Struggling About the Final Say in EU Law: The ECB Ruling of the German Federal Constitutional Court
The PSPP judgment of the German Federal Constitutional Court (GFCC), concerning the European Central Banks (ECB) public purchase programme of sovereign bonds, is only at first glance a ‘bang on the drum’. If one reads it in the context of the decisions taken during the crisis in the Euro area on the rescue parachutes (EFSF and ESM), it ties in with the landmark previous decisions of the GFCC and the European Court of Justice (ECJ) , especially the last one on the OMT program (‘Whatever it takes’) announced at the time by the former ECB’s President Draghi.
The OMT case was the first reference for a preliminary ruling made by the GFCC (see Case C-62/14, ECJ 16 June 2015). It can be understood as a blueprint for the current PSPP case. In both cases the main legal question was, whether the ECB’s program is covered by the ECB’s monetary policy mandate in article 127(1) TFEU or rather allocates to the conduct of economic policy, for which according to article 5(1) TFEU the Union only has a coordinating competence. In the current PSPP case the GFCC assumed that the ECB should have identified, weighted and balanced the monetary policy objective and its economic implications in the context of a proportionality test. Since the ECJ in its preliminary ruling took a different point of view and therefore did not object to the PSPP program in its judgment of 11 December 2018, the GFCC considered this to be an ultra vires act that cannot have any binding effect on Germany.
Apart from this, the ruling contains numerous ‘warnings’, especially with regard to compliance with the so-called ban on monetary public financing in article 123 TFEU. In this regard, claims for control may become relevant in view of the current ‘Corona Crisis’ program of the ECB (PEPP), which does not fully reflect the legal framework defined by the GFCC and the ECJ in the OMT case. Moreover, a variety of legal questions may arise with regard to the EU's solidarity measures in the corona crisis under the heading of the ‘European Recovery Plan’.
I. Democracy turned ‘Upside down’
The PSPP judgement is founded on an individual right on democracy with the intention to protect the budget autonomy of the Bundestag (PSPP, para. 98–115). Therefore its seems that the GFCC ruled in the name of democracy. Though at second glance it rather seems that democracy is turned upside down: The ECB, particularly at Germany’s request (and as a precondition of the GFCC in its Maastricht judgment of 1992), is a politically independent central bank that cannot be democratically controlled. However, it can exceptionally be subject to judicial control if it exceeds its mandate. But in this respect the EU Treaties do not provide for the jurisdiction of the GFCC but of the ECJ. According to article 263(1) TFEU it is the German Federal Government that could have brought an action for annulment against the ECB if it would have had reservations about the PSPP program. But if the Government does not file the possible action before the ECJ, then this is a political decision of an elected body that has to be respected by the GFCC. It rather would have to be democratically discussed by the opposition parties as well as in the coming elections to the German parliament, the Bundestag.
Seen from this perspective the PSPP ruling does conflict with the balance of powers and the principle of democracy. This shifting of powers to the GFCC becomes particularly clear when the Court expects the Bundestag to have adopted a resolution calling on the Federal Government to bring an action against the ECB before the ECJ (PSPP, para. 109, 229–232). Suppose the Government takes a different view and does not take action? Should the Bundestag then really withdraw its confidence in Chancellor Merkel under article 67 of the Basic Law in a question which is so complex in legal terms and so unclear in view of the relevant ECJ ruling, thereby plunging a government which is capable of action and supported by the will of the voters into a crisis?
II. Primacy of EU law in the perspective of the GFCC
In general, the GFCC accepts the primacy of EU law over national law. However, unlike the ECJ, it emphasizes that this primacy does not stem from the European Treaties as an autonomous source of law. On the contrary, primacy of EU law has its foundation in the order to apply EU law (article 23(1) Basic Law) issued by the legislative act approving the treaties (GFCC, Lisbon, para. 333 ff.). Hence, the GFCC reserves for itself a competence to review the constitutionality of European legal acts based on three tools: the fundamental rights review (GFCC, Solange II [in German], para. 107 ff.) the ultra vires review (GFCC, Lisbon, headnote 5, para. 240) that the GFCC, reacting to massive criticism, developed in its Honeywell decision (para. 61) towards a more restrictive approach, and the identity review intended to scrutinise ‘whether the inviolable core content of the constitutional identity of the Basic Law pursuant to article 23(1) third sentence in conjunction with article 79(3) of the Basic Law is respected’ (GFCC, Lisbon, para. 240). Unfortunately, the relationship between the three powers of review remained unclear, a problem that became obvious in the PSPP case.
III. The failed dialogue of the courts
In contrast to the ECJ, the GFCC considers that the ECB’s monetary policy mandate has been exceeded in the light of its proportionality test. In doing so, the GFCC has, formally (according to its wording) but not substantively, adhered to its criteria developed in the Honeywell ruling for the existence of an ultra vires ruling by the ECJ. By arguing that the ECJ’s proportionality test is ‘structurally’ flawed and ‘methodologically no longer justifiable’ and thus ‘interpretation of the Treaties is no longer comprehensible and is therefore objectively arbitrary’, an ultra vires action by the ECJ in interpreting the PSPP decision of the ECB that meets the criteria of ‘sufficiently qualified’ and ‘obvious’ is claimed (GFCC, PSPP, para. 119).
However the choice of words alone does not replace the substantive justification. From a substantive point of view, the GFCC’s statements cannot convincingly substantiate an ultra vires act, at least by reference to its own Honeywell criteria. In this respect, it is particularly problematic that there was obviously a misunderstanding between the courts with regard to the proportionality test—which is decisive for the GFCC’s ultra vires accusation. If the ECJ’s preliminary ruling is placed next to the GFCC’s PSPP ruling, it becomes clear that the ECJ examines compliance with the principle of proportionality in accordance with article 5(4) TEU as the yardstick for assessing the ECB’s exercise of its competence. In contrast, the GFCC uses it for the delimitation of competences (GFCC, PSPP, para. 139) when it examines whether the ECB has violated its mandate with the PSPP program by crossing the border from monetary policy to economic policy. However, just like the subsidiarity principle, the proportionality principle according to article 5 TEU concerns the exercise of competences, while the principle of conferral is decisive for the delimitation of competences between the EU and the Member States.
In view of this different understanding, the GFCC—pursuant to article 4(3) TEU—was obliged to enter into a renewed dialogue with the ECJ for further clarification of the unanswered questions on the meaning of proportionality with regard to the PSPP program of the ECB. The Italian Constitutional Court and the ECJ have demonstrated in the Taricco case that such an approach is promising (cf. ECJ, Taricco 1 and Taricco 2, and Fabbrini and Pollicino, 2020)
IV. Constitutional identity as the sole limit of primacy
However, even if one agrees with the GFCC and assumes that the PSPP program of the ECB in the form of the ECJ judgment constitutes an ultra vires act, the judges in Karlsruhe had—from a European law perspective—no legitimation to overrule the preliminary ruling of the judges in Luxemburg and to put into question the primacy of EU law as well as the authority of the ECJ (article 19(1) TEU). In the light of article 4(2) TEU such a fallback-responsibility of a national constitutional court as a means of last resort can only be considered if the constitutional identity would have been affected. In contrast to this, the PSPP ruling of the ECJ concerned a mere ultra vires act, which—even according to the assessment of the Federal Constitutional Court itself—had no effect on Germanys constitutional identity (GFCC, PSPP, para. 116, 228).
Constitutional identity as a limit of the primacy of Union law is recognised by article 4(2) TEU as well as in the case law of the ECJ and many national constitutional courts. However, this only applies within the framework set by the norm. Therefore even the invocation of constitutional identity must, in accordance with the principle of sincere cooperation (article 4(3) TEU), be put into concrete terms in a dialogue between the courts for the individual case. Only if this dialogue has failed a national constitutional court, as a means of last resort, can override the primacy of application of EU law by invoking its constitutional identity.
Against this background, the GFCC should have referred the matter to the ECJ by way of a preliminary ruling pursuant to article 267(3) TFEU, now in the form of the question of whether the ultra vires act in dispute (in this case of the ECB) in the light of the ECJ’s decision is capable of violating constitutional identity pursuant to Article 4(2) TEU.
Precisely because the confrontation between the ECJ and the GFCC was avoidable, both courts should—as they did already once in the course of the Solange case law —learn from an initially failed dialogue and fill the constitutional court network with life in the area of tension between loyal cooperation (Article 4(3) TEU) and mutual consideration (Article 4(2) TEU).
Christian Calliess holds the Chair of Public Law and European Law at Freie Universität Berlin and was involved in the ESM and OMT proceedings before the Federal Constitutional Court and the European Court of Justice as the legal representative of the German Bundestag.
 See Christian Calliess, ‘The Future of the Eurozone and the Role of the German Federal Constitutional Court’ (2012) 31 Oxford Ybk Eur L 402.
 See GFCC, PSPP, para. 136 et seq. and especially regarding article 123 TFEU in para. 184 et seq., para. 189 et seq. and para. 197, 201, 212 and 216.
 Cf. the country reports in Christian Calliess and Gerhard van der Schyff (eds), Constitutional Identity in a Europe of Multilevel Constitutionalism (Cambridge University Press, Cambridge 2020).
 GFCC, Solange I, p. 280 and then—in the light of the ECJ’s jurisdiction—GFCC, Solange II, p. 375.
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