an international body decision making power that could have severe budgetary implications for Ireland. The defendants argued that the treaty at issue in Crotty, namely Title III of the SEA, Ireland’s membership of the ESM Treaty would not reduce or fetter the executive or legal powers of the state, in particular in relation to foreign affairs. It pointed to the fact that Ireland’s contribution was limited and could only be increased with the future consent of the Irish Parliament.

  1. Conclusions of the Court:

The Court referred the Union matters (Points 3 and 4) to the Court of Justice under a separate judgement and requested the use of the accelerated procedure.  

Point 2, the transfer of powers claim, was not considered urgent by the Supreme Court as it related not to Ireland’s ability to ratify the ESM Treaty but rather giving internal effect to Ireland’s obligation under the Treaty.

The Court found it unnecessary to address Point 5 as any determination would not have any practical effect. If the Treaty was contrary to Union law then it would not go ahead in which case a determination of its compatibility with Irish constitution would be moot. In the alternative and the Treaty was in fact compatible with Union law then it would, for the purposes of this argument, also be compatible with the Irish constitution.

The Court therefore dealt with Points 1 and 6 in the present judgment, namely whether the ESM Treaty was compatible with the Irish constitution (Point 1) and whether an injunction restraining the Irish government from ratifying that Treaty should be granted (Point 6). 

A majority of the seven member Court found against the appellant under both points. It held that the ESM Treaty did not constitute an unconstitutional delegation of sovereignty per Crotty and that the balance of convenience overwhelmingly favoured refusing an injunction. A minority of one, Hardiman J, dissented, finding that a referendum and a constitutional amendment would be required in order for the State to legally ratify the ESM Treaty.

Point 1 – The Sovereignty Claim

A majority consisting of Denham CJ, Clarke, Fennelly, MacKechnie, Murray and O’Donnell JJ, (judgements by Denham CJ, Clarke, MacKechnie and O’Donnell JJ) found that the Treaty did not represent an unconstitutional delegation of power as defined in Crotty.

The majority contrasted the international treaty at issue in Crotty, namely Title III of the SEA dealing with coordination between members of the EC in the conduct of their foreign policies with the ESM Treaty. Crotty found that under the Irish constitution sovereignty flowed from the Irish people. This sovereignty was exercised by various organs established by the Constitution in accordance with the provisions of that constitution. The government had a wide discretion in the exercise of foreign policy. This discretion did not however include the ability to limit or delegate that power. Title III of the SEA was an open-ended, vague and wide-ranging commitment to adjust the State’s foreign policy in accordance with the concerns and actions of other states. As such it was a delegation of the Government’s freedom to direct the State’s foreign policy. It was therefore an unconstitutional delegation of sovereign authority to an international institution.

The ESM Treaty by contrast had a clearly defined scope. It was a narrow, if important, commitment on behalf of the state. The policy, namely the maintenance of stability in the Eurozone by the provision of appropriate financial assistance to members of the ESM, was defined and set down by the parties to the Treaty. The institution itself only implemented this policy. As stated by MacKechnie J ‘[i]n effect the fundamental difference between [Title III of the SEA and the ESM Treaty] is the fact that the ESM Treaty is essentially policy implementing and not policy making.’ Furthermore it was not an open-ended financial commitment. The liability of Ireland was limited and any increase in the capital would have to be approved by the Irish Parliament by legislation. Finally the limited circumstances in which Ireland would not exercise its voting rights (in the event of a failure to meet its commitments or in the event that a threat existed to the sustainability of the Euro zone) would not represent instances of policy making.

Hardiman J wrote the single dissenting judgement. After an assessment of the various judgments in Crotty he came to a different conclusion to the majority regarding its ratio, finding that the essence of that judgment was the point of reference for which the sovereign powers of the state should be exercised.[12] In particular he found that when exercising its powers the State was to have reference to the ‘common good’ as mentioned in Article 6 of the Irish constitution, where that ‘common good’ was to mean the common good of the Irish people. By contrast the ESM Treaty delegated decision making power over a considerable sum of money of the Irish people to be disbursed in the interest of maintaining the stability of the Eurozone as a whole. An interest that may, or may not, coincide with the “common good” of the Irish people. Furthermore, he found that under the ESM the Irish government would be obliged to submit to decisions regarding expenditure according to ‘particular procedures’, something that amounted to a delegation of sovereignty within the meaning of Crotty. Finally, Hardiman J had ‘considerable doubts’ regarding whether the procedures of the ESM and in particular the accountability of the Minister for Finance when exercising his powers as a member of the Board of Governors of the ESM.

Point 6 – The Injunction Claim

The appellant sought an injunction restraining the Government from ratifying the ESM Treaty pending the outcome of the Article 267 TFEU reference to the Court of Justice. A question arose as to the appropriate test with the appellant arguing that a test based on Union law should be used, in particular as articulated in Zuckerfabrik and Atlanta. This was not however evident, as the ESM Treaty is not a Union measure, and Ireland in ratifying it would not in fact be implementing Union law.

The majority found against the appellant with the most substantial treatment of the injunction question by Clarke J. A definitive judgment was not made on whether the domestic test based on Campus Oil or that based on Union law should be used or in fact what might be the substantial differences between the two tests. Rather it was found that the appellant’s case failed under either test. Based on an affidavit provided by a senior civil servant in the Department of Finance stating that it was in the financial interest of Ireland and other members of the ESM that it enter into force as soon as possible and that it was in Ireland’s interest to be involved in the ESM as early as possible, it was concluded that the balance of convenience overwhelmingly favoured the refusal of an injunction.

  1. Legal effects of judgment:

The judgment confirmed the compatibility of the ESM Treaty with the Irish constitution.[13]

  1. Outcome and implications:

The Government was not prevented from ratifying the ESM Treaty. In particular it was not obliged to hold a referendum amending the constitution in order to accede to the ESM.

Mr Pringle has indicated he is dropping the outstanding claim relating to the constitutionality of the ESM Act (in particular the appropriateness of the delegation of power under the Act to the Minister). Accordingly, following the judgement of the Court of Justice in the preliminary reference proceedings, it is expected that the Supreme Court will make an order refusing the appeal from the High Court leaving that Court’s judgment standing.[14] 

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?

The ESM Act 2012 authorises the Minister of Finance on behalf of the State to make payments of authorised capital into the ESM out of the Central Fund[15] up to a maximum of €11,145,400,000.[16] As payments made from the Central Fund they shall be subjected to the usual (ex post) accountability procedures of Parliament. Parliament has no further role in authorising payments under the Act. An amendment to the Act would be necessary to raise the ceiling above the figure mentioned above.

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?

Section 8 of the ESM Act 2012 requires that the Minister compile a report to be laid before the Dáil every six months. This report shall include the total value of contributions made to and received from the ESM. Beyond normal parliamentary procedures regarding executive accountability, Parliament does not have any formal role in the activities of the ESM or in determining the actions of the Minister for Finance when acting as a member of the Board of Governors of the ESM.

Application difficulties   
VIII.7

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

A number of members of Parliament and public commentators raised the question of the provision of financial assistance to Spain in order to recapitalise its banking system. In particular a common position across the political spectrum was that it would be desirable for the ESM to directly provide funds to banks and for that mechanism to be retrospectively applied to the Irish banking sector. Thus ‘[i]t is the policy of the Irish Government that recapitalisation of sovereigns should be separated from recapitalisation of banks and that a mechanism should be found to recapitalise banks in such a way that the recapitalisation would not form part of the general government debt and in normal parlance, would be of the sovereign balance sheet.’[17]

Opposition parties criticised severely the handling of the Cypriot financial situation in March 2013. In particular they criticised what was termed the incompetence and complacency of the European Council. They also criticised the levy imposed on deposits of more than €100,000, claiming it would undermine confidence in the banking systems as a whole.[18] Ireland’s support or at least acquiescence of the original deal, imposing a levy on all bank deposits was also questioned and a number of deputies argued that the deal reflected a distinct lack of solidarity with the Cyprus.[19] Micheál Martin, the leader of the opposition did welcome the inclusion of bondholders and shareholders in the final package claiming that ‘[i]t reinforces the fact that equity demands further significant relief for Ireland’.[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?

Beyond the passage of the ESM Act 2012 there have been no other legislative changes in order to implement or comply with the requirements of the ESM Treaty.

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

The ESM and in particular its recital 5 making access to ESM funding conditional on ratification and transposition of the Treaty on Stability and Coordination and Growth (TSCG) was a central issue in the referendum on TSCG itself. Advocates of a ‘no’ vote argued that recital 5 was a ‘blackmail clause’ while advocates of a ‘yes’ vote argued that it was a reasonable request that states accessing the ESM would make commitments to fiscal discipline.[21]

During the referendum campaign there was also a discussion regarding the exact relationship between the ESM and the amendment of Article 136 TFEU during which a pronouncement of the referendum commission on the matter was challenged before the High Court by Pearse Doherty (see question V.4 above).


[1]               Article 29.4 Bunracht na hÉireann (Constitution of Ireland).

[2]              Hogan and Whyte, JM Kelly: The Irish Constitution (n 1) 546.

[3]               Article 29.5 Bunracht na hÉireann (Constitution of Ireland).

[4]              Treaty Series 2013 No 14 European Stability Mechanism Treaty available at http://www.dfa.ie/uploads/documents/Legal%20Division%20Documents/Treaty%20Series%202013/no.14%20of%202013t.pdf (last visited 19 November 2013).

[5]              For a discussion of whether the decision to amend Article 136(3) TFEU required a constitutional amendment see answer to question V.4 above and Gavin Barrett, ‘The Treaty Amendment on the European Stability Mechanism: Does It Require a Referendum in Ireland?’ (2011) 29 The Irish Law Times 152.

[6]               See contribution of Minister for Finance, Michael Noonan, Dáil Debates, 7 June 2012, Vol 767 No 2, 600.

[7]               Pearse Doherty TD, ibid, 609.

[8]               Richard Boyd Barret TD, ibid, 611.

[9]               See as an example the contribution of Senator David Norris, Seanad Debates, 27 June 2012, Vol 216 No 5, 311 ff.

[10]             European Stability Mechanism Bill 2012, Committee Stage, 14 June 2012 available at  http://debates.oireachtas.ie/FI1/2012/06/14/00003.asp (last visited 19 November 2013).

[11]             For the High Court case see Pringle v The Government of Ireland (n63). For the Supreme Court case see Pringle v Government of Ireland (n 64).

[12]This point was also made by Denham CJ (paras 14 xviii and 17 ii) but did not play as significant a role in her reasoning.

[13]             Point 5 on the effect of a finding of incompatibility with Union law would have on the constitutionality of the ESM Treaty was not determined in the present judgment (see judgment of Denham CJ para 11 ii).

[14]             Correspondence with Mr Pringle, TD, 13 June 2013, on file with author.

[15]             European Stability Mechanism Act 2012, s 2.

[16]             ibid, s 3.

[17]             See comments of Minister for Finance Michael Noonan, Select Sub-Committee on Finance, 14 June 2012, European Stability Mechanism Bill 2012: Committee Stage.

[18]              See comments of Gerry Adams TD, Dáil Debates 27 March 2013 Vol 798 No 1, 23.

[19]              Mick Wallace TD, ibid, 28.

[20]             Micheál Martin TD, ibid, 21.

[21]             Is it not reasonable for citizens of other EU states to ask if we need additional funding why should we receive it in the absence of bring debt under control and supporting the essential legal architecture being put in place to ensure we do not get into similar difficulties in future?’ Minister for Justice and Defence Alan Shatter, Dáil Debates, 19 April 2012, Vol 762 No 1, 92-93.

Italy

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 Italy 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 not formally discussed in the Parliament before its announcement.

In any case, as already said also for the Treaty amendment of Article 136 (under Question V.1), a common feature of the Italian politics in relation to what one can call, again and in general terms, «European affairs» (also including the regular international treaties concluded in the Euro zone crisis, namely the Fiscal Compact and the ESM Treaty) is a certain (until now) stable bi-partisan favorable approach, by main center-left and center-right parties, in the approval of the related measures. The two major parties of the center-right and center-left coalitions (Popolo della Libertà e Partito Democratico, respectively) have been both strong pro-European movements, with really few, and scarcely relevant, exceptions among their members. This can be considered now as a traditional element of the Italian party system, probably one of the few rooted elements in a period of possible changes like the present.
This has historically had an impact also on the quantity and quality of the Italian debate on European issues: the related bills are normally adopted in the Parliament jointly by these two parties (and a large part of the satellite-parties), with relatively scarce, and normally apologetic, debate, and again relatively scarce echo in the general public debate.

In addition one can notice that, at the time of the negotiation of the Treaty, Italy was already experiencing clear problems in its budgetary situation. Therefore, the position of the government and the negotiation were influenced by this factor, fostering the typical bi-partisan support: note that the Treaty was signed in 2011 by the Berlusconi IV government, and re-signed in 2012 by the Monti government.

And again, in both the parliamentary Chambers, and in their Committees in charge of the first review, the procedure in question was joined with the other procedures related to the Fiscal Compact and the European Stability Mechanism (ESM), as it is clear from the attached documents (http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=Resaula&leg=16&id=667367, http://documenti.camera.it/leg16/resoconti/assemblea/html/sed0669/stenografico.pdf, so called «joint discussion», «discussione congiunta»; see also http://www.europarl.europa.eu/webnp/webdav/site/myjahiasite/users/fboschi/public/esm%20tscg/art.%20136%20ESM%20fiscal%20compact%20ratprocess.pdf).

In any case, see under Question IV.1 about the late emergence, after years and in the context of the new European elections campaign of 2014, of critical positions even by the direct negotiators for Italy.

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

It is probably relevant to highlight that, in both the Chambers, and for both the initial part in front of the competent Parliamentary Committees and the discussion in the Chamber, the procedure of authorization by law of the ESM was joined with the other procedures related to the Treaty amendment article 136(3) TFEU and the Fiscal Compact.

The ratification process through which the ESM Treaty has been ratified in Italy was the typical process dictated by articles 80 and 87(8) of the Constitution.

According to art. 80, the two Chambers of the Parliament (Camera dei Deputati and Senato della Repubblica) «authorize by law the ratification of international treaties which are of a political nature, or which call for arbitration or legal settlements, or which entail changes to the national territory or financial burdens or changes to legislation». So, having no doubts about the «political nature» of the Treaty and the «financial burdens» entailed, both Chambers of Parliament had to authorize its ratification, through the regular legislative procedure (since art. 72, last paragraph, Constitution dictates that «The regular procedure for consideration and direct approval by the House is always followed in the case of bills on constitutional and electoral matters, enabling legislation, the ratification of international treaties and the approval of budgets and accounts»).

Art. 87(8) Const. reads: «The President shall: authorize the introduction to the Houses of bills initiated by the Government, promulgate the laws and issue decrees having the force of law as well as regulations, call popular referenda in the cases provided for by the Constitution, appoint State officials in the cases provided for by law, accredit and receive diplomatic representatives, and ratify international treaties which have, where required, been authorized by the Houses». So the final step of the ratification procedure – and, formally speaking, the ratification itself – is an act of the President of the Republic. In any case, it is important to highlight that this is a typical act that, in the categorization of the President’s acts, it is normally qualified as “formally but not substantially” presidential: this means that the act involves the formal role of the President as the highest representative of the Republic, especially in international relations, but this does not imply his substantive role, nor his liability, for the related political choices, which are in the sphere of the Government in terms of negotiation, and of the Parliament for the authorization, as already seen.

No referendum was held on the ESM Treaty (or 136 Treaty amendment, or Fiscal Compact). In fact, art. 75(2) Constitution excludes this possibility for the ratification of international treaties as it «Referenda are not admissible in the case of tax, budget, amnesty and pardon laws, or laws authorizing the ratification of international treaties».

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

In terms of Parliamentary debates, as already remarked, it is relevant to highlight that, in both parliamentary Chambers, and in their Committees in charge of the first review, the procedure of authorization by law of the ESM was joined with the other procedures related to the Fiscal Compact and the 136 TFEU Treaty amendment (see Questions V.3 and IX.3).
The other important point to highlight, again, is the traditional bipartisan support,
in the Italian political system, by the two major parties of the center-right and center-left coalitions (Popolo della Libertà e Partito Democratico, respectively) and a large part of the satellite-parties, for the adoption – and therefore, the ratification and authorisation – of European measures (see above, and Questions V.3 and IX.3). This has historically had an impact on the quantity and quality of the Italian debate on European issues: the related bills are normally adopted in the Parliament jointly, with relatively scarce, and normally apologetic, debate, and again relatively scarce echo in the general public debate. This has only partially changed with the Eurocrisis, and the ratification procedure of the ESM Treaty (and of the other international measures, as aforementioned) constitutes evidence of that: at the time of the discussion and the approval, Italy had the two main coalitions supporting together the new Monti government (as a kind of “große Koalition” pushed by the choices of the President of the Republic after PM Berlusconi’s resignation, linked itself to the Eurocrisis), and only some small parties as formal opposition.

The parliamentary debates were obviously influenced by the joint discussion on the three different ratification procedures.

The rapporteurs themselves emphasized the difference with the old times in which the ratification of the EU-related bills were seen as a only “technical” debate, with no political echo nor particular resistance. But the debates seem to be a general discussion of the typical, historical problems of the so called democratic deficit in the European Union, with strong arguments, from both CR and CL, for the need of a more “political” federal Union. Sometimes the discussion touches on the German “expansionist” commercial policy in Europe and in the Mediterranean countries, because of the macroeconomic and monetary dynamics helping German exports in comparison with the Italian ones.

But in general, the real technical discussion relevant here was linked to the problems of the financial inadequacy of the European stability mechanism, and the important concerns for the possible great costs for the Italian budgetary system.

The Senator rapporteur Dini (PdL), for example, summarized as follows the doubts risen during the examination by the III Committee for Foreign Affairs (http://leg16.senato.it/japp/bgt/showdoc/frame.jsp?tipodoc=SommComm&leg=16&id=657978):

– the need to clarify the amount of the authorized capital stock of the European Stability Mechanism, which, pursuant to Article 8 of the Treaty establishing amounts to 700 billion euro. In the conclusions of the Eurogroup on 30 March 2012 the mobilization for the firewall was calculated in 800 billion euro, while the ceiling of the lending capacity of the instruments consolidated EFSF – ESM was indicated as 500 billion euro, pursuant to Article 39 of the Treaty establishing the ESM.

– the need to clarify the wording of Article 12 of the Agreement, which, in the boundaries of the support that the ESM may provide to a Member State, provided that since January 1st, 2013 also collective action clauses were included in all public debt state titles of the Euro area newly issued and with maturities of over one year in a way that ensures that their legal impact was identical. This prediction was in fact directed at achieving an appropriate form of private sector participation.

– the payment in five installments, in accordance with Article 41 of the Treaty ESM, of the initial capital by each member of the ESM. Pursuant to paragraph 3 of Article 41 an ESM Member may decide to accelerate the payment of its shared capital. Doubts came both on the schedule of payments of the Italian contribution, and the system of further “on call” contributions to the ESM to grant loans to member countries of the euro in financial difficulty.

– a discrepancy was also highlighted in predictions about the entry into force of the Decision 2011/199/EU amending Article 136 of the Treaty on the Functioning of the European Union with regard to the Stability Mechanism, scheduled for 1 January 2013, and the commitment made by the European Council of 9 December 2011 to operationalize the EMS from the month of July 2012.

– need for clarification of the effect on the assessment of the public debt of middle-long term emissions for the payment of the Italian contribution, in relation to the possible increased need in terms of interests estimated for 2012 at about 120 million euro.

Real strong resistance to the approval of the bill came only from relatively small parties of the new opposition under the Monti government: some of them actually tried to discuss the issue of a possible referendum on the new European measures, but it is important to highlight in this respect that no “consultative referendum” of this kind is foreseen in the Italian Constitution, and the only way to establish it would be through a special “constitutional law” (legge costituzionale), used only once in the history (but precisely on EU-related issues, in 1989) (see under Questions V.3 and IX.3).

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

No. This was not surprising, given the limited possible modalities of access to the Italian Constitutional Court (see Question IV.5 above for more details). 

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?

The ratification Law n. 116/2012, in its Article 3, authorises for the payments «established in Articles 9 and 41 of the Treaty»,[1] and also, in relation to those, for «the emissions of medium-long term bonds».

See above, under question VIII.3, for the critical remarks raised by the rapporteur Senator Dini, during the examination of the ratification Bill in the III Committee for Foreign Affairs, about the payment in five installments, in accordance with Article 41 of the Treaty ESM, of the initial capital by each member of the ESM. Pursuant to paragraph 3 of Article 41 an ESM Member may decide to accelerate the payment of its shared capital: and doubts came both on the schedule of payments of the Italian contribution, and the system of further “on call” contributions to the ESM to grant loans to member countries of the euro in financial difficulty.

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?

Beyond ordinary parliamentary procedures regarding executive accountability, note that art. 4 of the new law 234/2012 (the new law on the «general rules on Italy’s participation in the formation and implementation of legislation and policies of the European Union»), under the title «Information and consultation of Parliament», states, inter alia, that:

«4. The Government informs and consults the Houses of the Parliament, under the procedures identified by the law referred to in Article 81, sixth paragraph, of the Constitution, as replaced in accordance with the Constitutional Law 20 April 2012, n. 1, and in the manner provided by the respective Regulations, about the coordination of economic and budgetary policies and the functioning of the mechanisms of financial stabilization, as laid out or pursued in accordance with:

a) acts, bills and documents adopted by the institutions of the European Union;

b) the aims identified in an enhanced cooperation under Article 20 of the Treaty on the European Union;

c) agreements and hypotheses of intergovernmental agreements between Member States of the European Union».

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

 Italy did not encounter specific and relevant difficulties in the application of the Treaty.

It is relevant to remark that the main debates in Italy, both in the Parliament in the aforementioned «joint discussion» on the three major Euro-crisis measures (see Questions V.3, VIII.3 and IX.3) and in a general political sense, were focused on Italy as a possible ‘target’ of the measures of financial stability, and not so much on the interventions for other countries (if not, in a somewhat typical way, to remark that Italy is spending a great amount of money for those in a period of internal crisis).

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?

None directly related to the ESM-Treaty.

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

No other relevant information.

[1]               http://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:legge:2012-07-23;116.

Latvia

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 Latvia 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.

Latvia supported the conclusion of the ESM Treaty and an establishment of a permanent ESM because “it would ensure the stability of the finances of the Eurozone in general.”[1] Latvia’s position emphasized that it was pleased with the opportunity to participate in the discussions concerning the mechanism because at the time of negotiations was planning its accession to the Eurozone.[2]

The general position was that primarily the work should be done to strengthen the economic governance in the EU in order to avoid actual use of the ESM and in order for it to be available just as a precautionary measure. A very important issue for Latvia was the calculation of payments and a fair and simple formula for calculation. According to the Informative Report from March 2011, this formula should not create essential disparities in the Member State payments in comparison with their GDP. The receivement of financial assistance should be based on strict rules to avoid malicious use of this mechanism when states hope to receive free financial resources without giving a strong political commitment to stabilize the situation in the country and divert the consequences upon other Member States.[3]

According to the minutes of the meeting by the Parliamentary Committee for European Affairs (PCEA) on 23 March 2011 regarding the position of Latvia for the European Council meeting on 24-25 March 2011 Latvia’s national position was to support the strengthening of the ESM, especially the increase in flexibility for interest payments. Latvia negatively looked at the diversification of funding tools (e.g. unconditional credit-line creation). Latvia supported the agreement on the ESM and considered that primarily the economic governance in the EU has to be strengthened in order to avoid the necessity to use the ESM and, thus, it could operate mainly as a precautionary measure.[4]

From the PCEA meeting of 14 March 2011 it follows that Latvia participated in the extended meetings of Eurozone countries concerning the creation of the ESM and its main characteristics. This was considered to be very important because after joining the Eurozone in 2014 Latvia will have to take part in all the new commitments of the ESM.[5] If a Eurozone state will not be able to repay the financial aid, this could have an influence also on the budget of Latvia. Provisionally the Latvian payment in the capital was estimated to be approximately 140-280 million EUR.[6]

In general Latvia’s position was to support the independent creation of the ESM because it will ensure the stability of Eurozone finances in general. Latvia believed that the ESM should primarily operate only as a precautionary measure. Very important was the issue about the calculation of the paid-in capital and it was stressed that it cannot create essential differences among Member State payments in comparison to their GDP. The receipt of means from the ESM has to be based on stringent conditions in order to avoid abuse of the mechanism. Latvia supported the efforts of smaller Member States to achieve the establishment of fairer contribution key. [7]

The discussions in the PCEA concerned the German suggestions on the contribution key (the equality of rules concerning big and small Member States – how to use such indicators as population and GDP to calculate the contributions). One MP (R. Kārkliņa, coalition, Vienotība) suggested that the Slovenian formulation that “the rich one should pay more” should be used in the position. The position was approved.[8]

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

Before 2014 Latvia was not a party to the ESM Treaty and not part of the Eurozone. However, since Latvia will join the Eurozone in 2014, the Cabinet of Ministers on 22 August 2013 issued an order (No 393) “For Latvian Accession to the ESM”[9] . This order commands to the Ministry of Finance to provide in the long-term funding commitments under the Ministry of Finance’s sub-programme 41.03.00 „Contributions to International Organizations” contributions in the amount of 201 900 000 euro for the ESM. This includes contributions in the amount of 40 380 000 euro in 2014, 2015 and 2016 and contributions in the amount of 80 760 000 euro in the following period until 2018.[10]

The Draft Law „On the Treaty on the Establishment of the European Stability Mechanism” was approved by the Government on 12 November 2013[11] and submitted to the Parliament on 21 November 2013. The annotation of the Draft Law states that Latvia will be a Eurozone member starting in 2014 and that all Eurozone Member States have to be members of the ESM. In accordance with Article 2 ESM joining the ESM is possible for a Member State as soon as an ECOFIN decision is taken on abrogation of the derogation from adopting the euro. Therefore, the accession to the ESM for Latvia could start on 6 August 2013. The Ratification is necessary in order for Latvia to become a member of the ESM. In addition, the ratification law will provide the authorization order for Latvian representatives in the ESM Board of directors and Board of governors.[12]

The Draft Law was considered to be „urgent” by the responsible Parliamentary Committee and by the Parliament majority before the first reading and will be approved in two readings with a simple majority. Two instead of three readings is an exception provided for inter alia international treaties according to the Art 114(2)(3) of The Rules of Procedure of the Saeima.[13] A qualified majority procedure in accordance with Article 68 Constitution (in cases where international treaties which delegate part of the state competences to international institutions are ratified a qualified majority is needed – two-thirds of the votes of the present MPs with at least two-thirds of all the MPs being present at the sitting) is not applied in this case – it is not considered that the Treaty would delegate state competences to international institutions. So far the Draft Law has been approved without any debates in the first reading (56 in favour, 1 – against and 26 abstained).[14]

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

Latvia has not yet finished ratification of the ESM (the Draft Law ratifying the ESM Treaty was adopted in the first reading in the Parliament (Please see Question VIII.2). During the first reading the Draft Law ratifying the ESM Treaty was adopted without any discussions.[15]

However, there have been some discussions, since Latvia is to join the ESM in 2014. On 13 Aug 2013 it was reported that Latvia will borrow the means for payments in the ESM.[16] A representative from the Ministry of Finance has argued that these 40.4 million euro which Latvia will have to contribute to the ESM are not expenses but rather a capital investment. According to him, Latvia will borrow this money and will pay interest for this loan. In this way the contributions to the ESM will not increase the budget deficit and will not reduce the fiscal room for next year’s budgetary expenses.[17]

It has been argued that, if the EU countries are disciplined and do not get into new financial troubles, the expenses of Latvia will be small – above 300 million euro; and they will serve as a payment for security that in case of negative economic scenario, Latvia will receive help. However, in case of problems, the ESM might require from Latvia an almost five times bigger amount of financial means and there is a risk of loosing this money. Latvia does not foresee such a scenario but economic experts have argued that it is very real.[18]

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

Latvia has not yet finished ratification of the ESM Treaty. So far there has not been any information concerning potential litigation before the Constitutional Court regarding this Treaty.

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?     

Latvia is not yet a party to the ESM Treaty (the ratifying Law is pending befor the Parliament). Since Latvia is in the process of adopting the ESM ratifying law and accompanying laws, it could be considered that the Parliament has a direct say concerning the first payment of the paid-in capital required from Latvia by the ESM Treaty.

The Annotation of the Draft Law ratifying the ESM Treaty provides that depending on the type of decision the Latvian Representative on the ESM Board sometimes needs agreement of the Parliament, its Budget and Finance (Taxation) Committee or the agreement of the Cabinet of Ministers. The criteria for determining in what kind of decisions the Parliament should be involved are two:

a.                            The Parliament adopts a decision in cases where the content of Treaty provisions are being changed. The decision from Parliament is not necessary, only if some numerical value in the Treaty is changed automatically in accordance with a mechanism determined in other provisions of this Treaty (e.g. accession of a new member to the ESM)

b.                            Agreement from the Budget and Finance (Taxation) Committee of the Parliament is necessary in cases where Parliament’s decision is not necessary but there are changes regarding contributions by Latvia. The agreement is not necessary only if such changes clearly result from already established Treaty provisions.[19]

In the Draft Law On State Budget 2014, which has been submitted to the Parliament by the Government on 1 October 2013[20] an article concerning the commitments of the Republic of Latvia regarding the ESM was included (please refer as well to question VIII.3).

According to the annotation of the Draft Law On State Budget 2014:

        The 7th recital of the preamble to the ESM Treaty provides that all Eurozone countries become member states of the ESM.

        Article 11(1) ESM Treaty provides that the contribution key for subscribing to ESM authorised capital stock shall be based on the key for subscription, by the national central banks of ESM Members. However, in order for the Treaty not to create too great financial burden for less well-off member states, it provides a flexible solution in respect of the way contributions are made (transitional period for 12 years). Latvia qualifies for these lighter provisions.

        The contributions to the ESM do not create negative consequences to the state budget balance and do not influence the budget deficit.[21]

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.

Latvia is currently in the process of ratifying the ESM Treaty. The Draft Law is currently pending before the Parliament and the rules on the role of the Parliament can still change. Please refer to Questions VIII.3 and VIII.5 (especially to VIII.5 concerning the Parliament’s role).

In general, since the Draft Budget Law 2014 contained an article concerning Latvia’s commitments under the ESM Treaty starting with 2014, the Parliament voted on this matter together with the proposed budget for 2014. Further the Parliament’s role will be determined in accordance with the Laws accompanying the ESM Treaty ratification; so far for the Government’s proposal concerning the provisions regulating the role of the Parliament in these matters please refer to Question VIII.5.

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

So far there have not been any real debates on this matter, since Latvia joined Eurozone only very recently – 2014.

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?

Latvia is currently in the process of ratifying the ESM Treaty. Please see Questions VIII.3-6 for details.

According to the Annotation of the Draft Law on the ratification of the ESM following changes and amendments to national law will be necessary:

1)      Amendments to the Law on Budget and Financial Management: Article 9(14) to give the Finance Minister the right to increase the yearly appropriation determined by the yearly state budget law for contributions to the ESM, by not increasing the total amount of liabilities determined by the budget law. It is necessary because the actual payment of paid capital each year can differ from the one determined by the yearly budget law. This results from Article 41 ESM Treaty.

2)      Changes in the Regulations of the Cabinet of Ministers (5 March 2013, No 120) in order to ensure fulfilment of Article 12(3) ESM Treaty (Collective action clauses shall be included, as of 1 January 2013, in all new euro area government securities, with maturity above one year, in a way which ensures that their legal impact is identical).

3)     Changes in the Order of the Cabinet of Ministers from 20 December 2006 (No 991) to include the ESM there and to ensure proper records of shareholding of Latvia


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

There have been debates concerning the fact that after joining the Eurozone Latvia will be required to contribute to the ESM. This has been used as well as one of the arguments against joining the Eurozone in 2014.

Latvia will have to pay 186 million euro in five instalments (each amounting to about 37.2 million euro). After the first 12 years during which Latvia will be under the favourable conditions it will have to contribute the remaining 138 million euro. The requested capital will be 1.3 billion euro.[22] It has been argued that this system is unfair considering that e.g. Greece – which was the main beneficiary from crisis funds – has a GDP of 15.900 euro per person, while the GDP in Estonia was only 9.100 euro and in Latvia 6.400 euro.[23]

In a speech given concerning the Euro Implementation law[24] the Prime Minister (Valdis Dombrovskis) on 31 January 2013 emphasized as well the arguments in favour of the ESM:

“The EU and especially Eurozone states are connected with each other and instability in one can lead to instability in others and negatively influence the economy of the whole Eurozone. Therefore contributions to the ESM should be seen not as saving particular Member States but as a contribution to the common stability. It has been as well reminded that a couple of years ago Latvia itself received financial aid and that the mechanism could be compared to that of the IMF”.[25]

He argued that solidarity is one of the founding principles of Europe:

“Neither politically nor economically is our country completely self-sufficient, therefore the contributions can be seen as insurance payments which can be useful for us.”[26]

[1] Art. 50 of the Constitution of Cyprus provides that the President and the Vice-President of the Republic of Cyprus, separately or conjointly, shall have the right of final veto on any law or decision of the House of Representatives or any part thereof concerning, among other issues relating to ‘foreign affairs’, the conclusion of international treaties, conventions and agreements. Art. 57 (3) of the Constitution of Cyprus provides the deadline for the exercise of this veto which is within four days of the date when the decision has been transmitted to the President’s and Vice-President’s respective offices.

[2] Free translation of Article 169 of the Constitution of the Republic of Cyprus.

[4] AKEL is a ‘left-wing’ party that at the time was in government. It was succeeded in government after the presidential elections of 2013 by the ‘Dimokratikos Synagermos’ (Democratic Rally) party. The presidential election in Cyprus leads to a new government, as the President appoints and dismisses the members of the Ministry of Councils of the Republic (see also Question I.1) . 

Lithuania

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.esm.europa.eu/about/legal-documents/index.htm and http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf)

Negotiation
VIII.1
What political/legal difficulties did Lithuania 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.

Lithuania did not take part in the negotiations of the ESM Treaty as it was not a member of the eurozone at the relevant time. It was the second non-eurozone Member State after Latvia to accede to the ESM, on 14 January 2015 and become a member on 3 February 2015.

ratification
VIII.2
How has the ESM Treaty been ratified in Lithuania and on what legal basis/argumentation?

The ESM Treaty was ratified by the Seimas adopting a Law on 18 December 2014.[1] 82 voted in favour, 1 against and one abstended from voting.

The main arguments for ratifying the Treaty remained the same as those behind ratification of the amendment of Art. 136 TFEU. The explanatory memorandum of the Ministry of Finance described the functions of the ESM, noted that support of the ESM entails a strict requirement to adjust the macroeconomic policy, and emphasised that in case Lithuania would find itself in need it would also be able to request assistance from the ESM.[2] In addition, the Ministry argued that Lithuania‘s ESM membership would contribute to regional and interregional cooperation, development of multilateral relationships, strengthen political and economic ties with other States and Lithuania‘s role in the global arena.[3]

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

No political or legal difficulties were encountered during the process of ratification.

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

No.

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?
      

Under Art. 2. of the Law ratifying the ESM Treaty, the Seimas’ prior consent is required in two situations:

  1. If a decision needs to be taken under Art. 10 (1) of the ESM Treaty to change the maximum lending volume and the adequacy of the authorized capital stock of the ESM.
  2. If the decision is taken to change the contribution key under Art. 11 of the ESM Treaty, if this would result in a higher contribution key for Lithuania.

The Law was adopted with a broad consensus, ie this document did not raise any discussions at the adoption stage.

The Law does not provide for any role for the Seimas with respect to the payment of the first installment to the ESM. However, the payment was planned in Art. 12 (10) (1) of the Law on the Fiscal Indicators of the State and Municipal Budgets, which was approved by the Seimas. Consequently, the decision to make the payment was taken by the Government specifically referring to the Law on the Fiscal Indicators of the State and Municipal Budgets.[4]

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 rules governing the taking of the decisions to grant financial assistance and the disbursement of tranches are found in a decision adopted by the Government.[5] The decision requires the Minister of Finance to obtain an approval of the Government on these issues. However, the Parliament is not directly involved in taking these decisions. Under part 7 of the said decision the Government informs the Seimas (its committee on European Affairs) about the positions no later than within 5 days after their adoption.[6] The decisions to grant financial assistance and the disbursement of tranches require consent of the Government in corpore.[7]

A consent of the Government in corpore is necessary for the following decisions:

  1. establishment, cancellation, administration and usage of reserve and other funds under ESM Arts. 4(4) and 24;
  2. issuing of new shares other than at par under ESM Art. 8(2);
  3. payment of an authorized unpaid capital under ESM Art. 9(1);
  4. granting of financial assistance to a member of ESM, setting of conditions of economic policy, choice of measures and financial conditions under ESM Arts. 12, 13, 14, 15, 16, 17 and (or) 18;
  5. review of the instruments of financial assistance under ESM Art. 19;
  6. pricing policy under ESM Art. 20;
  7. decisions seeking to ensure that overdue amounts are settled, under ESM Arts. 25(2) and (3).

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

So far no legal or serious political difficulties have arisen. However, in July 2015 the new leader of the Labour Party Valentinas Mazuronis, who is also a member of the European Parliament, expressed his concern that the plan to provide financial assistance to Greece from the ESM involved too much risk and therefore the Labour Party did not approve of it.[8] As a member of the ruling coalition, the Party initiated a discussion on this issue at the State’s political council.[9] This did not lead to any significant development, as the Government approved its position to issue financial support to Greece nevertheless.[10]

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 changes were made so far.

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

No further information.

 

[1] Lietuvos Respublikos įstatymas dėl Belgijos Karalystės, Vokietijos Federacinės Respublikos, Estijos Respublikos, Airijos, Graikijos Respublikos, Ispanijos Karalystės, Prancūzijos Respublikos, Italijos Respublikos, Kipro Respublikos, Latvijos Respublikos, Lietuvos Respublikos, Liuksemburgo Didžiosios Hercogystės, Vengrijos, Maltos, Nyderlandų Karalystės, Austrijos Respublikos, Portugalijos Respublikos, Slovėnijos Respublikos, Slovakijos Respublikos ir Suomijos Respublikos Europos stabilumo mechanizmo steigimo sutarties ir su ja susijusių dokumentų ratifikavimo, [Law on ratification of the Treaty Establishing the European Stability Mechanism and Relating Documents] Nr. XII-1493, TAR, 2014-01-01, Nr. 21152.

[2] Lietuvos Respublikos Finansų Ministerija, Lietuvos Respublikos įstatymo Dėl Belgijos Karalystės, Vokietijos Federacinės Respublikos, Estijos Respublikos, Airijos, Graikijos Respublikos, Ispanijos Karalystės, Prancūzijos Respublikos, Italijos Respublikos, Kipro Respublikos, Latvijos Respublikos, Liuksemburgo Didžiosios Hercogystės, Maltos, Nyderlandų Karalystės, Austrijos Respublikos, Portugalijos Respublikos, Slovėnijos Respublikos, Slovakijos Respublikos ir Suomijos Respublikos Europos Stabilumo Mechanizmo steigimo sutarties ratifikavimo projekto XIIP-2559 aiškinamasis raštas, [Explanatory Memorandum on the Draft Law on Ratification of the Treaty Establishing the European Stability Mechanism No. XIP-2559] 2014-11-26.

[3] Ibid.

[4] Lietuvos Respublikos Vyriausybės nutarimas Dėl Lietuvos Respublikos įmokėtojo kapitalo dalies Europos stabilumo mechanizme sumokėjimo [Decision of the Government of Lithuania on payment of the contribution key to the European Stability Mechanism] TAR, 2015-01812.

[5] Lietuvos Respublikos Vyriausybės nutarimas Dėl LR dalyvavimo Europos Stabilumo Mechanizmo valdytojų taryboje ir direktorių valdyboje. Lietuvos Respublikos dalyvavimo Europos stabilumo mechanizme tvarkos aprašas [Decision of the Government of Lithuania on Lithuania’s participation at the European Stability Mechanism Board of Governors and the Board of Directors], 2015-01-01, TAR Nr. 2902 [act adopted on 18 February 2015].

[6] Ibid, part 7.

[7] Ibid.

[8] ELTA, Valentinas Mazuronis: Graikijos gelbėjimo projektas yra per daug rizikingas.  [Valentinas Mazuronis: Greece‘s rescue package involves too much risk] 2015-07-17 www.ve.lt

[9] The political council of the ruling coalition is an informal political body, composed of the leaders of the parties participating at the ruling coalition. The council does not have a legal status, however, it is often gathered to discuss the most topical political issues, most importantly – the formation of the ruling coalition and other significant topics that require a common position of the coalition. In January 2015 it has been gathered to discuss the prospect of maintaining the ruling coalition as the president of honour of the Labour Party V. Uspaskich encouraged the members of the party to vote against the draft budget of 2015. Most recently in September 2015 it discussed the adoption of the Social Model, which seeks to liberalize labour relationships in the country.

[10] BNS, Vyriausybė pritarė EK deryboms dėl paramos Graikijai [The Government approved European Commission‘s negotiations on Support to Greece], www.lzinios.lt, 2015-07-16.

Luxembourg

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 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.

Ratification
VIII.2
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[1] . 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.[2] 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)).[3]

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.[4] 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).

Ratification difficulties       
VIII.3
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.[5] 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.[6] 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.[7] 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.[8]

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).[9] The main reason for this amendment was to grant equal status to both mechanisms.[10]

The third amendment added a new Article 4 to the law, which itself added a new Article 4 to the Luxembourg EFSF-law.[11] 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.[12]

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.[13]

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.[14] 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.[15] The guarantees have to be treated as financial engagements in the sense of Articles 14, 15 and 19 of the national treasury law.[16] This means that the guarantees have to form part of the national list of budgetary expenses.[17] 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.[18]

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.[19] 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.[20] 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.[21]

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.[22] 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.

Case law        
VIII.4
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).

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?      

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    
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.

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.[23] 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.

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

No difficulties known in the application of the ESM.

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 relevant changes.

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

No other relevant information.



[1] During the reading of the law classified as projet de loi 6405.

[2] MEMORIAL – Journal Officiel du Grand-Duché de Luxembourg, Recueil de Legislation, A – N° 135, p. 1709-1723, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/129/168/112687.pdf.

[3] Projet de loi 6405, p. 4, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/194/006/109035.pdf.

[4] Chambre des Députés, Bulletin de Vote, 26 june 2012, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/122/137/112316.pdf.

[5] Projet de Loi 6406, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[6]               Amendements gouvernementaux, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[7]               Amendements gouvernementaux, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[8]               Amendements gouvernementaux, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[9]               Amendements gouvernementaux, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[10]              Amendements gouvernementaux, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[11]              Amendements gouvernementaux, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[12]              Amendements gouvernementaux, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[13] Amendements gouvernementaux, p. 3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/105/111084.pdf.

[14] Avis du Conseil d’Etat, 22 May 2012, p. 1, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/148/111487.pdf.

[15] Avis du Conseil d’Etat, 22 May 2012, p. 1, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/148/111487.pdf.

[16] See in particular Article 19 of the Luxembourg Treasury Law (Loi du 8 juin 1999 sur le Budget, la Comptabilité et la Trésorerie de l’Etat), http://www.legilux.public.lu/leg/a/archives/1999/0068/a068.pdf#page=6.

[17] Avis du Conseil d’Etat, 22 May 2012, p. 2, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/148/111487.pdf.

[18] Avis du Conseil d’Etat, 22 May 2012, p. 2-3, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/119/148/111487.pdf.

[19] Avis complémentaire du Conseil d’Etat, 12 June 2012, p. 1, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/123/128/112227.pdf.

[20] Rapport de la Commission des Finances et du Budget, 22 June 2012, p. 10, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/129/147/112486.pdf.

[21] Rapport de la Commission des Finances et du Budget, 22 June 2012, p. 10, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/129/147/112486.pdf.

[22] Chambre des Députés, Séance 34, p. 437, http://www.chd.lu/wps/PA_RoleEtendu/MergeServlet?lot=C-2011-O-034-0005.

[23] MEMORIAL – Journal Officiel du Grand-Duché de Luxembourg, Recueil de Legislation, A – N° 135, p. 1724, http://www.chd.lu/wps/PA_RoleEtendu/FTSByteServingServletImpl/?path=/export/exped/sexpdata/Mag/129/168/112687.pdf.

Malta

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 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).

Ratification
VIII.2
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   
VIII.3
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  
VIII.4
Is there a (constitutional) court judgment on the ESM Treaty?

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

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?      

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       
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 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     
VIII.7
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.

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 information known.         

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

Not applicable.

[1]                       http://www.parlament.mt/file.aspx?f=23449

[2]                       See Legal Notice 232 of 2012, http://www.doi-archived.gov.mt/en/legalnotices/2012/07/LN%20232.pdf

[3]              See Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 687 et seq., http://www.parlament.mt/file.aspx?f=32225; Transcript of Sitting 496 of the Plenary Session of the House of Representatives on 2 July 2012, p. 734 et seq., http://www.parlament.mt/file.aspx?f=36398; Transcript of Sitting 498 of the Plenary Session of the House of Representatives on 4 July 2012, p. 828 et seq., http://www.parlament.mt/file.aspx?f=36400

[4]              Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 687 et seq., http://www.parlament.mt/file.aspx?f=32225

[5]              Transcript of Sitting 495 of the Plenary Session of the House of Representatives on 27 June 2012, p. 697, http://www.parlament.mt/file.aspx?f=32225

[6]                       See the report in Times of Malta, ‘ESM: Malta’s €58m bill’, 28 June 2012, http://www.timesofmalta.com/articles/view/20120628/local/ESM-Malta-s-58m-bill.426293

[7] Article 5 of Act XII of 2012

Netherlands

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.

Poland

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 Poland 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.

On 31 January 2012 the Senat’s Budget and Public Finances Committee and the EU Affairs Committee discussed some aspects of the ESM Treaty at their joint meeting.[1]  The Senators asked the following questions: whether signing the Fiscal Compact will oblige Poland to pay contributions to the ESM and whether signing the ESM Treaty it is the only way to get funds from the ESM.[2] In reply, the representative of the Ministry of Finance underlined that the decision about signing the ESM Treaty will need to be taken at the moment when Poland will be joining the Eurozone.[3] Similar problems were later discussed by the ratification of the Fiscal Compact in the Senat, including the question of how much Poland would have to contribute to the ESM.[4]

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

Not relevant for Poland.

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

Not relevant for Poland.

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

No.

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?    

Not relevant for Poland.

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.

Not relevant for Poland.

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

Not relevant for Poland.

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?

Not relevant for Poland.

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

No other relevant information.

[1]  Zapis stenograficzny ze wspólnego posiedzenia Komisji Budżetu i Finansów Publicznych (Nr 9) oraz Komisji Spraw Unii Europejskiej (Nr 11), 31.01.2012.

[2]  Id, pp.10-12.

[3]  Id, p. 28.

[4]  27. Posiedzenie Senatu, 21.02.2013, p.126, http://www.senat.gov.pl/prace/senat/posiedzenia/przebieg,39,1.html

Portugal

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 Portugal 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.

Portugal did not oppose the ESM within the EU.

At the time in which ESM started being discussed in parliament, Prime-Minister José Socrates was still in office. Foreign Affairs Minister Luís Amado presented both the ESM and the amendment to article 136.º TFEU as an important step towards the stability of the euro. Discussions in parliament in December 2010 and January 2011 reveal that there was an overall agreement over the ESM. However, PPD/PSD raised serious concerns about what would be the consequences of non-complying with the commitments imposed by the new mechanism; whether resorting to the IMF would be the “solution”.[1]

In July 2011, the Minister of Finance signed the Treaty approving the ESM. Portugal was both a member and a beneficiary of ESM. At that point a new government, composed by a PPD/PSD and CDS/PP coalition was already in power too. Pedro Passos Coelho was Prime-minister. A modified version of the Treaty, incorporating amendments aimed at improving the effectiveness of the mechanism, was signed in Brussels on 2 February 2012.

 

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

The procedure of ratification of an international treaty in Portugal is part of the Parliament´s political and legislative competence, as is stated on Article 161 of the CRP. [2]In what concerns the type of document adopted, accordingly with Article 166 (5) CRP, in the case of an international treaty the Parliament adopts a Resolution. Following the approval of the Parliament´s the resolution, by simple majority, in this case about the ESM Treaty, the document was signed by the President in accordance with Article 135 b) CRP. The Resolution on the ESM Treaty ratification was approved by the Parliament on the 13th of April with votes against of PCP, BE, PE, abstention of Pedro Delgado Alves (PS), Rui Pedro Duarte (PS) and favorable votes of PSD, PS, CDS-PP, which were the same votes of the approval of the Fiscal Compact.[3]

The ESM Treaty was approved first by Resolução da Assembleia da República n.º 80/2012 and finally ratified by the Decree of the President of the Republic n.º 93/2012 (published on the Diário da República I, n.º 117, 19 June 2012). The ratification then was notified to the EU Council on the 4th of July 2012. [4]

 

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

Resolução da Assembleia da República n.º 80/2012 (see question VIII.2) was approved with votes against of PCP, BE, PE, abstention of Pedro Delgado Alves (PS), Rui Pedro Duarte (PS) and favorable votes of PSD, PS, CDS-PP. Overall, the Parliament approved it by 204 votes (PSD, PS and CDS-PP) to 24 (PEV, PCP, BE), with 2 abstentions (two PS MP against 96 MP PS). [5]

 

Most of the political and legal quarrels during the debate coincide with those of the ratification of the TSCG (see question IX.1 onwards). On the same day (13 April 2012) the parliament discussed/voted two proposals of resolutions on the ratification of two international treaties (respectively on ESM and TSCG); three projects of resolution proposing a referendum about the TSCG and finally one project proposing new rules on a renewed national consensus about the EU (TSCG-related). Specifically on the negotiation of the ESM, the government was criticised for not having pushed for a higher financing capacity during negotiations – beyond the 500 000 millions euros. [6]

The Socialists regretted that the discussion and approval of all these initiatives was taking place at the same time therefore preventing a deeper analysis of implications. PS accused the government of being too hasty – Portugal would be the first EU MS to ratify the TSCG. [7] The Prime-Minister highlighted the importance of the swift approval for the external credibility of the State; the stability of the Eurozone and the maintenance of the single currency. The will to be the first Member State to ratify the Treaties was reiterated several times during the debate, as a way to “show that Portugal is compromised with its own recovery and that of the EU”.

 

Other several negative aspects were also raised: the fiercest critiques were directed to the lack of a social agenda accompanying the Treaties, to combat the increase in unemployment rates. The PS put forward the possibility of creating an additional protocol to the Treaties, which would add a ‘social dimension’ – mainly focused on the correlation between economic growth and combating unemployment. The BE was particularly fierce in criticising the lack of ‘democratic participation’ in the whole process, with the denial of a referendum (see the answer to question IX.2). The PCP, on the other hand, claimed that the process presented a threat to the national sovereignty in political, economic and budgetary terms, adding that even the Constitutional Court was menaced and subdued to the Court of Justice of the European Union. The ‘golden rule’ was seen as a way to violate the Constitution, by imposing budgetary rules with a permanent and mandatory character, which will lead to the impoverishment of the country and loss of the democratic and free exercise of the people’s will. This party proposed no additional protocol, but rather a clear rejection of the ratification – and a referendum (see the answer to question IX.2).

 

The Prime Minister replied that the Government had the democratic legitimacy to present the ratification proposals, since it was elected by the people, and, as such, a discussion in the Parliament would amount to the most transparent way of ratifying the Treaties.

 

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

No. 

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?

The payment of the first instalment required by the ESM is part of the law approving the Budget for 2013.[8] The procedure to approve the Budget is posited in Article 161 g) of the CRP, which states that the Parliament passes into law the laws on the most important options of national plans and the Budget, after proposal of the Government. Concerning the particular issue of the payment of part of the capital of the ESM, Article 130 of the Lei 66B 2012 (budgetary law) determines that the Government is authorized to proceed to it until the limit of € 803 000 000.[9]

 

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?

Article 1 and 2 of Law n.º 8-A/2010, of 18 May gives full power to the Minister of Finance to negotiate and decide on Portugal’s (terms of) participation in any EU coordinated effort to guarantee the economical and financial stability of the euro through the concession of loans to Eurozone Member States. Parliament only has to be informed and updated (article 7).

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

See questions VIII.1, VIII.2, VIII.3.

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?

See question VIII.5.

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

No relevant information available to report.

[1] http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n31-0059&type=texto&q=Mecanismo%20Europeu%20de%20Estabilidade&sm=p

[2]           Same procedure mention on question V.2.

[3]           http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=36836.

[4]           See. DR_ESM.pdf and Ratification Tables. Pdf.

[5] See: http://www.parlamento.pt/ActividadeParlamentar/Paginas/DetalheIniciativa.aspx?BID=36836

[6]           http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n95-0020&type=texto&q=regra%20de%20ouro, and http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l11sl2n34-0048&type=texto&q=Mecanismo%20Europeu%20de%20Estabilidade&sm=p

[7]           http://debates.parlamento.pt/page.aspx?cid=r3.dar&diary=s1l12sl1n95-0020&type=texto&q=regra%20de%20ouro

[8]           See: LEI-66B-2012_OE2013_DR.pdf.

[9]           See: Article 130 of  LEI-66B-2012_OE2013_DR.pdf, also, http://debates.parlamento.pt/page.aspx?cid=r3.dar_s2&diary=s2al12sl2n16-0103&type=texto&q=mecanismo%20europeu%20de%20estabilidade&sm=p

 

Romania

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 Romania 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.

Romania is not a party to the ESM Treaty as it is not a Eurozone Member State.

Slovenia

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 19 contracting parties are the member states of the Eurozone, but the ESM Treaty is concluded outside EU law.    
(
http://www.esm.europa.eu/about/legal-documents/index.htm and http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf)

Negotiation
VIII.1
What political/legal difficulties
did Slovenia 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.

According to the media, the Committee on Foreign Policy[1] of the National Assembly discussed the stipulation of the ESM during the session that took place on June 2, 2011. The transcript of the session in not available. During this meeting the National Assembly conferred to the Minister of Finance the right to sign the treaty on July 11, 2011.

The Committee on Foreign Policy of the National Assembly discussed the issue again on October 12, 2011, evaluated again the initiative for the conclusion of the agreement and decided to approve it. The transcript is however not available.[2]

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

The ESM was ratified through the Act ratifying the Treaty Establishing the European Stability Mechanism, adopted in April 2012,[3] a regular parliamentary act. The act was amended in February 2013, with the Act amending the act ratifying the Treaty establishing the European Stability Mechanism.

16 and 18 members of respectively the Committee on Finance and Monetary Policy and the Committee on Foreign Policy voted in favour of the act. The Act ratifying the Treaty Establishing the European Stability Mechanism was finally adopted on April 19, 2012. The Act was later amended two times. The Act amending the act ratifying the Treaty establishing the European Stability Mechanism was adopted in February 2013, with 86 votes in favour and none against. Further, in November 2013, the Act ratifying the adaptation to be made to the Treaty establishing the European Stability Mechanism was adopted.

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

The proposed Act ratifying the Treaty Establishing the European Stability Mechanism was discussed by the Committee for Foreign Affairs on April 11, 2012. During the session Joze Horvat (NSi) asked whether there will be some implications for the sovereignty of Slovenia in designing its economic policy. Alenka Bratusek (PS) asked why such agreement would be good for Slovenia. Joze Jerovsek (SDS) questioned how such institution could be monitored. Marija Pelvack (DeSus) asked what implications the treaty would have for the budget of Slovenia. Ultimately, the Committee of Foreign Policy supported the act. [4]

The vote for the act took place on April 19, 2012. The leading coalition supported the ratification. Also some parties in the opposition supported the ratification. Pozitivna Slovenia, for instance maintained that being a member of the Eurozone mitigates the negative impact of the crisis for Slovenia, and emphasized that the destiny of Slovenia is strictly related to the destiny of the Euro. It thus concluded that it is in the interest of Slovenia to safeguard the Euro. At the time of the voting, 74 deputies out of a total of 90 voted in favour of the ratification, none voted against.[5]

Dejan Krušec, the State Secretary at the Ministry of Finance, explained that ratification of the ESM will not have a direct impact on the sovereign decisions of Slovenia in its monetary policy. He maintained that the ESM financial assistance will help the euro area, which was facing severe difficulties.[6] Mitja Mavko for the Ministry of Finance explained that the government believed that the law was necessary to bring financial stability in the euro area. He emphasized that the developments in global financial markets are increasingly uncertain, and the establishment of such a permanent mechanism will provide a better defense to the euro area.[7] Political parties member of the opposition supported the ratification process.

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

Not applicable.

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?

Given that the payment of the first instalment is provided in the annual budget, its approval probably followed the general procedure for the approval of the budget. In other words, the government suggested the payment of the first instalment as part of the annual budget, and the National Assembly had to confirm it.

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 ESM Treaty was ratified through an act which does not clarify the role of the parliament in granting financial assistance. Article 4 of the Act Regulating the Guarantees of the Republic of Slovenia for Ensuring Financial Stability in the Euro Area however provides that the Government should inform the National Assembly about the decisions to grant any guaranty. In the adoption of each funding program the government and the National Assembly shall cooperate in accordance with the Act on Cooperation between the National Assembly and the Government in EU Affairs. It seems that this approach has been adopted also for financial aid granted through the ESM mechanism. This was for instance the case when financial aid was granted to Spain.[8]

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

On July 19, 2012, the Committee on EU Affairs discussed the proposal to confirm the financial assistance to Spain. Several members questioned how such aid would affect Slovenia’s own financial stability. For example, Saša Kos (PS) asked whether it would be possible to freeze Slovenia’s obligation, until the financial position of Slovenia becomes more stable. Roman Jakič (PS) asked whether Slovenia would have to actually pay money, or, for the time, it was only offering a guarantee. He also questioned whether Slovenia would have the actual ability to pay such guarantee, if such obligation arises. The Committee ultimately supported the proposal with 9 votes in favour (15 in total), and none against.[9]

See also answer to question 46.

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 reference has been found to this.

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

Not applicable.

Slovakia

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%