29 October 1997
OPINION OF THE EUROPEAN MONETARY INSTITUTE
at the request of the Department of Finance of Ireland under Article 109f(6) of the Treaty
establishing the European Community (the “Treaty”) and Article 5.3 of the Statute of the
EMI concerning a draft bill enacting provisions relevant to the role of the Central Bank of
Ireland in the European System of Central Banks and connected matters (“the draft bill”)
(CON/97/20)
1. On 10 September 1997 the EMI received a request for an opinion on a draft bill enacting
provisions relevant to the role of the Central Bank of Ireland (“the Bank”) in the European
System of Central Banks and connected matters from the Department of Finance of Ireland. No
explanatory memorandum was submitted to the EMI.
2. The EMI’s competence to deliver an opinion is based on Article 1.1 of the Council Decision
(93/717/EC) of 22 November 1993 on consultation of the EMI by the authorities of the Member
States on draft legislative provisions, as the draft bill contains inter alia provisions concerning
currency legislation, the status and powers of the Central Bank of Ireland and connected
matters.
3. The EMI welcomes the timely adaptation of the statutory regime applicable to the Bank as
currently set out in the Central Bank Acts 1942 to 1997 (respectively referred to in this opinion
as “the 1942/1971/1989/1997 Act”). That statutory regime includes the Central Bank Act 1997,
upon a draft of which the EMI was consulted and delivered its opinion on 28th May 1996
(CON/96/04). Such adaptation assists the EMI and other Community institutions to assess, in
accordance with their reporting obligations under the Treaty, progress made towards the
fulfilment of the legal requirements for Stage Three.
4. The EMI notes in particular that the draft bill addresses almost all of the matters that the EMI
had identified as requiring consideration in the context of timely adaptation towards fulfilment of
the legal requirements for Stage Three as mentioned in the EMI’s publication, “ Legal
Convergence in the Member States of the European Union as at August 1997”  (October 1997 )
(and in the November 1996 Convergence Report) . The EMI would, however, like to raise the
following detailed comments as set out in the subsequent paragraphs of this opinion.
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5 (Section 3 of the draft bill ) The EMI notes that altho ugh provision is made for how the
proposed sections contained in the bill should be brought  into effect, there are no provisions about
the time or times when that will be , nor for what periods . The EMI assumes that additional
measures are intended in this regard. The refe rence to  the Irish pound as a subdivision of the
euro, for example, requires to be limited in its applicat ion to the transitional period .
6. (Section 6 of the draft bill)  A general provision is proposed by way of a new section 5A to the
1942 Act by which it is stated at subsection (1) that it shall be lawful for the Bank to comply
with its obligations in the Treaty and Statute. However, a proposed subsection 5A(2) states that
the Bank “shall have regard” to the Treaty and Statute when exercising any power or
performing any function or duty referred to in the new section 5A. It is not clear whether the
mandatory nature of the Treaty and Statute is thus unambiguously expressed.  A positive
statement that such exercise or perform ance is to be subjec t to the provi sions of the Treaty a nd
Statute would  be pre ferable.
7. (Section 7 of the draft bill)  Article 2 of the ESCB/ECB Statute  states that the pr imary
objective of the ESCB shall be to maint ain price stability. The primary statutory objective of the
Bank is proposed to be “to maintain price stability in the interests of the welfare of the people as
a whole.” The dir ect juxtaposition of these two concepts does not unambiguously correspond  to
Article 2 of the Statute .. While recognising that the maintenanc e of price stability is in the
interest s of the welfare of the people as whole, it  would be necessary not to seek to alter the
requisite statement of the Bank’s pr imary objective.
8. (Section 7 of the draft bill)  The draft bill proposes a new subsection 6(2) of the 1942 Act
dealing with the Bank’s secondary objectives. These do not appear to be directly derived from
the secondary objectives mentioned in Article 2 of the ESCB/ECB Statute and, by being
described as the Bank’s “other objectives”, may be read as excluding those derived from the
ESCB/ECB Statute.
9. (Section 7 of the draft bill ) In the proposed subsection 6(3) the protocol refer red to is in fact a
protocol annexed to the Treaty establishing the  European Community  rather than the Treaty on
European Union.
10.(Section 7 of the draft bill)  Clause 7 of the draft bill proposes a new section 6(4) of the 1942
Act under which the Minister for Finance is proposed to have the power to oblige the Governor
on behalf of the Board or the Board to consult with him on the execution and performance of
such functions, powers and duties as are entrusted to the Bank by law. This formulation appears
to include the performance of ESCB-related tasks. This explicit statutory mechanism is one
which the EMI considers might be used to influence the decision-making process within the
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Bank and, more seriously, within the ESCB, and is, therefore, considered to be incompatible with
the requirement of central bank independence.
11.(Section 10 of the draft bill)  It is proposed in the draft bill to amend section 32 of the 1942 Act
so as to add a provision excluding from voting those directors who are in  the permanent service
of the State on matters relating to ESCB-related tasks. However, no similar or other proposal is
made in respect of the remaining non-executive  directors which would  ensure that no conflicts
of interest might arise in the ir involvement  in the  performance of ESCB-related tasks. It was
pointed out in the EMI’s publication, “Legal Convergence in the Member States of the European
Union as at August 1997”  (October 1997 ) (and in the N ovember 1996 Convergence Report ) that
this is a matter requiring to be dealt with in order to satisfy the compatibility requirements of
Article 108 of the Treaty.
12 (Section 11 of the draft bill)  It is proposed to widen the scope of those subject to reporting
obligations to include reporting agents designated by the ECB. However, section 18(1) of the
1971 Act, as amended by section 37 of the 1989 Act,  restricts the scope of activities in relation
to which such reporting is to take place to those activities there listed. This list of activities - to
which no amendment is proposed - may not be sufficiently comprehensive to cover all the
ECB’s likely statistical requirements in that none of the existing heads (section 18(1) (a) to (f))
clearly embraces statistics on transactions undertaken on behalf of others or by reporting agents
designated by the ECB which are not financial institutions.
13 (Section 16 of the draft bill)
13.1 The draft bill proposes to substitute section 24 of the 1989 Act with new wording. Section
24 of the 1989 Act currently provides for the monetary unit of the State  as being the Irish pound,
and makes provisions for exchange rates. The legislative intention of the draft bill appears to be
to repeat parts of the draft Council Regulation on the introduction of the euro to be adopted
under Article 109l (4), third sentence, of the Treaty establishing the European Community (OJ
No.C 236/8, 2 August 1997) (“the euro regulation”). However, the approach adopted in the draft
bill is not without difficulties.
13.2 National implementation of regulations is not usually necessary and is indeed impermissible
where it disguises from those subject to the proposed law the Community source of their rights
and obligations (Case 39/72 [1973] E.C.R. 101; Case 34/73 [1973] E.C.R. 981). Legislative
duplication of the euro regulation is inconsistent with Community law unless Community
regulations require implementation by national measures (which is not the case with th ose parts
of the  euro regulation  that state the nature of the new currency ) such that the incorporation of
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the texts of such regulations may be justified for the sake of coherence and in order to make
them comprehensible by the persons to whom they apply (Case 272/83 [1985] E.C.R.).
13.3 And e ven if the legislative repetition of the euro regulation were acceptable under
Community law, there are features of the proposed section 24 that must require alteration in any
event.
13.4  There are inherent difficulties in referring to an item of proposed Community law which
remains in draft form, and will not be enacted until 1998. In this context, it may be noted that the
draft bill proposes references (at sections 24(1)(3) and 25(2) of the 1989 Act) to “the Council
Regulation” without stating that it has been published only as a draft.
13.5  The wording taken from the euro regulation does not exactly track the original  (for
example, the draft bill refers to “cent” where the euro regulation has “cents” ). Nor is t he
wording taken from the euro regulation  complete  (for example, the draft bill provides for the
division of the euro into one hundred cent[s] and that the Irish pound shall be a national currency
unit subdivision of the euro. It does not refer, however, to the contents of Article 6, paragraph 1,
first sentence, of the euro regulation which provides that “the euro shall also be divided into the
national currency units ...” ).
13.6  Whilst the EMI accepts the need for legal clarity in the totality of legislation which amounts
to the monetary law of a participating Member State  and recognises the practice and n eed to
refer in national legislation  to the lawful currency  of the state , it would recommend that no such
attempt should be made to repeat or reflect the detailed wording of the euro regulation , which
will have direct effect in all participating Member States .
14 Under Article 105a of the Treaty certain competences in rela tion to banknotes are provided to
the ECB . No provision is made in the draft bill to address the fact that the wording of section 44
of the 1971 Act as inserted by section 120 of the 1989 Act, which states that issuance of
banknotes shall be lawful if they are issued against certain assets, and thereby implies that
issuance on any other terms would not fall within the powers of the Bank , is not restricted to the
issuance of national banknotes  and may therefore be inconsistent with Article 105a.  Issuance of
euro banknotes under Article 105a of the Treaty must be effected under uniform conditions in all
participating Member States. The provision in the 1971 Act  may therefore be contrary to the
Treaty provisions in that it unduly restricts the Bank’s ability to perform ECSB related tasks.
15 No provision is made in the draft bill to address the wording of sections 10 (1) and  13(1)(b) of
the 1997 Act, which provide tha t the consent of the Minister for Finance is required before the
Bank may refuse to approve the rules of a payment system or subsequently revoke such an
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approval. The existence of such a requirement for ministerial consent is inconsistent with the
ESCB ’s tasks in relation to payment systems and the competence of the ECB to make
regulations in that regard.
16 No provision is made in the draft bill to address the wording of section 134 of the 1989 Act,
which empowers the Minister for Finance to direct that certain business transactions be
suspended if he considers it necessary in the national interest or for the purpose of safeguarding
the currency of the State. Such direction may only be made after having consulted the Bank.
The existence of this power does not recognise the competence of the ESCB in the field of
monetary policy and the transfer to Community level of all monetary powers of participating
Member States.  It is suggested that the power should be restricted to business transactions
which are not related to  the performance of ESCB-related tasks  and that the exercise of the
power should not be referable to safeguarding  the currency of the State.
17.The EMI notes that detailed provisions have not been included in the draft bill concerning the
amendments required to recognise ECB and Community competences in the areas of the
issuance of banknotes and coins respectively.
18 The EMI has no objection to this opinion being made public.
29 October 1997.