EN
OPINION OF THE EUROPEAN CENTRAL BANK
of 31 October 2002
at the request of the Finnish Ministry of Finance
on a proposal to amend the Emergency Powers Act
(CON/2002/27)
A. Background
1. On 16 September 2002 the European Central Bank (ECB) received a request from the Finnish
Ministry of Finance for an opinion on a draft government proposal amending the EmergencyPowers Act ( Valmiuslaki 1080/1991)  and certain other related acts (the proposal).
The Emergency Powers Act aims, in accordance with its Section 1(1), to secure the livelihood
of the population and the national economy, to maintain legal order and constitutional andhuman rights, and to safeguard the territorial integrity and independence of Finland inemergency conditions. The purpose of the proposal is to insert new provisions in the EmergencyPowers Act regarding the regulation of the Finnish financial markets as well as the insuranceindustry in emergency conditions.
2. The ECBs competence to deliver an opinion is based on Article 105(4) of the Treaty
establishing the European Community and on Article 2(1) of Council Decision 98/415/EC of29 June 1998 on the consultation of the European Central Bank by national authoritiesregarding draft legislative provisions
1, as the proposal contains provisions on matters
concerning the core competencies of the ECB and the European System of Central Banks(ESCB) as well as on Suomen Pankki. In accordance with the first sentence of Article 17.5 ofthe Rules of Procedure of the European Central Bank, the Governing Council of the ECB hasadopted this opinion.
B. Description of the proposal.
3. According to the Statement of Reasons of the proposal, the emergency powers currently
envisaged in the Emergency Powers Act do not sufficiently provide for regulating the financial
                                                     
1 OJ L 189, 3.7.1998, p. 42.
2markets in emergency situations. Therefore, it is proposed to give the Finnish Government wide
powers to regulate the financial markets in such situations.
The Government would be empowered to exercise, through its decrees, new competenciesenumerated in the amended version of Section 12 of the Act, and in a new Section 12a.Furthermore, it would be entitled to empower Suomen Pankki or another Finnish state authorityto implement such decrees. In addition, according to the amended version of Section 13 of theAct the Government is also entitled to extend the existing tasks of Suomen Pankki to the extent
necessary to implement the decrees. The ECB notes that this would inevitably mean that
Suomen Pankki would be subject to the instructions of the Finnish Government.
4. The emergency powers are to be exercised, accor ding to Sections 2 and 3 of the Emergency
Powers Act, only when the following three cumulative conditions are met: (a) an emergencysituation occurs; (b) the established authorities cannot control the situation using their regularpowers; and (c) the President of the Republic adopts a decree recognising the situation andauthorising the use of the powers provided for in the Emergency Powers Act.
The emergency situations within the meaning of the Emergency Powers Act are exhaustivelyenumerated in its Section 2 and comprise:
/g183 an armed attack against Finland, as well as war or the aftermath of war,
/g183 a serious violation of the territorial integrity of Finland or a threat of war against the
country,
/g183 war or a threat of war between foreign countries or a serious international crisis
constituting a threat of war, requiring immediate action to increase Finlands defences, orother specific circumstances outside Finland having a comparable effect, if they may posea grave danger to the underlying foundations of society and the populations well-being,as referred to in Section 1(1) of the Act,
/g183 a serious threat to the livelihood of the population or to the foundations of the national
economy brought about by hampered or inte rrupted import of indispensable fuels and
other sources of energy, raw materials and goods or by a comparable serious disruption ofinternational trade, and
/g183 a catastrophe.
5. The new competencies to be attributed to the Government by the proposal would include, in
particular, the power:
/g183 to prohibit or impose conditions and other requirements on the export and import of
foreign currency and other means of payment, securities or bonds,
3/g183 to oblige a natural or legal person resident in Finland to repatriate, against compensation,
to Finnish state authorities different currencies, securities or bonds located oradministrated abroad,
/g183 to prohibit transactions altering the amount or nature of foreign means of payment,
securities or bonds owned or administered by a natural or legal person resident inFinland,
/g183 to regulate the interest rates applicable in the financial markets,
/g183 to regulate and restrict lending and deposit-taking activities by credit institutions,
/g183 to prohibit or restrict issuance and trade of securities and book-entry securities,
/g183 to suspend or restrict the functioning of clearing and settlement systems,
/g183 to restrict and regulate payment transfer s and payment systems. According to the
Statement of Reasons, this power could cover also the Finnish component of TARGET,
/g183 to lay down provisions concerning the accounting and financial statements of credit
institutions,
/g183 to impose restrictions on the application of provisions on the activities and pricing
policies of credit institutions.
6. Concerning the possible extension of the tasks of Suomen Pankki, the Statement of Reasons of
the proposal states that new tasks can be justified on the basis of Article 14.4 of the Statute ofthe European System of Central Banks and of the European Central Bank. According to thatArticle a national central bank (NCB) may perfor m functions other that those specified in the
Statute. Furthermore, according to the Statement of Reasons, the requirement of independenceof Suomen Pankki as provided for in Article 108 of the Treaty and Article 7 of the Statute
would not apply to any additional tasks performed under Article 14.4, since they would not beregarded as being part of the functions of the ESCB.
Moreover, the Statement of Reasons states that even if such additional tasks to be performed byan NCB could not be justified under Article 14.4 and would contradict the acts and instrumentsadopted by the ECB in its field of competence, a Member State would in any case have the right
to take unilateral measures of this kind under Articles 58 and 297 of the Treaty, when theconditions for their application are met. In particular, the proposal states that under theemergency conditions mentioned in Article 297, such as serious internal disturbances affectingthe maintenance of law and order, or in the event of war, a Member State could even be entitledto control all of the foreign reserves held and managed by its NCB.
4C. The emergency situation
7. As regards the condition described under (a) in paragraph 4 above, concerning the emergency
situations, the ECB submits that the events enumerated in Section 2 of the Emergency PowersAct are not identical to those referred to in Article 297. The circumstances justifying theinvocation of Articles 58 and 297 must be construed and interpreted strictly as has beenestablished by the consistent case law of the Court of Justice of the European Communities. TheECB notes that Section 10 of the Emergency Powers Act significantly limits the application ofthe emergency powers provided for by the Act. According to that Section, the application of theemergency powers under the Act shall be subject to the restrictions on the scope of the law ofFinland based on international agreements binding on Finland and on the generally acceptedrules of international law. In this context the ECB submits that, from the perspective of theoperation of the financial markets, the most significant such obligations binding Finland are tobe found in the Treaty and the Statute. However, the Statement of Reasons indicates that noclear demarcation line may be drawn between crises and disturbances in normal conditions andin emergency conditions, therefore giving the impression that the emergency powers in theproposal may also apply in circumstances not ex pressly mentioned in Community law. To the
extent that the emergency events contemplated in the proposal diverge from the events foreseenin the Treaty, they cannot be legally justified by it. In particular, the ECB would like toemphasise that purely economic reasons neither justify exceptions to the application of Treatyprovisions nor fall within the scope of circumstances under which Articles 58 or 297 can beinvoked
2.
D. The regular exercise of powers by the established authorities
8. As regards the condition described under (b) in paragraph 4 above concerning the authorities
inability to control the situation using regular powers, the ECB submits that both the ECB and
Suomen Pankki, as component members of the ESCB, are the established and competentauthorities, in accordance with Finnish legislation, responsible in Finland for the tasks conferredon the ESCB by the Treaty and the Statute. Consequently, both of them should be understood asbeing included in the definition of authorities in the Emergency Powers Act. Therefore, to theextent that emergency events would not deprive them of the capacity to perform their tasks byusing their statutory powers, this second condition would not be met and the Emergency PowersAct could not apply to them with regard to the ESCB field of competence. A differentinterpretation, following which the Emergency Powers Act could be applied with regard to thetasks of the ESCB, even if the ECB and Suomen Pankki retained intact their operational and
                                                     
2 See e.g. Case C-120/95 Decker vs. Caisse de Maladie , Case C-398/98 Commission vs. Greece , Case C-158/96 Kohl
vs. Union des Caisses de Maladie . 
5decision-making capabilities, would neither be justifiable under nor consistent with Community
law.
9. By adopting the euro as the single currency Finland has transferred, irreversibly, to the
Community level the competencies enumerated in the Treaty and the Statute with regard to thetasks of the ESCB. The decision-making for those tasks belongs exclusively, under Article 8 ofthe Statute, to the decision-making bodies of the ECB. The decisions taken by those bodiesapply to the whole euro area, and this is as it should be because in a monetary union measuresthat were to be adopted unilaterally by one participating Member State would be bound to haveimmediate consequences in the other participating Member States. Conversely, common actionby the whole ESCB, decided by the Governing Council of the ECB, may provide for better
remedies to local economic disruptions. For example, allowing Suomen Pankki, together withother ESCB members to manage foreign reserves abroad rather than compulsorily repatriatingsuch assets to Finland could better contribute to the efficient managing of an emergencysituation in Finland. Therefore, the proposal could perhaps impose, rather than repatriation, anobligation to transfer to Suomen Pankki foreign assets held by the private sector abroad.
The resolution of any crisis situation affecting the money supply and price stability of one partof the euro area should therefore primarily take  place in the context of the ESCB institutional
framework, as provided for by the Treaty and the Statute. Although the scenarios may differ, theexample of the joint ESCB action together with international cooperation proved very effectivein preventing and solving temporary liquidity shortages in the aftermath of the 11 Septemberterrorist attacks, and protected the stability of the global financial system. Thus, unless theemergency events impeded the ESCB from performing its tasks, action by national authoritiescould be justified neither on economic grounds nor under Community law.
For reasons of legal certainty and clarity, the ECB suggests that the proposal explicitlystipulates that both the ECB and Suomen Pankki come within the definition of authorities in
Section 2 of the Emergency Powers Act. Such clarification is needed as the proposalcontemplates a certain role for Suomen Pankki in the case of an emergency, but to the extentthat Suomen Pankki could use its regular powers, the Emergency Powers Act could not apply toit. Only in the event of either the ECB or S uomen Pankki being rendered unable to function
because of an emergency event could the provisions of the Emergency Powers Act apply withrespect to their statutory tasks. 
E. The granting of emergency powers by the President of the Republic
10. As regards the condition described under (c) in paragraph 4 above concerning the President of
the Republic adopting a decree recognising an emergency situation and authorising the use ofthe emergency powers in accordance with the Emergency Powers Act, the ECB submits thatfundamental principles and provisions of Community law must be respected.
6In this context the ECB recalls that according to Article 10 of the Treaty the Member States
have a duty to facilitate the achievement of the Communitys tasks and must abstain from anymeasure which could jeopardise the attainment of the objectives of the Treaty. The Court ofJustice has held in cases where Member States acted due to urgency on matters of exclusiveCommunity competence
3 that Member States may act only as trustees of the common interest,
and that Member States cannot bring into force any interim measure which may be required bythe situation except as part of a process of  collaboration with the Commission (in the case of
ESCB tasks the reference to the Commission is to be read as a reference to the ECB). Therefore,the ECB recalls that Community law envisages the priority of Community actions in emergencysituations
4. If the ECB and Suomen Pankki were capable of functioning in an emergency
situation, there would be no basis under Community law not to apply this principle. In the fieldof competence of the ESCB such priority has to be read as referring to emergency decision-making of the Governing Council of the ECB.
Moreover, the ECB recalls the consistent Community case law according to which provisions ofthe Treaty providing for exceptions must be construed and interpreted strictly. In the domain ofexchange controls, the concepts of public policy and public security used in Article 58 of theTreaty must be interpreted restrictively
5. Such Treaty provisions should not be used in an
improper manner6 and their application must respect the principles of proportionality and non-
discrimination. The Court of Justice may review the use of such provisions by a Member State7.
Finally, the ECB recalls that exceptions provided for by the Treaty must be of a temporary
nature.
The ECB therefore suggests that the proposal acknowledges that the granting of emergencypowers by the President has to comply with the abovementioned fundamental principles and
rules of Community law.
11. The proposal should moreover provide that the ECB should be consulted before the adoption of
any draft for such a Presidential decree, using, if needed, an urgency procedure. That would bein line not only with Community law provisi ons on consultation of the ECB (Article 105(4) of
the Treaty), but also with the duties to which the abovementioned Article 10 of the Treatyrefers.
In addition, the ECB submits that the obligation of mutual consultation referred to inArticle 297 of the Treaty should be read in this context and, as regards the tasks of the ESCB,
                                                     
3 See e.g., Case 804/79 Commission vs. UK , paragraph. 30.
4 See e.g. Articles 59, 100(2) and 120 EC.
5 See e.g. Case 95/81 Commission vs. Italy , Case C-394/97 Heinonen , and Case C-423/98 Albore . 
6 See Article 298 EC.
7 See Article 298 EC.
7that it should be taken as referring to consultation among the ECB and the NCBs as component
members of the ESCB.
12. With regard to the material content of the emergency powers that a Presidential decree may vest
in the Finnish Government, such as the power  to extend the tasks of Suomen Pankki as
discussed in paragraphs 3 and 6 above, the ECB has the following views. Tasks clearly falling
within the core competencies of the ESCB, such as  the setting of interest rates, the holding and
managing of foreign reserves and the operation of payment systems, cannot fall within the scopeof Article 14.4 of the Statute. Thus Article 14.4 does not provide a correct legal basis for theproposal in this regard. Such tasks should rema in within the competence of the ESCB to the
extent that the emergency situation allows its functioning. Furthermore, the ECB recalls that theapplication of Article 14.4 is always subject to the possibility of the Governing Council of theECB to find that it interferes with the objectives and tasks of the ESCB.
F. General 
13. This request for an ECB opinion concerns for the first time since the beginning of the third stage
of economic and monetary union a national act on emergency powers that would affect ESCBtasks. The ECB understands that pre-existing national legislation on emergency powers in otherMember States, if any, has to be interpreted and applied in consistency with the principles andrules of Community law as it stands after the adoption of the Treaty of Maastricht.  
14. Since the proposal affects some very core prin ciples of Community law, the ECB would like to
suggest that the Commission of the European Communities, as the guardian of the Treaties, isalso given an opportunity to express its opinion thereon.
Done at Frankfurt am Main on 31 October 2002.
The President of the ECB
[signed]
Willem F. DUISENBERG