EN 
  
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 16 February 2006 
at the request of the Finnish Ministry of Justice  
on Committee report 2005:2 consisting of a draft Government proposal for a law on emergency 
powers act and for laws amending certain related Laws 
(CON/2006/6)  
 Background 1. On 5 January 2006 the European Central Bank (ECB) received a request from the Finnish Ministry 
of Justice for an opinion on a Committee Report (2005:2) ‘Proposal for a new law on emergency powers, Report of the Emergency Powers Act Committee’
1 containing a draft Government 
proposal for a law on emergency powe rs and other laws amending certa in related Laws (hereinafter 
‘draft law’) and their statement of reasons. 
2. The ECB’s competence to deliver an  opinion is based on the first, second, third, fifth and sixth 
indents of Article 2(1) of Council Decision 98/415/E C of 29 June 1998 on the consultation of the 
European Central Bank by national authorities regarding draft legislative provisions2, as the 
legislative proposal contains provisions concerni ng rules on currency matters, means of payment, 
national central banks, payment and settlement system s and rules applicable to financial institutions 
insofar as they materially influence the stability of  financial institutions and markets. In accordance 
with the first sentence of Article 17.5 of the Rul es of Procedure of the European Central Bank, the 
Governing Council has adopted this opinion.  
Description of the draft law  3. According to the draft law’s statement of reasons  its main objective is to bring the Emergency 
Powers Law (hereinafter ‘Law’)
3 into conformity with the Finnish Constitution and to modernise 
the authorities’ current emergency powers. In pa rticular, a delegation of regulatory powers in 
emergency conditions as provided for in the Law is not compatible with the Constitution, as 
according to the latter, emergency powers affecti ng basic rights may not be delegated in a loose 
manner. Instead, a rather detailed legal framework to  be applied in emergency situations has to be 
                                                      
1  Komiteanmietintö 2005:2, Ehdotus uudeks i valmiuslaiksi, Valmiuslakitoimikunnan mietintö, Oikeusministeriö Helsinki 
2005. 
2  OJ L 189, 3.7.1998, p. 42. 
3  Valmiuslaki, 1080/1991 of 22 July 1991. 
2 set out in law. It would also be unconstitutional for the Government to simply assume exceptional 
powers on an ad hoc basis.  
4. The draft law defines a limited number of emerge ncy situations in which a Governmental decree 
can be issued to provide Finnish authorities with  certain emergency powers, for a limited period. 
These emergency situations are:  
• an armed attack on Finland and its immediate aftermath (‘armed attack’), 
• a substantial armed threat against Finland, the effects of which can only be repelled by 
immediately introducing the powers under the Em ergency Powers Law (‘armed threat’),  
• a particularly serious event or threat imp acting on the population’s subsistence or the 
foundations of the national economy that poses a material hazard to society’s functioning 
(‘economic crisis’), and  
• a particularly serious major accident and its immediate aftermath as well as widespread 
dangerous communicable disease having effects co mparable to those of a serious major 
accident (‘major accident or communicable disease’). 
5. In these situations, once the Government has estab lished, in consultation with Finland’s President, 
the existence of emergency conditions, it can adopt  a decree activating cer tain emergency powers. 
Powers are only authorised that are (i) nece ssary and proportionate to achieve the purpose of 
protecting the population and its s ubsistence and the national economy,  maintaining legal order and 
human rights as well as safeguarding Finland’s territo rial integrity and independence in emergency 
conditions; and (ii) propor tionate to the goal sought through their use. In addition, the draft law 
provides that the emergency powers can only be used in situations that cannot be controlled through the authorities’ regular powers. The Gove rnment Decree must thereafter be submitted to 
the Finnish Parliament that will decide whether to  confirm the Decree, which will then remain in 
force for the period it foresees, or whether to partially or fully repeal it. The Decree will lapse unless submitted to the Parliament within one week of its issue. 
6. The draft law provides for emergency powers in various sectors, such as communications, social 
security, energy supply and financial markets. In accordance with the ECB’s consultative 
competence, the present opinion only deals with emergency powers concerning the financial 
markets: These are dealt with in Part II (Secti ons 13 to 26) of the draft law. In particular: 
• Section 14 of the draft law provides that in order to safeguard the nation’s exchange reserves 
and the State’s liquidity in the conditions of ‘a rmed attack’ and ‘armed threat’, responsibility 
is vested in Suomen Pankki for practical m easures required for exchange controls, such as 
granting permission to take actions impacti ng the currency reserve and deciding on the duty 
of repatriation of currency, securities and receivables.  
• Section 16 of the draft law provides that in order to secure the population’s livelihood, the 
State’s liquidity or essential economic activity in the conditions of ‘armed attack’, ‘armed 
3 threat’ and ‘economic crisis’, the Government D ecree could e.g. (i) provide for interest rates 
to be observed by credit institutions, financia l institutions and other similar bodies on various 
types of financial claims so that these w ould not exceed or fall below the maximum and 
minimum limits set by the Government Decree; (ii) regulate the issue of loans and restrict withdrawals of deposits and other repayable asset s; and (iii) provide for a certain proportion 
of investments by credit and other institutions to  be made in debt instruments issued by the 
State. Suomen Pankki, the Financial Supervis ion Authority and the Insurance Supervisory 
Authority willensure enforcement of these rul es in their respective fields of operations. 
• Section 18 of the draft law provides that in all the foreseen emergenc y conditions securities 
markets could be subject to restriction. The Financial Supervision Authority will be 
responsible for enforcing these rules regardi ng securities markets. Moreover, Section 19 
provides that in the same cases payment transacti ons could be restricted. Suomen Pankki and 
the Financial Supervision Authority will ] enforce these rules. 
• Section 20 of the draft law provides that in a ll the foreseen emergency conditions, solvency 
requirements lower than the those provided for under the law will apply to credit institutions, 
investment firms and insurance and pension institutions, if meeting the statutory solvency requirement in emergency conditions may ma terially compromise their operations. In 
addition, according to Section 22 of the draft law, the Government Decree may provide for exceptions to the ordinary legal requirement s concerning bankruptcy, liquidation, accounting 
and financial statements applicable to cr edit and financial institutions, management 
companies, investment firms, the stock exch ange, the central securities depository, option 
corporations, insurance and pension instituti ons. The Financial Supe rvision Authority and 
the Insurance Supervisory Authority will be responsible for enforcement of these rules. 
• The draft law also amends Section 13 of the Law on the book-entry system listing the tasks 
of central securities depository, Arvopaperi keskus (‘APK’), which holds all book-entry 
Finnish securities, providing that APK maintain s the central data systems required for the 
book-entry system with the hardware and software located in Finland.  
7. According to Section 26 of the draft law, the Government Decree on the application of certain 
emergency powers concerning the duties assigned by the Treaty to the European System of Central Banks (ESCB) may only be adopted if the ECB, or Suomen Pankki acting as part of the ESCB, are incapacitated in emergency cond itions. Prior to issuing the Decree on emergency powers according 
to Sections 14, 16 and 19 of the draft law, the Government must request an opinion from the ECB in expedited proceedings.  
ECB Opinion 8. By adopting the euro, Finland has transferred irre versibly to the Community monetary policy and 
other powers enumerated in the Treaty and the Stat ute with regard to ESCB tasks. In these fields 
(setting reference rates, injecting or withdrawi ng liquidity in the market, ensuring efficient and 
4 sound clearing and payment systems, managing forei gn reserves, issuing banknotes, contributing to 
the stability of the financial system) certain  policy-making and legislative powers belong 
exclusively, under Article 8 of the Statute, to the decision-making bodies of the ECB. According to 
Article 10 of the Treaty, the Member States ha ve a duty to facilitate the achievement of 
Community’s tasks and must abstain from any m easure which could jeopardise the attainment of 
the objectives of the Treaty.  
9. Already in 2002, the Finnish authorites consulte d the ECB on a draft amendment to the current 
Law. In its Opinion (CON/2002/27) of 31 October 2002, the ECB concluded that some of the powers granted to the Finnish authorities conf licted with the Treaty as they belonged to 
Community competencies in the field of monetary union and of the single market for capital. In its opinion, the ECB criticised among others (i) the defi nition of emergency situations; in particular 
the emergency conditions enumerated in the Law were  broader than those referred to in Article 297 
of the Treaty; and (ii) the lack of clarity of the provision on when the Law would apply. In this latter respect, the opinion noted that emergency powers should only apply if both Suomen Pankki 
and the ECB are deprived by emergency events of  their capacity to perform their tasks and that 
both the ECB and Suomen Pankki shoul d be referred to as authorities th at need to be unable to take 
measures, before the Law can be activated. A different interpretation following which the Law 
could be applied with regard to the tasks of  the ESCB, even if the ECB and Suomen Pankki 
retained their operational and decision-making cap abilities intact, would neither be justifiable 
under nor consistent with Community law. Finally , the opinion noted that (iii) the ECB should be 
consulted before the adoption of any draft decree in its field of competence.  
10. Having assessed the draft law, the ECB notes that it aims at taking into account the 
abovementioned concerns raised by the ECB in its previous opinion. The ECB welcomes the fact 
that Section 26 of the draft law requires the G overnment to request an opinion from the ECB in 
expedited proceedings prior to issuing the Decree.  
11. Section 26 also provides that the Government Decree on the introduction of the powers provided 
for in Sections 14, 16 and 19 concerning duties belonging to the ESCB under the Treaty and the 
Statute may only be issued if the ECB, or Suomen Pankki acting as part of the ESCB, are incapacitated by the emergency conditions. It is clear from the overall assessment set out in the 
ECB opinion of 2002 that both the ECB (including through the Eurosystem emergency measures) and Suomen Pankki must be incapacitated to ta ke action before national emergency powers 
affecting the ESCB tasks can be activated. The E CB stresses accordingly that the word ‘or’ in 
Section 26 of the draft law should be replaced by the word ‘and’, in order to avoid the 
misconception that the Government Decree on emerge ncy powers could be adopted in a situation 
where Suomen Pankki is incapacitated as part of the Eurosystem e.g. perform its Eurosystem-
related duties but the ECB is s till functioning. Whereas the draft law’s statement of reasons use 
both expressions ‘or’ and ’and’, they generall y provide the impression that the purpose of 
Section 26 is indeed to ensure the primacy of Community action meaning that also the ECB should 
5 be incapacitated to act before the decree on em ergency powers may be adopted. Amending the 
wording of the Law itself would clarify this issue.  In general, the ECB considers Section 26, once 
clarified, as an important improvement to the current Law.  
12. However, there are still some provisions that woul d need to be brought into line with Community 
law, as specified in more detail below.  
13. According to settled case-law, Member States ma y derogate from obligations imposed by the 
Treaty under the conditions laid down in the Treaty itself4. Article 297 of the Treaty is one of the 
few articles allowing derogation from the rul es of the Treaty under certain conditions and 
according to certain procedures5. This Article deals with exceptional cases which are clearly 
defined and are to be interp reted in a restrictive manner6; it can therefore be understood only as a 
‘hedge clause’ and not as an expression of  any residual Member State competence7. The Court of 
Justice has held in cases where Member States act ed due to urgency on matters of exclusive 
Community competence8 that ‘Member States may act only as trustees of the common interest’ and 
that ‘Member States cannot bring into force an y interim measure which may be required by the 
situation except as part of a process of collaboration with the’[Community]. 
14. Unfortunately, the emergency conditions set out in Section 3 of the draft law still do not correspond 
with those listed in Article 297 of the Treaty.  The emergency conditions  ‘economic crisis’ and 
‘major accident or communicable disease’ in th e draft law are clearly not included in the 
exhaustive list of emergency conditions, although the ECB notes that the emergency condition 
‘economic crisis’, required to tri gger the application of the draft law, must concern a particularly 
serious economic crisis caused by a serious exogenous  event or threat, and not merely an economic 
crisis involving the domestic market. The ECB st rongly recommends amending the draft law so 
that the powers that fall within the ESCB’s excl usive competence may not be granted to national 
authorities in the absence of an emergency condition included in Article 297 of the Treaty.  
15. The wording in Article 14 of the draft law ‘Finnish currency’ could be misinterpreted to mean that 
Finland would re-introduce an ow n national currency. Based on the statement of reasons for  
Section 14, especially concerning the exchange rate used when paying the compensation for 
repatriated ‘Finnish currency’9, it appears however that referen ce is made to the euro. The ECB 
considers that the euro, as a single currency, shoul d be referred to as such and that the wording 
                                                      
4  Joined Cases 6 and 11/69, Commission v French Republic , ECR [1969] 523; Case C-285/98, Tanja Kreil v 
Bundesrepublik Deutschland  [2000] ECR I-69, paragraph 16. 
5  Article 297 of the Treaty provides for a consultation obligat ion for the Member States for the exceptional cases where a 
Member State may be called upon to take measures to protect its national interests. The proceedings set out in Article 298 
of the Treaty aim at guaranteeing that Article 297 is used in a restrictive way. 
6  Case C-13/68 Salgoil v Italian Ministry of Foreign Trade  [1968] ECR 453. 
7  Gilsdorfer/Brandtner, ‘Vorbem. zu den Artikeln 296 bi s 298 EG’, No 3-5, Bardenhewer-Rating/Grill/Jakob/Woelker, 
EG- und EU-Kommentar , 6th ed. (2004), p. 1534. 
8  See e.g., Case 804/79 Commission  v UK, paragraph 30. 
9  ‘The exchange rate for the relevant currency applied by S uomen Pankki when exchanging the relevant currency in euro at 
the time of transfer would be observed’. 
6 ‘Finnish currency’ should be re placed either by ‘euro’ or by ‘currency being legal tender in 
Finland’. The ECB also recommends replacing ’the current exchange rate of Suomen Pankki shall 
be observed’ by the wording ‘the relevant current exchange rate of euro shall be observed thereby’ 
or by the wording ‘the relevant ECB reference rates shall be observed’.   
16. Moreover, the ECB considers that the consultation obligation set out in Section 26 of the draft law 
should cover also Section 18(3) and Section 20 of th e draft law. Article 18(3) allows for restrictions 
on operations of a central securities depository holding securities in book-entry form which is 
licensed in Finland and may affect the settlement of  Finnish collateral held by the Eurosystem and 
thus the execution of monetary policy operations or the provision of intraday credit for payment system purposes. The provision by Government De cree of a generalised exception to ordinary 
solvency requirements for credit institutions pr ovided for in Section 20 of the draft law would 
concern Eurosystem’s counterparties and thus imply a derogation from ordinary Eurosystem 
requirements and possibly cause spill over effects on the financial stability of other Eurosystem 
members.  
17. The draft law introduces a requirement for any centr al securities depository licensed in Finland to 
maintain in Finland the book-entry information t echnology system required for its functioning. The 
ECB shares the authorities’ concerns  for the continuity of post-trading facilities located in the euro 
area. The ECB is of the view, in particular, that  it is essential to subject the SSSs used by the 
Eurosystem for collateral settlement and custody to  the law of a euro area country in order to 
ensure that the perfection and realisation of elig ible collateral used for Eurosystem operations are 
subject to euro area law. In addition, a provision requiring the location of such infrastructure in a 
specific country and not generally in the euro area warrants careful consideration. Since the 
treatment of collateral is a collective Eurosystem subject, of which Suomen Pankki is an integral 
part, it is logical for the collateral infrastructure to be located anywhere in the euro area, as 
reflected in the Eurosystem’s policy line published in 2001
10.   
18. The ECB also proposes adjusting the list of definiti ons in Section 13(1) of the draft law to clarify 
that when referring to credit and other institutions as addressees of the restrictions, only institutions 
resident in Finland are concerned. Concerning S ection 13(2) of the draft law providing that ’the 
Nordic Investment Bank, Nordic Project Export Fund and other international financial or other 
institutions resident in Finland sh all be considered parties reside nt abroad’, the ECB assumes that 
this treatment reflects the 5th edition of the IMF Balance of Payments Manual.  
19. Moreover, as it is possible that the ECB and Suomen Pankki, as part of the ESCB, would only 
temporarily be unable to take normal measures, th e ECB recommends also clarifying in Section 26 
of the draft law that the Decree it  refers to will be applicable on ly as long as the said entities are 
incapable of acting. Concerning the ECB’s ability to take action, it is noted for the sake of clarity 
                                                      
10  The Eurosystem’s policy line w ith regard to consolidation in central counterparty clearing.  
7 that there are ESCB emergency and contingency pl ans, according to which the ECB, in general, 
will act in emergency situations. 
20. Article 26 of the draft law provides that the G overnment Decree affecting the ESCB competences 
may only be enacted if the ECB, or Suomen Pa nkki as part of the ESCB, are incapacitated, 
expressing the principle of the supremacy of Community action. As the draft law provides for procedures for emergency situations based on the principles and procedures set out in Article 297 
of the Treaty, the ECB would welcome an additiona l reference in the draft law, for the sake of 
clarity, to the obligation to consult the other Member States set out in Article 297 of the Treaty, according to which the Member States are obliged to consult each other to prevent the functioning 
of the internal market from being affected by th e measures a Member State is allowed to take in 
extraordinary cases enumerated in it. In particular, if ‘exceptions  to solvency requirements’ for 
financial institutions (for instance by Section 20) in  an ‘economic crisis’ (a particularly serious 
crisis caused by a relevant exoge nous event or threat, with an impact on the stable operations of 
financial markets) are allowed to be introduced, coordination with other Member States and EU 
institutions could involve monitoring of spill over effects on financial stability of other Member 
States with a view to triggering, if necessary, a coordinated Eurosystem or Europe-wide response. 
21. In order to avoid any misunderstandings the ECB recommends clarifying in Section 17 of the draft 
law
11 that the detailed provisions on index clauses will apply for other than statistical purposes.   
22. Since the draft law affects some very core princi ples of Community law, such as the principle of 
the free movement of capital, the ECB propo ses consulting the Commission of the European 
Communities, as the guardian of the Treaties, on this draft law. 
23. This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 16 February 2006. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                     
 
11  Section 17 of the draft law provide s among others that ‘more detailed provi sions on index clauses and other links 
prohibited in emergency conditions alongside the index clauses or engagements prohibited pursuant to the said Law shall 
be laid down by Government decree’.