Date of acceptance
:
08/10/2012
Translation
C-370/12 - 24
Observations of the Netherlands
Case C-370/12*
Document lodged by:
Kingdom of the Netherlands
Usual name of the case:
PRINGLE
Date lodged:
14 September 2012
WRITTEN OBSERVATIONS
by the Netherlands Government, lodged pursuant to the second paragraph of
Article 23 of the Protocol on the Statute of the Court of Justice of the
European Union
in Case C-370/12 Pringle
In the abovementioned case, the Netherlands Government, represented by Corinna
Wisselsen and Mielle Bulterman, head and employee respectively at the
Department of European law of the Legal Affairs Directorate of the Ministry of
Foreign Affairs in The Hague, submits the following observations for the
consideration of the Court.
I. Introduction
1
By an order for reference of 31 July 2012, the Supreme Court (Ireland) (‘the
referring court’) referred a number of questions to the Court of Justice for a
preliminary ruling pursuant to Article 267 TFEU concerning:
–
the validity of European Council Decision 2011/199/EU of 25 March 2011
amending Article 136 of the Treaty on the Functioning of the European
Union with regard to a stability mechanism for Member States whose
currency is the euro (OJ 2011, L 91, p. 1; ‘the European Council Decision’).
* Language of the case: English.
OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
–
the compatibility with European Union law of the Treaty establishing the
European Stability Mechanism concluded in Brussels on 2 February 2012 1
(‘the ESM Treaty’).
–
the relevance of the entry into force of the European Council Decision for
the approval of the ESM Treaty.
2
The questions have been raised in the context of an action by Thomas Pringle
(‘Pringle’) against the Irish Government, Ireland and the Attorney General (‘the
defendants’) in relation to the ratification of the ESM Treaty by Ireland.
II. The facts
3
Pringle is a Member of the Lower House of the Irish Parliament (Dáil Éireann).
On 13 April 2012, in his capacity as a natural person, he initiated proceedings
against the defendants. In these proceedings he disputes inter alia the validity of
the European Council Decision and the compatibility of the ESM Treaty with
European Union law. On 17 July 2012, his action was dismissed on all points by
the High Court.
4
Pringle lodged an appeal against the decision of the High Court with the referring
court. The referring court has decided to refer questions for a preliminary ruling
concerning the European Council Decision and the ESM Treaty. On account of
the unusual urgency and the public interest of this case, the referring court has
requested that the Court deal with these questions in accordance with the
accelerated procedure under Article 104a of the Rules of Procedure.
5
On 14 August 2012, the President of the Court decided that the order for reference
would be dealt with in accordance with the accelerated procedure.
III. Legal framework
International law framework
ESM Treaty
6
The most relevant recitals in the preamble to the ESM Treaty for these written
observations read as follows:
‘1. The European Council agreed on 17 December 2010 on the need for euro area
Member States to establish a permanent stability mechanism. This European
Stability Mechanism (“ESM”) will assume the tasks currently fulfilled by the
1 Concluded between the Kingdom of Belgium, the Federal Republic of Germany, the
Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French
Republic, the Italian Republic, the Republic of Cyprus, the Grand-Duchy of Luxembourg,
Malta, the Kingdom of the Netherlands, the Austrian Republic, the Portuguese Republic,
the Slovenian Republic, the Slovakian Republic and the Republic of Finland.
2
European Financial Stability Facility (“EFSF”) and the European Financial
Stabilisation Mechanism (“EFSM”) in providing, where needed, financial
assistance to euro area Member States.
2. On 25 March 2011, the European Council adopted Decision 2011/199/EU
amending Article 136 of the Treaty on the Functioning of the European Union
with regard to a stability mechanism for Member States whose currency is the
euro adding the following paragraph to Article 136: “The Member States whose
currency is the euro may establish a stability mechanism to be activated if
indispensable to safeguard the stability of the euro area as a whole. The granting
of any required financial assistance under the mechanism will be made subject to
strict conditionality”.
3. With a view to increasing the effectiveness of the financial assistance and to
prevent the risk of financial contagion, the Heads of State or Government of the
Member States whose currency is the euro agreed on 21 July 2011 to “increase
[the] flexibility [of the ESM] linked to appropriate conditionality”.
4. Strict observance of the European Union framework, the integrated macro-
economic surveillance, in particular the Stability and Growth Pact, the
macroeconomic imbalances framework and the economic governance rules of the
European Union, should remain the first line of defence against confidence crises
affecting the stability of the euro area.
…
10. On 20 June 2011, the representatives of the Governments of the Member
States of the European Union authorised the Contracting Parties of this Treaty to
request the European Commission and the European Central Bank ("ECB") to
perform the tasks provided for in this Treaty.
…
16. Disputes concerning the interpretation and application of this Treaty arising
between the Contracting Parties or between the Contracting Parties and the ESM
should be submitted to the jurisdiction of the Court of Justice of the European
Union, in accordance with Article 273 of the Treaty on the Functioning of the
European Union (“TFEU”).’
7
Article 3 of the ESM Treaty, entitled ‘Purpose’, reads as follows:
‘The purpose of the ESM shall be to mobilise funding and provide stability
support under strict conditionality, appropriate to the financial assistance
instrument chosen, to the benefit of ESM Members which are experiencing, or are
threatened by, severe financing problems, if indispensable to safeguard the
financial stability of the euro area as a whole and of its Member States. For this
purpose, the ESM shall be entitled to raise funds by issuing financial instruments
3
OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
or by entering into financial or other agreements or arrangements with ESM
Members, financial institutions or other third parties.’
8
Article 12, entitled ‘Principles’, reads as follows:
‘1. If indispensable to safeguard the financial stability of the euro area as a whole
and of its Member States, the ESM may provide stability support to an ESM
Member subject to strict conditionality, appropriate to the financial assistance
instrument chosen. Such conditionality may range from a macro-economic
adjustment programme to continuous respect of pre-established eligibility
conditions.
… ‘
9
Article 13, entitled ‘Procedure for granting stability support’, reads as follows:
“1. An ESM Member may address a request for stability support to the
Chairperson of the Board of Governors. Such a request shall indicate the
financial assistance instrument(s) to be considered. On receipt of such a request,
the Chairperson of the Board of Governors shall entrust the European
Commission, in liaison with the ECB, with the following tasks:
(a) to assess the existence of a risk to the financial stability of the euro area as a
whole or of its Member States, unless the ECB has already submitted an analysis
under Article 18(2);
(b) to assess whether public debt is sustainable. Wherever appropriate and
possible, such an assessment is expected to be conducted together with the IMF;
(c) to assess the actual or potential financing needs of the ESM Member
concerned.
2. On the basis of the request of the ESM Member and the assessment referred to
in paragraph 1, the Board of Governors may decide to grant, in principle,
stability support to the ESM Member concerned in the form of a financial
assistance facility.
3. If a decision pursuant to paragraph 2 is adopted, the Board of Governors shall
entrust the European Commission – in liaison with the ECB and, wherever
possible, together with the IMF – with the task of negotiating, with the ESM
Member concerned, a memorandum of understanding (an "MoU") detailing the
conditionality attached to the financial assistance facility. The content of the MoU
shall reflect the severity of the weaknesses to be addressed and the financial
assistance instrument chosen. In parallel, the Managing Director of the ESM shall
prepare a proposal for a financial assistance facility agreement, including the
financial terms and conditions and the choice of instruments, to be adopted by the
Board of Governors.
4
The MoU shall be fully consistent with the measures of economic policy
coordination provided for in the TFEU, in particular with any act of European
Union law, including any opinion, warning, recommendation or decision
addressed to the ESM Member concerned.
4. The European Commission shall sign the MoU on behalf of the ESM, subject to
prior compliance with the conditions set out in paragraph 3 and approval by the
Board of Governors.
5. The Board of Directors shall approve the financial assistance facility
agreement detailing the financial aspects of the stability support to be granted
and, where applicable, the disbursement of the first tranche of the assistance.
6. The ESM shall establish an appropriate warning system to ensure that it
receives any repayments due by the ESM Member under the stability support in a
timely manner.
7. The European Commission – in liaison with the ECB and, wherever possible,
together with the IMF – shall be entrusted with monitoring compliance with the
conditionality attached to the financial assistance facility.
10 Article 14, entitled, ‘ESM precautionary financial assistance’, reads as follows:
‘1. The Board of Governors may decide to grant precautionary financial
assistance in the form of a precautionary conditioned credit line or in the form of
an enhanced conditions credit line in accordance with Article 12(1).
2. The conditionality attached to the ESM precautionary financial assistance shall
be detailed in the MoU, in accordance with Article 13(3).
…
6. After the ESM Member has drawn funds for the first time (via a loan or a
primary market purchase), the Board of Directors shall decide by mutual
agreement on a proposal from the Managing Director and based on an
assessment conducted by the European Commission, in liaison with the ECB,
whether the credit line continues to be adequate or whether another form of
financial assistance is needed’
11 Article 15, entitled ‘Financial assistance for the re-capitalisation of financial
institutions of an ESM Member’, reads as follows:
‘1. The Board of Governors may decide to grant financial assistance through
loans to an ESM Member for the specific purpose of re-capitalising the financial
institutions of that ESM Member.
5
OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
2. The conditionality attached to financial assistance for the re-capitalisation of
an ESM Member’s financial institutions shall be detailed in the MoU, in
accordance with Article 13(3).
…
5. Where applicable, the Board of Directors shall decide by mutual agreement, on
a proposal from the Managing Director and after having received a report from
the European Commission in accordance with Article 13(7), the disbursement of
the tranches of the financial assistance subsequent to the first tranche’
12 Article 16, entitled ‘ESM loans’, reads as follows:
‘1. The Board of Governors may decide to grant financial assistance in the form
of a loan to an ESM Member, in accordance with Article 12.
2. The conditionality attached to the ESM loans shall be contained in a macro-
economic adjustment programme detailed in the MoU, in accordance with Article
13(3).
…
5. The Board of Directors shall decide by mutual agreement, on a proposal from
the Managing Director and after having received a report from the European
Commission in accordance with Article 13(7), the disbursement of the tranches of
the financial assistance subsequent to the first tranche.’
13 Article 17, entitled ‘Primary market support facility’, reads as follows:
‘1. The Board of Governors may decide to arrange for the purchase of bonds of
an ESM Member on the primary market, in accordance with Article 12 and with
the objective of maximising the cost efficiency of the financial assistance.
2. The conditionality attached to the primary market support facility shall be
detailed in the MoU, in accordance with Article 13(3).
…
5. The Board of Directors shall decide by mutual agreement, on a proposal from
the Managing Director and after having received a report from the European
Commission in accordance with Article 13(7), the disbursement of financial
assistance to a beneficiary Member State through operations on the primary
market.’
14 Article 18, entitled ‘Secondary market support facility’, reads as follows:
6
‘1. The Board of Governors may decide to arrange for operations on the
secondary market in relation to the bonds of an ESM Member in accordance with
Article 12(1).
2. Decisions on interventions on the secondary market to address contagion shall
be taken on the basis of an analysis of the ECB recognising the existence of
exceptional financial market circumstances and risks to financial stability.
3. The conditionality attached to the secondary market support facility shall be
detailed in the MoU, in accordance with Article 13(3).
…’
15 Article 37, entitled ‘Interpretation and dispute settlement’, reads as follows:
‘1. Any question of interpretation or application of the provisions of this Treaty
and the by-laws of the ESM arising between any ESM Member and the ESM, or
between ESM Members, shall be submitted to the Board of Directors for its
decision.
2. The Board of Governors shall decide on any dispute arising between an ESM
Member and the ESM, or between ESM Members, in connection with the
interpretation and application of this Treaty, including any dispute about the
compatibility of the decisions adopted by the ESM with this Treaty. The votes of
the member(s) of the Board of Governors of the ESM Member(s) concerned shall
be suspended when the Board of Governors votes on such decision and the voting
threshold needed for the adoption of that decision shall be recalculated
accordingly.
3. If an ESM Member contests the decision referred to in paragraph 2, the dispute
shall be submitted to the Court of Justice of the European Union. The judgement
of the Court of Justice of the European Union shall be binding on the parties in
the procedure, which shall take the necessary measures to comply with the
judgment within a period to be decided by said Court.’
European Union law framework
EU Treaty
16 Article 48(6) EU, entitled ‘Simplified revision procedures’, reads as follows:
‘The Government of any Member State, the European Parliament or the
Commission may submit to the European Council proposals for revising all or
part of the provisions of Part Three of the Treaty on the Functioning of the
European Union relating to the internal policies and action of the Union.
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OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
The European Council may adopt a decision amending all or part of the
provisions of Part Three of the Treaty on the Functioning of the European Union.
The European Council shall act by unanimity after consulting the European
Parliament and the Commission, and the European Central Bank in the case of
institutional changes in the monetary area. That decision shall not enter into force
until it is approved by the Member States in accordance with their respective
constitutional requirements.
The decision referred to in the second subparagraph shall not increase the
competences conferred on the Union in the Treaties.’
Treaty on the Functioning of the European Union
17 The most relevant provisions from Title VIII (economic and monetary policy) of
the Third Part of the TFEU for these written observations are the following ones.
18 Article 122 TFEU reads as follows:
‘1. Without prejudice to any other procedures provided for in the Treaties, the
Council, on a proposal from the Commission, may decide, in a spirit of solidarity
between Member States, upon the measures appropriate to the economic situation,
in particular if severe difficulties arise in the supply of certain products, notably
in the area of energy.
2. Where a Member State is in difficulties or is seriously threatened with severe
difficulties caused by natural disasters or exceptional occurrences beyond its
control, the Council, on a proposal from the Commission, may grant, under
certain conditions, Union financial assistance to the Member State concerned.
The President of the Council shall inform the European Parliament of the decision
taken.’
19 Article 123 TFEU reads as follows:
‘1. Overdraft facilities or any other type of credit facility with the European
Central Bank or with the central banks of the Member States (hereinafter referred
to as “national central banks”) in favour of Union institutions, bodies, offices or
agencies, central governments, regional, local or other public authorities, other
bodies governed by public law, or public undertakings of Member States shall be
prohibited, as shall the purchase directly from them by the European Central
Bank or national central banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the
context of the supply of reserves by central banks, shall be given the same
treatment by national central banks and the European Central Bank as private
credit institutions.’
20 Article 125 TFEU reads as follows:
8
‘1. The Union shall not be liable for or assume the commitments of central
governments, regional, local or other public authorities, other bodies governed by
public law, or public undertakings of any Member State, without prejudice to
mutual financial guarantees for the joint execution of a specific project. A
Member State shall not be liable for or assume the commitments of central
governments, regional, local or other public authorities, other bodies governed by
public law, or public undertakings of another Member State, without prejudice to
mutual financial guarantees for the joint execution of a specific project.
2. The Council, on a proposal from the Commission and after consulting the
European Parliament, may, as required, specify definitions for the application of
the prohibitions referred to in Articles 123 and 124 and in this Article.’
21 The current Article 136 TFEU reads as follows:
‘1. In order to ensure the proper functioning of economic and monetary union,
and in accordance with the relevant provisions of the Treaties, the Council shall,
in accordance with the relevant procedure from among those referred to in
Articles 121 and 126, with the exception of the procedure set out in Article
126(14), adopt measures specific to those Member States whose currency is the
euro: (a) to strengthen the coordination and surveillance of their budgetary
discipline; (b) to set out economic policy guidelines for them, while ensuring that
they are compatible with those adopted for the whole of the Union and are kept
under surveillance.
2. For those measures set out in paragraph 1, only members of the Council
representing Member States whose currency is the euro shall take part in the vote.
A qualified majority of the said members shall be defined in accordance with
Article 238(3)(a).’
IV. The questions referred for a preliminary ruling
22 The referring court has referred the following questions to the Court for a
preliminary ruling:
‘(1) Whether European Council Decision 2011/199/EU of 25th March 2011 is
valid:
–
Having regard to the use of the simplified revision procedure pursuant to
Article 48(6) TEU and, in particular, whether the proposed amendment to Article
136 TFEU involved an increase in the competences conferred on the Union in the
Treaties;
–
Having regard to the content of the proposed amendment, in particular
whether it involves any violation of the Treaties or of the general principles of law
of the Union.
9
OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
(2) Having regard to
–
Articles 2 and 3 TEU and the provisions of Part Three, Title VIII TFEU, and
in particular Articles 119, 120, 121, 122, 123, 125, 126, and 127 TFEU;
–
the exclusive competence of the Union in monetary policy as set out in
Article 3(1)(c) TFEU and in concluding international agreements falling within
the scope of Article 3(2) TFEU;
–
the competence of the Union in coordinating economic policy, in
accordance with Article 2(3) TFEU and Part Three, Title VIII TFEU;
–
the powers and functions of Union Institutions pursuant to principles set out
in Article l3 TEU;
–
the principle of sincere cooperation laid down in Article 4(3) TEU;
–
the general principles of Union law including in particular the general
principle of effective judicial protection and the right to an effective remedy as
provided under Article 47 of the Charter of Fundamental Rights of the European
Union and the general principle of legal certainty;
is a Member State of the European Union whose currency is the euro entitled to
enter into and ratify an international agreement such as the ESM Treaty?
(3) If the European Council Decision is held valid, is the entitlement of a
Member State to enter into and ratify an international agreement such as the ESM
Treaty subject to the entry into force of that Decision?’
IV. Answers to the questions
Question 1
23 By its first question, the referring court wishes to ascertain whether the European
Council Decision is valid. In that connection, the referring court is asking the
Court to review the Decision in the light of (1) the criteria set out in Article 48(6)
EU for the use of the simplified revision procedure and (2) the Treaties and
general principles of law of the Union.
24 This first question of the referring court raises the important preliminary issue of
whether and, if so, to what extent, the Court has jurisdiction to review the validity
of the European Council Decision. The Netherlands Government will first
consider this preliminary issue.
Jurisdiction of the Court of Justice to review the European Council Decision
25 The European Council has been a European Union institution since the entry into
force of the Treaty of Lisbon. Article 267 TFEU states that the Court has
10
jurisdiction to give rulings concerning the validity and interpretation of acts of the
institutions. This jurisdiction therefore also covers acts of the European Council.
26 It follows from the foregoing that the Court does have jurisdiction to give rulings
concerning the validity of the European Council Decision. The Netherlands
Government takes the view that there are limits to this jurisdiction in a case such
as the present one.
27 On the basis of Articles 19 EU and Article 267 TFEU, the Court has jurisdiction
to give rulings concerning questions relating to the interpretation and application
of the Treaties. However, the Court does not have jurisdiction to give rulings
concerning the validity of the Treaties. After all, treaty amendments are approved
by the Member States in accordance with their national procedures. This means
that the Court may not review the validity of treaty amendments. This is also
confirmed by the case-law (see Case C-253/94
Roujansky v
Council [1995] ECR
I-7, paragraph 11; Joined Cases 31/86 and 35/86
LAISA and CPC España v
Council [1988] ECR 2285, paragraphs 6 to 18).
28 Since the present case concerns a European Council Decision which provides for
an amendment to the TFEU in accordance with the simplified procedure, this
means, according to the Netherlands Government, the following. The Court has
jurisdiction to give a ruling concerning the validity of this European Council
Decision, in so far as that review does not amount to a review of the validity of
primary law.
29 Thus, the Court does have jurisdiction to assess the validity of the European
Council Decision in the light of Article 48(6) EU (question 1, indent 1), even
though the Decision has not yet entered into force. However, the Netherlands
Government takes the view that the Court does not have jurisdiction to carry out a
substantive review of the European Council Decision (question 1, indent 2). The
European Council Decision does admittedly have the form of secondary
legislation, but must on the basis of its nature and substance be regarded as
constitutional in nature. It has after all been adopted by the European Council in
its capacity as Treaty author on the basis of Article 48(6) EU. The Decision
includes an amendment to Article 136 TFEU. This means that a substantive
review of the Decision would amount to review by the Court of the validity of
primary law.
The European Council Decision fulfils the requirements of Article 48(6) EU
30 The European Council Decision is based on Article 48(6) EU. This provision
provides for the simplified revision of the TFEU. Article 48(6) EU lays down the
following conditions for amending the TFEU by means of the simplified revision
procedure:
–
The amendment must relate to all or part of the provisions of Part Three of
the TFEU.
11
OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
–
The amendment cannot increase the competences conferred on the Union in
the Treaties.
31 If these two conditions are satisfied, the European Council, acting by unanimity
on a proposal by the government of a Member State, the European Parliament or
the Commission, and after consulting the European Parliament and the
Commission, and the European Central Bank (‘the ECB’) (in the case of
institutional changes in the monetary area), may adopt a decision amending Part
Three of the TFEU. This decision does not enter into force until it is approved by
the Member States in accordance with their respective constitutional requirements.
32 The Netherlands Government submits that all conditions for the use of the
simplified revision procedure have been satisfied.
33 In the first place, the condition that the European Council Decision provides for an
amendment to a provision of Part Three of the TFEU relating to Union policies
and internal actions is satisfied, since the proposed amendment concerns Article
136 TFEU.
34 The condition that the Treaty amendment is not to increase the competences
conferred on the Union is also satisfied. The version of Article 136(3) TFEU as
provided for in the European Council Decision reads as follows:
‘The Member States whose currency is the euro may establish a stability
mechanism to be activated if indispensable to safeguard the stability of the euro
area as a whole. The granting of any required financial assistance under the
mechanism will be made subject to strict conditionality.’
35 This new point 3 of Article 136 TFEU does not involve any increase in the
competences of the European Union. The provision confirms merely that
European Union law allows the Member States whose currency is the euro to
establish a stability mechanism to be activated if indispensable to safeguard the
stability of the euro area. As the Commission observes in point 12 of its Opinion
of 15 February 2011 (COM(2011)70 def) concerning the Decision, it does not
provide a legal basis enabling the Union to adopt measures that would not have
been possible prior to the proposed Treaty amendment.
36 The reason for introducing Article 136(3) TFEU is to create legal certainty
concerning the competence of the Member States to establish and activate a
stability mechanism. The introduction of Article 136(3) TFEU confirms the view
that the Treaties, and in particular Article 125 TFEU, do not prevent the Member
States whose currency is the euro from setting up a stability mechanism if (1)
indispensable to safeguard the stability of the euro area as a whole and (2) the
granting of assistance is made subject to strict conditionality.
37 Finally, the procedural conditions for the application of Article 48(6) EU are also
satisfied. The proposal for the European Council Decision was lodged on 16
12
December 2010 by the Belgian Government. The Commission, the European
Parliament and the ECB 2 were consulted on this proposal. All three of these
institutions have given a positive opinion with respect to the Decision.
38 On 25 March 2011, the Decision was adopted by unanimity. The Decision enters
into force on 1 January 2013 on condition that all Member States have notified the
Secretary-General of the Council of the completion of the national approval
procedure or, failing that, two months after the last notification. At the time of
writing these written observations, these approval procedures are still ongoing.
39 According to the Netherlands Government, it follows from the foregoing that the
European Council Decision fulfils the conditions flowing from Article 48(6) EU
in respect of the use of the simplified revision procedure.
The European Council Decision is not contrary to the Treaties or to general
principles
40 The Netherlands Government submits that the Court does not have jurisdiction to
review the validity of the Treaty amendment set out in the European Council
Decision in the light of the Treaties and the general principles (see paragraphs 27
to 29 above). For the sake of good order, the Netherlands Government would
make the following points.
41 As was explained above, Article 136(3) TFEU does not create any new
competences for the Union or the Member States. This provision confirms that the
Treaties allow the Member States the latitude to establish a Treaty such as the
ESM Treaty. It follows already from this that the Treaty amendment set out in the
European Council Decision is not contrary to the Treaties or to general principles.
42 In answering question 2 the Netherlands Government will examine the question
whether the ESM Treaty is compatible with the Treaties and the general
principles. The conclusion resulting from this examination, namely that the ESM
Treaty is compatible with European Union law, confirms, in the Netherlands
Government’s submission, its view that Article 136(3) TFEU is not contrary to the
Treaties or the general principles.
Conclusion
43 On the basis of the foregoing, the Netherlands Government is of the opinion that
the first question of the referring court must be answered as follows: the European
Council Decision is valid.
Question 2
2 Commission Opinion of 15 February 2011, referred to above; European Parliament
resolution of 23 March 2011(OJ 2011 C 247 E, p. 22); Opinion of the ECB of 17 March
2011 (OJ 2011 C 140, p. 8).
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OBSERVATIONS OF THE NETHERLANDS GOVERNMENT – CASE C-370/12
44 By its second question, the referring court essentially wishes to ascertain whether
European Union law precludes a Member State entering into the ESM Treaty. The
referring court refers in this respect to various Treaty provisions and general
principles. The Netherlands Government observes that a large number of those
provisions do not satisfy the requirement that they be sufficiently precise and
unconditional to enable an individual to rely upon them directly against the ESM
Treaty. That applies inter alia in respect of Articles 2 and 3 of the EU Treaty and
of Articles 119 to 121 TFEU inclusive.
45 In answering question 2, the Netherlands Government will examine in turn the
following issues, which, in its submission, form the substance of the present case:
1. The ESM Treaty does not infringe the competences of the Union in respect of
monetary policy and the coordination of economic policy;
2. The ESM Treaty is not contrary to Articles 122(1) TFEU and 125(1) TFEU;
3. The ESM Treaty does not infringe the powers and functions of the institutions;
4. The ESM Treaty is not contrary to the principle of sincere cooperation.
No infringement of the competences of the Union in respect of monetary and
economic policy
46 The Netherlands Government submits that the ESM Treaty does not infringe the
competences of the Union in respect of monetary policy and the coordination of
economic policy. The ESM Treaty is an instrument intended to support an ESM
Member in the event of a temporary liquidity shortage. It is not an instrument of
monetary policy. It does not give any direction to the monetary policy of the
Union or the coordination of the economic policy of the participating EU Member
States. The Netherlands Government will clarify this position below. The
Netherlands Government will first examine the relationship between the ESM
Treaty and the competence of the Union for monetary policy. It will then examine
the relationship between the ESM Treaty and the competence of the Union in
respect of the coordination of the economic policy of the Member States.
No infringement of the competence of the Union in respect of monetary policy
47 Monetary policy (as described in Article 119(2) TFEU and Article 127 TFEU) is
primarily aimed at achieving price stability by influencing the quantity of money
in circulation in the economy. To that effect, a central bank has a number of
policy instruments at its disposal. As regards the euro, the monetary task has been
entrusted to the European System of Central Banks. The monetary policy of
Member States whose currency is the euro is an exclusive competence of the
Union (Article 3(1)(c) TFEU).
14
48 The ESM Treaty is an instrument by which assistance can be given to an ESM
Member subject to strict conditionality if that is indispensable for the stability of
the euro area as a whole. These conditions are negotiated, in accordance with
Article 13(3) of the ESM Treaty, by the Commission – in liaison with the ECB
and (wherever possible) together with the International Monetary Fund – with the
ESM Member concerned. The conditions are then fixed in an MoU with which the
ESM Member agrees.
49 The fixing of conditions for an ESM Member’s eligibility for assistance does not
fall within monetary policy. The same applies with respect to instruments that are
set up to make that assistance possible. Unlike in the case of monetary policy, the
assistance granted by the ESM is aimed not at price stability, but at the stability of
the euro area as a whole.
50 The granting of assistance in the context of the ESM Treaty is also not contrary to
Article 123 TFEU. This provision prohibits monetary financing, that is to say
overdraft facilities or any other type of credit facility with the ECB or with the
central banks of the Member States. That is not the case at all in the context of the
ESM Treaty since the capital originates from the ESM Members rather than from
the ECB.
No infringement of the competence of the Union in respect of the coordination of
the economic policy of the Member States
51 In addition, the ESM does not infringe the competence of the Union in terms of
coordinating the economic policy of the Member States. The ESM Treaty does not
involve any coordination of policy. The Netherlands Government takes the view
that the measures that an ESM Member takes in order to be eligible for assistance
as fixed in the memorandum of understanding constitute national policy.
52 These measures should of course be adopted in accordance with guidelines,
opinions, warnings, recommendations or decisions of the EU. All ESM Members
are indeed bound when giving effect to the ESM Treaty by their obligations as
Member States of the European Union (see, to that effect, Case C-55/00
Gottardo
[2002] ECR I-413, paragraph 33). According to the Netherlands Government, the
ESM Treaty contains sufficient safeguards to ensure that these obligations are
taken into account when the ESM Treaty is applied.
53 In recital 4 in the preamble to the ESM Treaty, the importance is emphasised of
strict observance of the European Union framework, the integrated
macro-economic surveillance, in particular the Stability and Growth Pact, the
macroeconomic imbalances framework and economic governance rules as the first
line of defence against confidence crises affecting the stability of the euro area.
Article 13(3) of the ESM Treaty states expressly that the MoU is to be fully
consistent with the measures of economic policy coordination provided for in the
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TFEU, in particular with any act of European Union law, including any opinion,
warning, recommendation or decision addressed to the ESM Member concerned.
54 Moreover, the ESM Treaty entrusts tasks and competences to the Commission, the
ECB and the Court of Justice which contribute to ensuring that the EU-law
framework is respected when the ESM Treaty is applied. This point will be
examined in further detail below (paragraphs 71 to 81).
55 The Netherlands Government submits that it follows from the foregoing that the
ESM Treaty contains sufficient safeguards to ensure that the implementation of
the ESM Treaty is fully consistent with the measures of economic policy
coordination provided for in the TFEU. For that reason, the view cannot be taken
that conflict arises with Article 121(2) TFEU, which provides for the competence
of the Union to adopt broad guidelines.
56 On the basis of the foregoing, the Netherlands Government concludes that the
ESM Treaty does not infringe the competences of the European Union in respect
of monetary policy and in respect of the coordination of the economic policy of
the Member States.
No conflict with Articles 122(2) TFEU and 125(1) TFEU
57 The ESM Treaty does not infringe Articles 122(2) TFEU and 125(1) TFEU. The
Netherlands Government will examine these points in turn below.
Article 122(2) TFEU
58 Article 122(2) TFEU provides for the possibility of Union financial assistance to
be granted to a Member State where it is in difficulties or is seriously threatened
with severe difficulties caused by exceptional occurrences beyond its control. The
Netherlands Government submits that this provision does not prevent the ESM
from granting assistance to a Member State in financial need. Article 122(2)
TFEU creates a competence for the Union, but does not preclude the grant of
financial assistance to a Member State by an international organisation such as the
ESM or the IMF.
Article 125(1) TFEU (‘no bail out’ clause)
59 In the Netherlands Government’s submission, Article 125(1) TFEU, the so-called
‘no bail out’ clause, does not constitute an obstacle to approval of the ESM
Treaty. It reaches that view on the basis of a teleological interpretation of Article
125(1) TFEU.
60 Article 125(1) TFEU provides that Member States are not liable for the
commitments of central governments, regional, local or other public authorities of
other Member States. It therefore lays down a prohibition on the obligations of
16
Member States being assumed. This prohibition is aimed at enforcing budgetary
discipline on Member States whose currency is the euro.
61 This works as follows. The prohibition ensures that a Member State can borrow
money on the financial markets in accordance with market conditions. When a
Member State does not operate a sound economic and budgetary policy, it will
only be able to borrow money at a higher rate of interest. That compels the
Member State to put its public expenditure and its policy in order, in respect of
which the Member State enjoys broad discretion. The enforcement of budgetary
discipline is not a goal in itself, but pursues a higher goal: safeguarding the
economic stability of the EU and of the euro area in particular.
62 It is important when interpreting Article 125(1) TFEU to take account of that
higher goal.
63 Member States whose currency is the euro have had to accept that the ‘no bail out’
clause has not had the preventive effect for a number of Member States, as just
described. The interconnectedness of the Member States whose currency is the
euro means that failure to support these Member States jeopardises the stability of
the euro area as a whole.
64 The Netherlands Government submits that Article 125(1) TFEU does not
preclude, in such a situation, measures from being taken the purpose of which is to
avert this serious threat to economic and monetary union. To rely on the
prohibition of Article 125(1) TFEU as an argument against taking such measures
would have a counter-productive effect: it would prohibit a measure the purpose
of which is precisely to attain the objective for which Article 125(1) TFEU was
adopted. In such a situation, Article 125(1) TFEU cannot perform the function
pursued by the prohibition laid down therein.
65 On the basis of the foregoing, the Netherlands Government is of the view that
Article 125(1) TFEU does not preclude a treaty such as the ESM Treaty. Indeed,
the purpose of the ESM Treaty is to make assistance to Member States possible, if
indispensable to safeguard the stability of the euro area as a whole.
66 This teleological interpretation is also in accordance with the wording of Article
125(1) TFEU, which provides that Member States are not liable for the
commitments of central governments, regional, local or other public authorities of
other Member States. This means, according to the Netherlands Government, that,
from an economic point of view, each Member State is itself responsible and
remains so for compliance with its financial obligations. According to the
Netherlands Government, this obligation is satisfied where assistance is granted in
the framework of the ESM Treaty.
67 The assistance that an ESM Member in financial need may obtain can take the
following forms: precautionary financial assistance in the form of a precautionary
conditioned credit line (Article 14 of the ESM Treaty), financial assistance with
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the purpose of re-capitalisating a financial institution of an ESM Member (Article
15 of the ESM Treaty), ESM loans (Article 16 of the ESM Treaty), primary
market support facility through the purchase of bonds (Article 17 of the ESM
Treaty) and secondary market support facility in relation to the bonds of an ESM
Member (Article 18 of the ESM Treaty).
68 For all these forms of assistance, it is the case that the ESM Member which
receives assistance itself remains legally responsible for its financial obligations.
The strict conditionality attached to the granting of assistance moreover
encourages the ESM Member concerned to actually be in a position to comply
with its financial obligations. This serves to prevent the ESM assuming
obligations in an economic sense. In view of these specific safeguards, the
granting of assistance in the framework of the ESM Treaty does not involve
commitments being assumed for the purposes of Article 125(1) TFEU.
69 Finally, it is significant that this interpretation of Article 125(1) TFEU is also
reflected in Article 136(3) TFEU. The latter provision sets out the criteria which,
according to the Netherlands Government, are essential to ensure that assistance to
a Member State is not caught by the prohibition laid down in Article 125(1)
TFEU.
70 Pursuant to Article 136(3) TFEU, Member States whose currency is the euro may
establish a stability mechanism to be activated if indispensable to safeguard the
stability of the euro area as a whole. The granting of assistance must moreover be
made subject to strict conditionality. If these criteria are satisfied when assistance
is granted to a Member State, commitments are not assumed for the purposes of
Article 125(1) TFEU.
No infringement of the powers and functions of the institutions
71 The Netherlands Government submits that the ESM Treaty does not infringe the
powers and functions of the Union institutions. There are three Union institutions
which perform a function on the basis of the ESM Treaty: the Commission, the
ECB and the Court.
72 The ESM Treaty confers on the European Commission and the ECB executive
and advisory functions (Article 4(4), Article 13, Article 14(6), Article 15(5),
Article 16(5), Article 17(5) of the ESM Treaty). The Court has jurisdiction to rule
on disputes between an ESM Member and the ESM, as well as on disputes
between ESM Members (Article 37(3) of the ESM Treaty).
73 These functions contribute to ensuring that, when the ESM Treaty is applied, EU
law is respected. According to the Netherlands Government, the Treaties do not
preclude the Commission, the ECB and the Court from performing these
functions. In the case of the Commission and the ECB, this flows, according to the
Netherlands Government, from the so-called Bangladesh doctrine. The
18
jurisdiction of the Court to rule on disputes is founded on Article 273 TFEU. The
Netherlands Government will clarify this below.
Commission and ECB
74 In the context of the ESM Treaty, the Commission and the ECB have management
and coordination tasks. On 20 June 2011, they were authorised by the
representatives of the Governments of the Member States to perform these tasks
(see recital 10 in the preamble to the ESM Treaty).
75 The competence of the Member States to entrust such tasks to the Commission
outside the Treaties was recognised by the Court in Joined Cases C-181/91 and C-
248/91
Parliament v
Council [1993] ECR I-3713, paragraph 20). In that
judgment, the Court stated that the Treaties do
‘not prevent the Member States
from entrusting the Commission with the task of coordinating a collective action
undertaken by them on the basis of an act of their representatives meeting in the
Council’. According to the Netherlands Government, that case-law is also
applicable in respect of the entrustment of tasks to the ECB.
76 The management and coordination tasks of the Commission and the ECB in the
context of the ESM Treaty fall moreover within their competences under the EU
Treaty and the TFEU.
77 Pursuant to Article 17(1) EU, the European Commission has the task of promoting
the general interest of the Union and of taking appropriate initiatives to that end.
The ESM Treaty is of crucial importance to safeguarding the financial stability of
the euro area. The financial stability of the euro area is evidently in the interest of
the European Union. Through its involvement in the ESM Treaty, the
Commission therefore promotes the general interest of the Union. Moreover, the
Commission serves the general interest of the Union by ensuring that the ESM
Treaty is applied in a manner consistent with European Union law.
78 On the basis of Article 282(2) TFEU, the ECB – as part of the European System
of Central Banks – has the task of supporting the general economic policies in the
Union in order to contribute to the objectives of the European Union. The role of
the ECB in the framework of the ESM Treaty forms part of this. This Treaty has
after all been established in order to safeguard an objective of the Union: namely,
the safeguarding of the euro area as a whole.
79 Lastly, the Netherlands Government would point out that the tasks which the
Commission has on the basis of the ESM Treaty are tasks that it already performs
in the context of EU legislation in the field of economic governance of the EU and
the euro area, the so-called ‘sixpack’. 3 In the context of this legislation, the
3 Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16
November 2011 on the effective enforcement of budgetary surveillance in the euro area;
Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16
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Commission performs a central role, which involves, for each Member State,
specific assessments, monitoring, visits to Member States, recommendations and
warnings. This allows the Commission to gain a deep insight into the state of
Member States’ public finances. The assessments carried out by the Commission
in the framework of the ESM Treaty are not new in relation to those that it carries
out in the context of the sixpack.
The Court of Justice
80 As regards the jurisdiction of the Court to rule on disputes between an ESM
Member and the ESM, as well as on disputes between ESM Members, the
Netherlands Government makes the following observations.
81 On the basis of Article 273 TFEU, the Court has jurisdiction in any dispute
between Member States which relates to the subject matter of the Treaties if the
dispute is submitted to it under a special agreement between the parties. This
provision forms the basis of the Court’s jurisdiction in the event of disputes in the
context of the ESM Treaty (see also recital 17 in the preamble to the ESM Treaty).
82 Disputes concerning the interpretation and application of the ESM Treaty are
evidently disputes which relate to the subject matter of the Treaties. The
Netherlands Government submits that Article 37(3) of the ESM Treaty contains
an authorisation for the purposes of Article 273 TFEU by the EU Member States
which are parties to the ESM Treaty to refer such disputes to the Court.
No infringement of the principle of sincere cooperation
83 According to the Netherlands Government, the ESM Treaty does not infringe the
principle of sincere cooperation as laid down in Article 4(3) EU. This is explained
as follows.
84 First of all, it is important to note that the obligations flowing from EU
membership do not constitute an obstacle to the approval by Member States of the
ESM Treaty. As set out above, the ESM Treaty does not infringe the competences
of the Union in respect of monetary and economic policy (see paragraphs 46-56).
In addition, the ESM Treaty does not give rise to any conflict with specific Treaty
provisions (see paragraphs 57-70). Furthermore, the ESM Treaty contains
November 2011 on enforcement measures to correct excessive macroeconomic imbalances
in the euro area; Regulation (EU) No 1175/2011 of the European Parliament and of the
Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the
strengthening of the surveillance of budgetary positions and the surveillance and
coordination of economic policies; Regulation (EU) No 1176/2011 of the European
Parliament and of the Council of 16 November 2011 on the prevention and correction of
macroeconomic imbalances; Council Regulation (EU) No 1177/2011 of 8 November 2011
amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation
of the excessive deficit procedure; Council Directive 2011/85/EU of 8 November 2011 on
requirements for budgetary frameworks of the Member States.
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sufficient safeguards to ensure that European Union law is respected also when
the ESM Treaty is applied in practice (see paragraphs 53-54). According to the
Netherlands Government, the obligation under the second subparagraph of Article
4(3) EU for Member States to take any appropriate measure to ensure fulfilment
of the obligations arising from European Union law is therefore satisfied.
85 The principle of sincere cooperation also requires that the Member States refrain
from any measure which could jeopardise the attainment of the Union’s objectives
(third subparagraph of Article 4(3) EU). The ESM Treaty does not infringe this
obligation either. This Treaty has after all been established in order to safeguard
an objective of the Union: namely, the safeguarding of the euro area as a whole
(see above paragraph 76 and Article 3 of the ESM Treaty).
86 The Netherlands Government concludes that there is no infringement of the
principle of sincere cooperation.
Conclusion
87 On the basis of the foregoing, the Netherlands Government concludes that the
ESM Treaty is compatible with the Treaties and general principles. It follows
from this that European Union law does not prevent a Member State of the
European Union whose currency is the euro from entering into and ratifying a
treaty such as the ESM Treaty.
Question 3
88 By its third question, the referring court wishes to ascertain whether the entry into
force of the European Council Decision is a precondition for entering into and
ratifying the ESM Treaty.
89 The Netherlands Government takes the view that that is not the case. As was
stated in the answer to question 2 (see above paragraph 87), European Union law
does not prevent Member States whose currency is the euro from entering into and
ratifying the ESM Treaty. The power to do so is not conditional on the entry into
force of the European Council Decision. As was stated in the answer to question 1
(see above paragraphs 35-36), Article 136(3) TFEU merely constitutes
confirmation of the competence of Member States whose currency is the euro to
set up a stability mechanism.
90 The Netherlands Government therefore concludes that the entry into force of the
European Council Decision is not a precondition for entering into and ratifying the
ESM Treaty.
V. Conclusion
91 In the light of the foregoing, the Netherlands Government submits that the
questions referred for a preliminary ruling should be answered as follows:
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‘1. European Council Decision 2011/199/EU of 25 March 2011 amending Article
136 of the Treaty on the Functioning of the European Union with regard to a
stability mechanism for Member States whose currency is the euro is valid.
2. European Union law does not prevent a Member State of the European Union
whose currency is the euro from concluding and ratifying a treaty such as the
ESM Treaty.
3. The conclusion and ratification of the ESM Treaty is not conditional on the
entry into force of European Council Decision 2011/199/EU of 25 March 2011.’
Corinna Wissels Mielle Bulterman
acting as Agents
The Hague, 14 September 2012
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