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German ruling threat to EU law

06 Jul 2020 / CJEU Print

German ruling a potential threat to EU law

When an EU member state rejects European Court of Justice rulings, what does this mean for the future of the Union?

On 5 May, the German Federal Constitutional Court issued a judgment in which it declared a European Court of Justice (CJEU) decision ultra vires in Germany.

The ruling focused on the legality of aspects of the European Central Bank’s Public Sector Purchase Programme (PSPP). The legality of this programme had previously been referred to the CJEU, wherein it had been determined lawful.

The ruling has received widespread attention, as it poses a potentially fatal threat to the future of one of the main characteristics of the EU – namely, the principle of the supremacy of EU law over the national law of its member states.

Violated principles

In rejecting the CJEU ruling, the German court determined that the CJEU had violated principles of legal interpretation, and it further determined that the CJEU had failed to properly apply the EU’s proportionality principle.

In particular, the German court indicated that the CJEU had failed to ensure that the ECB applied its own proportionality analysis when assessing the likely impact of its policies on both monetary and broader economic outcomes.

The court claimed that the CJEU’s interpretation of the principle of proportionality in its judgment of 11 December 2018 “manifestly exceeds the judicial mandate conferred upon the CJEU in article 19(1)”, thus resulting in “a structurally significant shift in the order of competences, to the detriment of the member states”.

For this reason, the German court concluded that the CJEU’s “aforementioned judgment thus constitutes an ultra vires act that is not binding upon the Federal Constitutional Court” (paragraph 163).

The German ruling is final, as it is not subject to appeal to any other court.

EC response

The European Commission responded to the German ruling, stating that, “notwithstanding the analysis of the detail of the German constitutional court’s decision today, we reaffirm the primacy of EU law and the fact that the rulings of the European Court of Justice are binding on all national courts”.

Furthermore, the CJEU noted in a recent press statement that it has always held that the legality of the acts of EU bodies can only be determined by the CJEU – and not national courts – in order to prevent the chaotic situation in which EU acts are legal in one member state, but not in another.

The CJEU stated: “Divergences between courts of the member states as to the validity of such acts would indeed be liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty. Like other authorities of the member states, national courts are required to ensure that EU law takes full effect. That is the only way of ensuring the equality of member states in the union they created.”

It is reasonable to anticipate that paragraph 163 of this ruling will become one of the most cited paragraphs in the analysis of the supremacy of EU law in the coming years.

Given the central role of Germany in the EU, the decision is a major blow from the heart of the union.

Czech decision

The German judgment is, however, not the first time that a national court has found a CJEU judgment to be ultra vires, or at least concluded that it has no legal basis in domestic law.

As far back as 31 January 2012, the Czech Constitutional Court declared the CJEU judgment in the Landtová case to be ultra vires, thus giving national law precedence over EU law.

This case concerned an alleged discriminatory pension scheme in the context of the breakup of Czechoslovakia into the Czech Republic and Slovakia. Part of the agreement reached in the context of that breakup provided that pensions would be determined by the state of residence of the employer at the time of the dissolution.

This became problematic, as Slovak pensions remained significantly lower than those in the Czech Republic, thus leading to a series of disputes.

In issuing its ruling on this case, the CJEU held that this scheme contravened EU law on the ground that it discriminated on the basis of nationality.

In concluding that the decision of the CJEU was ultra vires, the Czech Constitutional Court ultimately found that the CJEU had overstepped the boundaries of the powers transferred to the EU by the Czech Republic. A core reason put forward by the Czech court was that the CJEU applied its principles to the dissolution agreement between the two countries.

On the surface, this judgment appeared to mark the beginning of member states displaying domestic judicial defiance against the EU, in that never before had a member state taken such a radical step in a final national judgment.

Danish decision

The Supreme Court of Denmark reached a similarly controversial conclusion on 6 December 2016 in the Dansk Industri case.

This case concerned a dispute between private parties, in which the claimant challenged the compatibility of a piece of Danish legislation with EU law, namely the EU principle of non-discrimination on grounds of age.

The Danish legislation at issue provided that a severance allowance was not payable to dismissed employees when they were entitled to an old-age pension from their employer and when the employee had joined the pension scheme before turning 50.

The CJEU ruled in this case that the Supreme Court of Denmark should interpret national law in light of Directive 2000/78/EC, and further held that the Supreme Court of Denmark should “disapply any provision of national law which is contrary to the EU law”.

Despite the clear direction of the CJEU, the Supreme Court of Denmark used this occasion to set new boundaries to the applicability of the CJEU’s rulings in Denmark, ultimately refusing to set aside the conflicting provision of national law and thus providing national law with precedence over EU law.

In doing this, the Supreme Court of Denmark concluded that the judge-made principles of EU law, such as the general principle of non-discrimination on grounds of age, were not binding, as they do not have their origin in a specific treaty provision.

Hungarian decision

Even in the short time since the decision of the German Federal Constitutional Court, the Hungarian government has sought to rely on the recent uncertainty that has arisen in the European legal order.

On 14 May 2020, the CJEU issued a judgment in relation to the treatment of asylum seekers being held in the transit zone at the Hungarian-Serbian border. This case concerned two asylum-seeking families who were being held in the transit zone for 464 and 526 days respectively without being able to leave lawfully.

The joint cases originated from preliminary ruling requests in December 2019, which led to the Hungarian Court asking the CJEU to rule on whether, among other questions, the above constitutes detention.

The CJEU ruled that being held in a transit zone amounts to detention under EU law (namely Directive 2013/33/EU) and that such detention cannot extend beyond four weeks.

This CJEU judgment has received wide attention. It has been seen by many as a victory for all Hungarian citizens, as it strengthens protections against arbitrary detention and is likely to have a significant impact in terms of the upcoming discussions on the future of the European asylum system, due to the fact that it reinforces essential human rights and asylum safeguards.

However, the Hungarian prime minister has referred to the judgment as part of a ‘coordinated attack’ by the EU on Hungary.

Significantly, the prime minister stated that, if the CJEU issues a judgment that conflicts with the Hungarian Constitution, then the constitution must have priority. This statement clearly echoes the recent judgment of the German court.

Nonetheless, despite the prime minister’s statement, the Hungarian Government subsequently announced on 21 May 2020 that, although the Hungarian government disagrees with the CJEU, it will close the transit zone.

Asylum seekers currently based in the transit zone will be transferred to alternative facilities within Hungary, namely asylum reception centres with varying degrees of increased permission to leave the centres, unlike the restriction of the transit zone.

The future

The final outcome in Hungary may appear, on the surface, to be a revalidation of the principles of European law. However, it may also be perceived as a strategic move by the Hungarian Government.

This can be implied from a press conference on 21 May, during which the Hungarian Government celebrated (as a victory for Hungarian diplomacy) the fact that Hungary cannot be compelled by others to direct who gets to settle within their borders.

These cases illustrate what might be described as a building tension between the CJEU and some member states over its perceived legal micromanagement of member state laws.

It is clear that the cases of Landtová and Dansk Industri have not proven to be fatal to the EU legal architecture.

It remains to be seen, however, whether the recent German ruling and the subsequent echoing of that ruling by the Hungarian Government will prove to be a more significant blow to the EU, or if they will merely join Landtová and Dansk Industri as being ‘bumps on the road’.

Eimear Burke and Dearbhla Walsh
Eimear Burke is a partner and Dearbhla Walsh is a trainee at Fieldfisher