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Germany’s Constitutional Court has gone nuclear. What happens next will shape the EU’s future ǀ View

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The judgment everyone is talking about, in the case of Weiss and others, was handed down by the Second Senate of the German Constitutional Court (the Bundesverfassungsgericht, or “BVerfG”) on 5 May 2020. In what might be its most significant ruling in its more than 70-year-long history, the Karlsruhe-based court declared that both the Court of Justice of the EU (CJEU) and the European Central Bank (ECB) acted outside the scope of their powers (ultra vires) in relation to the Public Sector Purchase Programme (PSPP) launched by the ECB in 2015.

As a result, for the first time ever, the BVerfG declared a judgment of the Court of Justice (the one rendered in 2018 in Weiss) as inapplicable in Germany, and unilaterally granted itself the power to decide on the validity within Germany of the PSPP decision of the ECB, an EU institution under the exclusive jurisdiction of the CJEU.

It may seem that the dispute is one of a technical nature in the field of monetary policy between two very powerful courts in Europe. However, this is by no means the case. The Weiss judgment involves an act of constitutional rebellion with potentially far-reaching consequences at many levels. An understanding of its implications, though, requires putting this ruling into context, as well as examining its content and the consequences it may have in the short and medium term.

The scenario

Law is one of the main tools on which the European integration process has been forged since its origins in the 1950s. The establishment and functioning of a common legal order taking precedence over the legal systems of EU member states has relied essentially on two pillars, namely the principle of primacy of EU law and a close cooperation between national courts and the CJEU.

Law is one of the main tools on which the European integration process has been forged since its origins in the 1950s.
Daniel Sarmiento and Dolores Utrilla
Researchers

This does not imply, however, that national judges have blindly and unconditionally accepted the primacy of EU law. For decades, a number of national constitutional courts have set certain limits to such primacy - and to the consequent power of the EU judiciary to have the final say in disputes concerning European rules. This watchful approach has been quintessentially embodied in Karlsruhe, which in a tortuous case law has warned the CJEU that it retains the power not to recognise the primacy of EU law in three cases: firstly, in the breach of fundamental rights, secondly in ultra vires action by the EU, and thirdly, the violation of the core principles of Germany’s constitutional identity. However, none of these levers have ever been triggered in full by BVerfG. So far.

The clash

The BVerfG’s Weiss judgment stems from an action against German institutions regarding their action in the context of the ECB’s PSPP, which many may remember as the Mario Draghi’s quantitative easing project that kept the Eurozone out of economic disaster in the aftermath of the 2008 financial crisis. The main issue at stake was whether the PSPP was compatible with the prohibition on monetary finance (Article 123 TFEU) and the principle of conferred powers.

Before deciding on the case, the BVerfG referred a question to the Luxembourg court for a preliminary ruling inquiring, in essence, whether the ECB is competent to purchase sovereign debt in a very broad scale on the secondary markets. In December 2018, the CJEU answered in the affirmative through its Weiss judgment.

In Karlsruhe, the BVerfG has now declared the CJEU’s ruling to be “objectively arbitrary” –and, therefore, ultra vires and not applicable in Germany – due to the poor standard of review employed. As a result, the BVerfG has stepped into the shoes of the EU judiciary and has reviewed the validity of the ECB action, concluding that it also lacked proper reasoning, and consequently is also ultra vires and must be amended in order to remain applicable in Germany.

Paradoxically, the BVerfG does not disagree with the solution to which the CJEU arrived in Weiss. On the substance, it accepts the conclusion that the PSPP does not breach the TFEU prohibition of monetary financing, but departs from the Luxembourg’s ruling on methodological grounds. This turns the Weiss judgment into a technical supervisory examination of the CJEU; no more, no less.

The consequences

In spite of all the noise, the purely legal effects of the ruling are not very far-reaching. It goes without saying that the BVerfG’s ruling does not affect the validity of either the CJEU’s judgment or the ECB’s PSPP. The judgment is formally addressed to the German Federal Government, the Bundesbank and the Bundestag, which on their own lack the capacity to amend the challenged ECB decision.

However, it is clear that the Weiss judgment will have dreadful consequences in the medium and long-term. As we have argued elsewhere, the BVerfG has blown up more than 60 years of loyal dialogue with Luxembourg and has profoundly eroded the authority of the EU’s highest jurisdiction. This comes at a particularly sensitive time, shortly after Brexit, in the midst of an unprecedented health and economic crisis, and in parallel with the worrying decline of the rule of law in some member states. The BVerfG’s rebellion clears the way for the ultra vires test to become an ordinary part of the toolbox of every national court, and instigates potential dissident behaviour in other member states. If Karlsruhe can defy the primacy of EU law, so can Warsaw or Budapest.

It is clear that the Weiss judgment will have dreadful consequences in the medium and long-term.
Daniel Sarmiento and Dolores Utrilla
Researchers

In view of all this, it is by no means surprising that the ruling has caused such a stir. Shortly after its release, the Court of Justice, the ECB, and the Commission issued statements recalling the primacy of EU law and the binding character of Luxembourg’s rulings on all national courts. In turn, the Polish authorities immediately appointed four new judges to the Supreme Court invoking the Weiss precedent and declared the CJEU’s decisions on the Polish judicial reforms ultra vires. Expect the saga to continue.

The question now is how the EU should reply. After the recent announcement by Commission President von der Leyen that the launch of an infringement procedure was under consideration, this appears as an inevitable course of action, in spite of the cautions with which it should be managed when applied to “judicial infringements.”.

Although an Article 258 TFEU infringement procedure will not be enough to solve the challenges posed by the BVerfG’s ruling, it can be a useful tool. Nevertheless, in the long-term, further measures will be needed to reshape the scenario for judicial dialogue in Europe. One possible path, as suggested by Joseph Weiler and José Luis Requejo, may be the creation of a constitutional chamber within the CJEU, an ad hoc body composed of EU and national judges that rules upon the request of a supreme or constitutional court when it considers that the EU has manifestly exceeded its powers. In the context of the upcoming Conference on the Future of Europe, this is a proposal that could at last be worth discussing.

  • Daniel Sarmiento is Professor at the Complutense University of Madrid and Editor-in-Chief of EU Law Live. Dolores Utrilla is Associate Professor at the University of Castilla-La Mancha and Assistant Editor of EU Law Live.

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