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17th Oct 2021

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That German court ruling hurts EU rule-of-law fightback

Last week Germany's Constitutional Court landed a decision that reverberated across the EU.

Rejecting a decision by the Court of Justice of the European Union (ECJ) on the European Central Bank's buying of eurozone debts, the judgement was a double whammy to Europe's efforts to address two of its most serious crises.

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One is the financial crisis following the Covid-19 pandemic - which relies on an active ECB.

The other is the dismantling of democracy and the rule of law in Poland and Hungary, in which the ECJ plays an increasingly important role.

The judgment was criticised by many legal scholars.

It was not only badly timed, its insistence that the European judges had made an "utterly indefensible decision" that amounted to an "objectively arbitrary interpretation" of the EU treaties sounded arrogant.

Rowing back?

Trying to limit the damage, the German judges have given some interviews in the last few days, stressing that the language of "objectively arbitrary" is a necessary legal formula when finding that an EU body overstepped its allocated powers.

But it is much more than a formula. It is the core of the judgement which justifies its conclusions. It is one thing to disagree with the reasoning of a court but calling it utterly indefensible suggests that the European judges, as well as many legal experts who support their position, have not understood the basics of EU law.

Closer inspection of the judgement and the following interviews given by the judges suggests that they were surprised by the negative response.

They now describe the judgement as a "contribution to the dialogue" between the courts. It was more shouting than dialogue, but the ensuing legal problems of ECB bond-buying may be a bit less intractable than most commentators believe.

Essentially the German court says that the Bundesbank can only continue participation in the bond-buying if the ECB Council publishes more detailed reflections on the macro-economic impacts of the policy.

It is certainly not ideal that a national court can indirectly force an independent EU institution to do something.

It is ironic that a German court would play that role when Germany itself has been an advocate of ECB independence. But the ECB can respond to such a request by the Bundesbank. Once it does, the Bundesbank can continue its participation without running afoul of the court's judgement. If somebody is not satisfied with the ECB reflections on the macro-economic implications, he would have to initiate a new case with the court, which would take many years.

That should not stop the European Commission from starting an infringement procedure to signal the gravity of the situation.

The real test of such a procedure would, however, be non-compliance of a German institution with EU law. As long as the Bundesbank does not stop its co-operation in the ECB, there is no tangible non-compliance.

The underlying assumption of the German Constitutional Court will not go away of course.

For decades, the court has argued that the EU is based on a transfer of limited powers from its member states and reserved the right to assess whether its action went beyond the limits of these powers.

It only took a few hours after the publication of the 42,000-word judgement for the Polish ministry of justice to praise Germany's constitutional court and pointing at the implications for the conflict between Poland and the commission over the rule of law.

That was to be expected, but at closer inspection there are many aspects of the case that should be less-amusing to the Polish and Hungarian governments.

For one, the message of the German judges to their European counterparts was: "Be more rigorous in holding the ECB accountable."

The German court has a high standard of public accountability and independent judicial checks and balances, free from government interference. Indeed, this case could not have been less welcomed by the German government.

'Independence' paradox

That role is the polar opposite of what Warsaw and Budapest have in mind for their high courts, which are staffed to make sure that they do not to stand in the way of government decisions.

The president of the German Constitutional court, who was part of the decision, referred to the Polish Constitutional Tribunal, which has been captured by the ruling party, a "fake court".

Also, the court stressed in this and many other judgments its acceptance of the primacy of European law and of the ECJ.

It only reserved the right to intervene in the extreme case of the ECJ acting beyond its allocated competences ('ultra vires'). It took great pains on dozens of pages to justify why it thinks so.

Even if ultimately the reasoning is unconvincing, the court did not open the door to any other national court declaring ECJ decisions ineffective at will.

The decision of the German court was unfortunate in today's Europe.

Its legal reasoning was not arbitrary, it did present good reasons, but it was extreme in concluding that the ECJ and a good part of professional legal opinion manifestly misunderstood European law.

The short-term damage to financial markets may be smaller than most fear.

The damage to democracy is however considerable because it weakened the ECJ, which has become the most effective institution to stop or slow down attacks against democracy and the rule of law in EU member states.

Author bio

Michael Meyer-Resende is the executive director of Democracy Reporting International, a non-partisan NGO that supports political participation.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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