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Tuesday, May 26, 2020

Explained: Why a recent verdict of Germany’s top court has sent shockwaves across EU

Critics of the German verdict say it could strike at the legal foundations of the 27-member zone.

By: Explained Desk | New Delhi | Updated: May 9, 2020 3:29:57 pm
germany court verdict, european union, European Court of Justice, European Central Bank, indian express explained The German ruling came to the delight of Eurosceptics, and was echoed by governments that have been in the EU’s crosshairs. (Source: Reuters)

On Tuesday, Germany’s constitutional court sent shockwaves through the European community as it questioned the legality of a past ruling of the European Court of Justice.

The judgment from Germany, which mainly takes aim at a bond-buying scheme of the European Central Bank (ECB), is seen at its heart as challenging the long-settled hierarchy of European Union (EU) judiciary, and has since resonated with many governments and politicians in the EU that are critical of its policies.

Judiciary in the European Union

The European Court of Justice (ECJ), a supranational institution, is a part Court of Justice of the European Union (CJEU), and is the European Union’s supreme court in matters of EU law.

Founded in 1952 after the Treaty of Paris, the Luxembourg-based court ensures that EU law is interpreted and applied the same in every EU country, and ensures that countries and EU institutions abide by EU law. It settles legal disputes between national governments and EU institutions.

In terms of hierarchy, the national courts of member countries are understood to be below the ECJ in matters of EU law.

German court vs ECJ

In 2018, the ECJ had ruled that a EUR 2 trillion bond-buying scheme of the European Central Bank (ECB), aimed at reinvigorating the EU economy after the multi-year European debt crisis, was legal as per EU law.

In Germany, opponents of the scheme had for years complained to the German Constitutional Court, the country’s highest, which in turn had expressed its concerns on parts of the scheme in 2017. This week, however, the German court dropped its biggest bombshell.

On Tuesday, the German court ruled that the ECJ’s 2018 ruling was “ultra vires”, meaning beyond the latter’s legal authority, and said that it did not properly address whether the ECB scheme was justifiably suited for the EU economy.

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Speaking of the 2018 ECJ decision, the German court said in a press release: “This view manifestly fails to give consideration to the importance and scope of the principle of proportionality [] which applies to the division of competences between the European Union and the Member States – and is simply untenable from a methodological perspective given that it completely disregards the actual economic policy effects of the programme.”

“If any Member State could readily invoke the authority to decide, through its own courts, on the validity of EU acts, this could undermine the precedence of application accorded to EU law and jeopardise its uniform application. Yet, if the Member States were to completely refrain from conducting any kind of ultra vires review, they would grant EU organs exclusive authority over the Treaties even in cases where the EU adopts a legal interpretation that would essentially amount to a treaty amendment or an expansion of its competences,” it said.

The German court has now given the ECB three months to prove that the bond-buying scheme was proportionate as per the EU’s actual needs.

Significance of the verdict

After the ruling, the European Commission underlined the supremacy of the ECJ, saying, “Notwithstanding the analysis of the detail of the German Constitutional Court decision today we reaffirm the primacy of the EU law, and the fact that the rulings of the European Court of Justice are binding on all national courts.”

The German ruling came to the delight of Eurosceptics, and was echoed by governments that have been in the EU’s crosshairs. Poland’s Deputy Justice Minister said, “For several months, the Polish government has been clearly saying that the EU cannot overstep its competences” and said that the German verdict is of “tremendous importance” for his country.

Critics of the German verdict say it could strike at the legal foundations of the 27-member zone, and the ensuing power struggle between the two courts could lead to a rewriting of EU treaties – in itself a highly contentious process. Some economists have also slammed the judges’ understanding of monetary policy– of both the German and EU courts.

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Belgium’s former prime minister Guy Verhofstadt said, “If every constitutional court of every member state starts giving its own interpretation of what Europe can and cannot do, it’s the beginning of the end.”

Experts believe that national courts in Poland and Hungary could now follow the precedent set by Germany in challenging the EU court’s orders.

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