Choreography of sound and fury: The Federal Constitutional Court’s recent PSPP judgment

Tuesday, June 2 2020, 10:45, analysis by dhr Prashant Sabharwal

De recente uitspraak van het Duitse Bundesverfassungsgericht over het opkoopprogramma van de ECB in de jaren 2010 heeft een hoop stof doen opwaaien. In dit artikel bespreekt Prashant Sabharwal aan de hand van jurisprudentie van het Bundesverfassungsgericht of het vonnis een bedreiging vormt voor de rechtsorde in de Europese Unie.

The recent verdict (“the PSPP judgment”) of the German Federal Constitutional Court (“FCC”) on the compatibility of the Public Sector Purchase Programme (“the Programme”) under the management of the European Central Bank (“ECB”) has attracted plenty of commentary, much of it critical concerning the reasoning of the judgment. The following contribution shall attempt to contextualize the PSPP judgment in the framework of the FCC’s historical jurisprudence and seek to gain an initial understanding whether the judgment does indeed represent a threat to the legal order of the European Union (“EU”).

Appraisal and Outlook

By declaring the CJEU preliminary ruling in Weiss to be ultra vires, the FCC effectively set aside a decision of the Court of Justice for the first time. Thus, the FCC followed through on its ultra vires doctrine, which it first considered in its 1993 Maastricht Treaty judgment (“ausbrechender Rechtsakt), then more developed in its 2009 verdict on the constitutionality of the Treaty of Lisbon and subsequently fully fleshed out in its 2010 Honeywell ruling.

The principal theme running through the PSPP judgment, beyond the substantial question of Germany’s participation in the Programme is legitimacy – the legitimacy of the CJEU arriving at its particular reasoning in Weiss and the legitimacy of the FCC setting aside the ruling of a Court of Justice which has claimed primacy over all national law, including national constitutional law, since both Costa v ENEL and the equally significant Simmenthal ruling. At several junctures, especially in restating its ultra vires doctrine and mechanism (PSPP judgment, paras 110-113), the FCC is at pains to emphasize its respect for European Union law, and the role of the Court of Justice’s interpretative authority concerning the EU Treaties.

Nonetheless, the criticisms levelled by the FCC at the CJEU are overt and sharp – effectively alleging that the CJEU abandoned its responsibilities regarding the evaluation of the proportionality of the Programme. What it did next appears even more extraordinary: It declared the Court’s ruling ultra vires, set it aside and then proceeded to substitute its own assessment of the PSPP instead. Beyond the immediate future of the Programme which will likely be resolved, it is the implications for the primacy of European Union law that are more interesting.

Complex History

Throughout their relationship, the FCC (being the apex court of one of the EU’s founding members) and the CJEU have been engaged in a tussle over the appropriateness of the CJEU’s primacy claim. The FCC’s Solange jurisprudence represented the first judicial challenge to the CJEU’s interpretative authority, and arguably contributed to the development of the EC’s fundamental rights jurisprudence in the wake of the judgment – leading to Solange II, in which the FCC reversed its stance on reviewing every European Community legal act for its compliance with fundamental rights. Successive Treaties, most notably Maastricht and Lisbon, offered the opportunity for the FCC to weigh in on Germany’s relationship with the remainder of the European Union as well, leading to the development of the aforementioned ultra vires doctrine, as well as the constitutional identity doctrine protecting the fundamental core of the country’s constitution, the Basic Law. The FCC used opportunities such as its judgment on the European Stability Mechanism (ESM) Treaty and the Outright Monetary Transactions (OMT) Programme to cement its cautious constitutional court. The OMT case also heralded the first preliminary ruling to the Luxembourg court, a remarkable development when seen in the overall context of the FCC’s relationship with the CJEU. However, given that the PSPP judgment represented the FCC’s second preliminary reference to Luxembourg and ended up in the FCC declining to follow the CJEU’s reasoning in Weiss, what next for this rather complex relationship?

Infringement Proceedings

There are three short to medium-term options: Infringement proceedings, amending the domestic legal framework in Germany or a reversal by the FCC itself. Let us go through each option in turn.

Infringement proceedings against Germany could demonstrate the European Commission’s resolve to safeguard the consistent enforcement of a central principle of EU law against all comers – and would arguably be underpinned by CJEU precedent. However, the decision to launch proceedings is entirely political and may have the drawback of fuelling Eurosceptic narratives across Europe. Additionally, it would bring more principal debates about judicial independence and res judicata to the fore. Such infringement proceedings, launched due to the ruling of an independent court, could also unwittingly cause a chilling effect for national courts taking a cautious line on questions of EU law, including primacy.

Two further routes would consist in domestic solutions to the issue – one blunt, one more artful. The blunt route would consist of amending the Basic Law or the Federal Constitutional Court Act to place actions of the ECB (perhaps even the remainder of the EU institutions) beyond the review powers of the FCC – or perhaps require both the First and Second Senates to sit as a grand chamber when deciding EU-related constitutional law, or require two preliminary reference requests by the FCC before using its ultra vires powers. However, if handled with insufficient care, this could cause even those not necessarily enamoured with the FCC’s line on Europe to stand with the popular FCC.

The less blunt solution consists of a complex pas-de-deux, choreographed to the proverbial sound and fury occasioned by the PSPP judgment: it would involve the Federal Government and the Bundestag purporting to address the FCC’s concerns by making representations to the ECB, the Commission and ECOFIN to effect a proportionality assessment, as well as suggesting to the media that the Bundesbank or the ECB carry out such an assessment. Such steps, perhaps also including a resolution by the Bundestag acknowledging the FCC’s concerns, could be used as a prelude for a face-saving climbdown by the FCC itself in which it would reverse its PSPP judgment.

The Long View: Primacy Calibrated?

In the long term, given the centrality of the relationship between the CJEU and the national (constitutional) courts, a new modus vivendi needs to be found in order to secure the EU legal order in a mutually acceptable manner. Member States remain sovereign, their judiciaries independent and their constitutional orders distinct. These have to be reconciled with membership of the European Union, but not be subsumed by it. Considering that the principle of primacy has contributed to the functioning of the Single Market, the PSPP judgment should be seen as an opportunity to launch a “war of the judges” – but to recalibrate and finetune the primacy principle in a manner that takes account of the legitimate expectations of the national (constitutional) courts to be stakeholders in the development of a genuinely European jurisprudence. Changes will be needed, in terms of attitude, procedures and thinking. However, if handled with care, fresh thinking and aplomb, this crisis can be the impetus needed to revive the relationship of the CJEU with the national (constitutional) courts on the basis of genuine cooperation and shared responsibilities. Time will tell whether the will is there to make this happen, in Karlsruhe, Luxembourg, Berlin and Brussels.