Case C‑370/12

Thomas Pringle

v

Government of Ireland and Others

(Reference for a preliminary ruling from the Supreme Court)

‛Stability mechanism for the Member States whose currency is the euro — Decision 2011/199/EU — Amendment of Article 136 TFEU — Validity — Article 48(6) TEU — Simplified revision procedure — ESM Treaty — Economic and monetary policy — Competence of the Member States’

Summary – Judgment of the Court (Full Court), 27 November 2012

Economic and monetary policy — Obligation to respect the principle of conferred powers — New tasks conferred by the treaty establishing the European stability mechanism, concluded by the Member States, to the Commission, the European Central Bank and the Court of Justice — Lawfulness

Economic and monetary policy — Economic policy — Prohibition on the Union or a Member State being liable for the commitments of another Member State or assuming those commitments — Conclusion by the Member States whose currency is the euro of a treaty establishing the European stability mechanism — Lawfulness

Economic and monetary policy — Economic policy — Prohibition on the European Central Bank and the other central banks granting overdraft facilities or credit facilities or purchasing debt instruments — Conclusion by the Member States whose currency is the euro of a treaty establishing the European stability mechanism — Lawfulness

Economic and monetary policy — Economic policy — Union competence to grant financial assistance to Member States in difficulty — Conclusion by the Member States whose currency is the euro of a treaty establishing the European stability mechanism — No effect on that competence

Economic and monetary policy — Monetary policy — Exclusive competence of the Union — Conclusion by the Member States whose currency is the euro of an agreement establishing the European stability mechanism — Effect on common rules in the area of the Union’s economic and monetary policy — None

Questions referred for a preliminary ruling — Judicial review of the legality of the acts of the institutions — Measures of general scope — Need for natural or legal persons to have recourse to a plea of illegality or a reference for a preliminary ruling on validity — Obligation of national courts to apply the national procedural rules in such a way as to permit the legality of European Union acts of general application to be challenged — Limits — Question concerning validity of a decision not contested on the basis of Article 263 TFEU with the consequence of loss of standing to institute proceedings or expiry of the period for the bringing of an action for annulment

The Treaty of Lisbon introduced, in addition to the ordinary procedure for the revision of the FEU Treaty, a simplified revision procedure under Article 48(6) TEU, the application of which is subject to a number of conditions. Since it is necessary that compliance with those conditions be monitored in order to establish whether the simplified revision procedure is applicable, it falls to the Court of Justice, as the institution which, under the first subparagraph of Article 19(1) TEU, is to ensure that the law is observed in the interpretation and application of the Treaties, to examine the validity of a decision of the European Council based on Article 48(6) TEU. To that end, it is for the Court to verify, first, that the procedural rules laid down in Article 48(6) TEU were followed and, secondly, that the amendments decided upon concern only Part Three of the FEU Treaty, which implies that they do not entail any amendment of provisions of another part of the Treaties on which the European Union is founded, and that they do not increase the competences of the Union. (see paras 31, 33-36)

See the text of the decision. (see paras 39-42)

European Council Decision 2011/199 amending Article 136 of the FEU Treaty with regard to a stability mechanism for Member States whose currency is the euro satisfies the condition laid down in the first and second subparagraphs of Article 48(6) TEU that a revision of the FEU Treaty by means of the simplified revision procedure may concern only provisions of Part Three of the FEU Treaty. First, Article 1 of Decision 2011/199 which, by the addition of a paragraph 3 to Article 136 TFEU, envisages the establishment of a stability mechanism, is not capable of affecting the exclusive competence held by the Union under Article 3(1)(c) TFEU in the area of monetary policy for the Member States whose currency is the euro. In the light of the objectives to be attained by the stability mechanism, the instruments provided in order to achieve those objectives and the close link between that mechanism, the provisions of the FEU Treaty relating to economic policy and the regulatory framework for strengthened economic governance of the Union, the establishment of that mechanism falls within the area of economic policy. Thus, first, as regards the objective pursued by that mechanism, which is to safeguard the stability of the euro area as a whole, that is clearly distinct from the objective of maintaining price stability, which is the primary objective of the Union’s monetary policy. As regards, secondly, the instruments envisaged in order to attain the objective concerned, Decision 2011/199 states only that the stability mechanism will grant any required financial assistance; it contains no other information on the operation of that mechanism. The grant of financial assistance to a Member State however clearly does not fall within monetary policy. Secondly, Decision 2011/199 does not affect the Union’s competence in the area of the coordination of the Member States’ economic policies. Since Articles 2(3) and 5(1) TFEU restrict the role of the Union in the area of economic policy to the adoption of coordinating measures, the provisions of the EU and FEU Treaties do not confer any specific power on the Union to establish a stability mechanism of the kind envisaged by that decision. Consequently, having regard to Articles 4(1) TEU and 5(2) TEU, the Member States whose currency is the euro are entitled to conclude an agreement between themselves for the establishment of a stability mechanism of the kind envisaged by Article 1 of Decision 2011/199. However, those Member States may not disregard their duty to comply with European Union law when exercising their competences in that area. The reason why the grant of financial assistance by the stability mechanism is subject to strict conditionality under paragraph 3 of Article 136 TFEU is in order to ensure that that mechanism will operate in a way that will comply with European Union law, including the measures adopted by the Union in the context of the coordination of the Member States’ economic policies. (see paras 56, 57, 60, 63, 64, 68-70, 72, operative part 1)

European Council Decision 2011/199 amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro does not confer any new competence on the Union. That amendment creates no legal basis for the Union to be able to undertake any action which was not possible before the entry into force of that amendment of the FEU Treaty. Further, the fact that the treaty establishing a European stability mechanism makes use of the Union’s institutions, in particular the Commission and the European Central Bank, is not capable of affecting the validity of Decision 2011/199, which in itself provides only for the establishment of a stability mechanism by the Member States and is silent on any possible role for the Union’s institutions in that connection. It follows that Decision 2011/199 satisfies the condition laid down in Article 48(6) TEU that a revision of the FEU Treaty by means of the simplified revision procedure may not increase the competences conferred on the Union in the Treaties. (see paras 73-75, operative part 1)

See the text of the decision. (see paras 84, 86)

Articles 3(1)(c) TFEU and 127 TFEU do not preclude the conclusion between the Member States whose currency is the euro of an agreement such as the treaty establishing the European stability mechanism (the ESM Treaty) or the ratification of that treaty by those Member States. The activities of the ESM do not fall within the monetary policy which is the subject of those provisions of the FEU Treaty since it is not the purpose of that mechanism to maintain price stability, but rather to meet the financing requirements of its members, namely Member States whose currency is the euro, who are experiencing or are threatened by severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole and of its Member States. To that end, the ESM is not entitled either to set the key interest rates for the euro area or to issue euro currency, while the financial assistance which the ESM grants must be entirely funded – the provisions of Article 123(1) TFEU being respected – from paid-in capital or by the issue of financial instruments, as provided for in Article 3 of the ESM Treaty. Any effect of the activities of the ESM on price stability is not such as to call into question that finding. Even if the activities of that mechanism might influence the rate of inflation, such an influence would constitute only the indirect consequence of the economic policy measures adopted. (see paras 95-98, operative part 2)

Article 3(2) TFEU which prohibits Member States from concluding an agreement between themselves which might affect common rules or alter their scope does not preclude either the conclusion by the Member States whose currency is the euro of an agreement such as the treaty establishing a European stability mechanism (the ESM Treaty) or their ratification of it. First, since the European Financial Stability Facility (EFSF) was established by the Member States whose currency is the euro outside the framework of the Union, the assumption by the European stability mechanism (ESM) of the tasks conferred on the EFSF is not such as to affect common rules of the Union or alter their scope. Secondly, even if it is apparent from recital 1 of the preamble to the treaty establishing the European stability mechanism (the ESM Treaty) that the ESM will, among other tasks, assume the tasks hitherto allocated temporarily to the European Financial Stability Mechanism (EFSM) established on the basis of Article 122(2) TFEU, that fact is not such as to affect common rules of the Union or alter their scope. The establishment of the ESM does not affect the power of the Union to grant, on the basis of Article 122(2) TFEU, ad hoc financial assistance to a Member State when it is found that that Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control. Moreover, since neither Article 122(2) TFEU nor any other provision of the EU and FEU Treaties confers a specific power on the Union to establish a permanent stability mechanism such as the ESM, the Member States are entitled, in the light of Articles 4(1) TEU and 5(2) TEU, to act in this area. (see paras 101-105, operative part 2)

Articles 2(3) TFEU, 119 TFEU to 121 TFEU and 126 TFEU do not preclude the conclusion between the Member States whose currency is the euro of an agreement such as the Treaty establishing the European stability mechanism (the ESM Treaty) or the ratification of that treaty by those Member States. Member States have the power to conclude between themselves an agreement for the establishment of a stability mechanism such as the ESM Treaty provided that the commitments undertaken by the Member States who are parties to such an agreement are consistent with European Union law. In that context, the ESM is not concerned with the coordination of the economic policies of the Member States, but rather constitutes a financing mechanism. While it is true that, under Article 3, Article 12(1) and the first subparagraph of Article 13(3) of the treaty establishing that mechanism, the financial assistance provided to a Member State that is a member of that mechanism is subject to strict conditionality, appropriate to the financial assistance instrument chosen, which can take the form of a macro‑economic adjustment programme, the conditionality prescribed nonetheless does not constitute an instrument for the coordination of the economic policies of the Member States, but is intended to ensure that the activities of the ESM are compatible with, inter alia, Article 125 TFEU and the coordinating measures adopted by the Union. Last, the ESM Treaty does not affect the competence of the Council of the European Union to issue recommendations on the basis of Article 126(7) and (8) TFEU to a Member State in which an excessive deficit exists. (see paras 109-114, operative part 2)

The subject-matter of Article 122 TFEU is solely financial assistance granted by the Union and not that granted by the Member States. The exercise by the Union of the competence conferred on it by that provision is not affected by the establishment of the European stability mechanism. (see paras 119-122, operative part 2)

Article 123 TFEU, which prohibits the European Central Bank and the central banks of the Member States from granting overdraft facilities or any other type of credit facility to public authorities and bodies of the Union and of Member States and from purchasing directly from them their debt instruments, does not preclude the conclusion between the Member States whose currency is the euro of an agreement such as the treaty establishing the European stability mechanism or the ratification of that treaty by those Member States. Article 123 TFEU is addressed specifically to the European Central Bank and the central banks of the Member States. The grant of financial assistance by one Member State or by a group of Member States to another Member State is therefore not covered by that prohibition. (see paras 123, 125, 128, operative part 2)

Article 125 TFEU, which provides that neither the Union nor a Member State are to ‘be liable for … the commitments’ of another Member State or ‘assume [those commitments]’, does not preclude the conclusion between the Member States whose currency is the euro of an agreement such as the treaty establishing the European stability mechanism or the ratification of that treaty by those Member States. While Article 125 TFEU prohibits the Union and the Member States from granting financial assistance as a result of which the incentive of the recipient Member State to conduct a sound budgetary policy is diminished, that provision does not however prohibit the granting of financial assistance by one or more Member States to a Member State which remains responsible for its commitments to its creditors provided that the conditions attached to such assistance are such as to prompt that Member State to implement a sound budgetary policy. As regards the ESM Treaty, the ESM does not, in the first place, act as guarantor of the debts of the recipient Member State. The latter remains responsible to its creditors for its financial commitments, given that under Article 13(6) of the treaty establishing the European stability mechanism, any financial assistance granted on the basis of Articles 14 to 16 thereof must be repaid to the ESM by the recipient Member State and that, under Article 20(1) thereof, the amount to be repaid is to include an appropriate margin. For the same reasons, the ESM does not by purchasing bonds on the primary market, which is comparable to the granting of a loan, assume the debts of the recipient Member State. The issuing Member State remains, moreover, solely answerable to repay the debts incurred by the purchase on the secondary market of bonds issued by an ESM Member. Secondly, stability support may be granted only when such support is indispensable to safeguard the financial stability of the euro area as a whole and of its Member States and the grant of that support is subject to strict conditionality appropriate to the financial assistance instrument chosen, designed, inter alia, to ensure that the Member States pursue a sound budgetary policy. Last, where a Member State that is an ESM Member fails to pay the sum called for and a revised increased capital call is made to all the other members, the defaulting ESM Member State remains bound to pay its part of the capital. Accordingly, the other ESM Members do not act as guarantors of the debt of the defaulting ESM Member. Consequently, a mechanism such as the ESM and the Member States who participate in it are not liable for the commitments of a Member State which receives stability support and nor do they assume those commitments, within the meaning of Article 125 TFEU (see paras 130, 136-143, 145-147, operative part 2)

Article 13(2) TEU which provides that each institution of the Union is to act within the limits of the powers conferred on it in the Treaties, and in conformity with the procedures, conditions and objectives set out in them, does not preclude the conclusion between the Member States whose currency is the euro of an agreement such as the treaty establishing the European stability mechanism (the ESM Treaty) or the ratification of that treaty by those Member States, the conferral, by the ESM Treaty, of new tasks to the Commission, the European Central Bank and the Court of Justice being compatible with their powers as defined in the Treaties. The Member States are entitled, in areas which do not fall under the exclusive competence of the Union, to entrust tasks to the institutions, outside the framework of the Union, such as the task of coordinating a collective action undertaken by the Member States or managing financial assistance, provided that those tasks do not alter the essential character of the powers conferred on those institutions by the EU and FEU Treaties. The duties conferred on the Commission and the European Central Bank within the ESM Treaty are tasks of that kind. The duties conferred on them in the context of the ESM do not entail any power to make decisions of their own. Further, those tasks do not alter the essential character of the powers conferred on those institutions by the Treaties, since the Commission, under Article 17(1) TEU, is to promote the general interest and the European Central Bank is to support the general economic policies in the Union, in accordance with Article 282(2) TFEU. As regards the allocation of jurisdiction to the Court of Justice by Article 37(3) of the ESM Treaty, that is based directly on Article 273 TFEU. Under that article, the Court has jurisdiction in any dispute between Member States which relates to the subject-matter of the Treaties, if that dispute is submitted to it under a special agreement. While it is true that the jurisdiction of the Court under Article 273 TFEU is subject to the existence of a special agreement, there is no reason, given the objective pursued by that provision, why such agreement should not be given in advance, with reference to a whole class of pre-defined disputes, by means of a provision such as Article 37(3) of the ESM Treaty. Further, a dispute linked to the interpretation or application of the ESM Treaty is likely also to concern the interpretation or application of provisions of European Union law. Last, while it is true that the jurisdiction of the Court under Article 273 TFEU is subject to the condition that only Members States are parties to the dispute submitted to it, since the membership of the ESM consists solely of Member States, a dispute to which the ESM is party may be considered to be a dispute between Member States within the meaning of Article 273 TFEU. (see paras 153, 158-165, 171, 172, 174-177, operative part 2)

The general principle of effective judicial protection guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union does not preclude either the conclusion by the Member States whose currency is the euro of an agreement such as the Treaty establishing the European stability mechanism (the ESM Treaty) or their ratification of it. Article 51(1) of the Charter states that the provisions thereof are addressed to the Member States only when they are implementing European Union law. Article 51(2) of the Charter states that it does not extend the field of application of Union law beyond the powers of the Union or establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties. Accordingly, the Court is called upon to interpret, in the light of the Charter, the law of the European Union within the limits of the powers conferred on it. The Member States are not implementing European Union law, within the meaning of Article 51(1) of the Charter, when they establish a stability mechanism such as the ESM where the EU and FEU Treaties do not confer any specific competence on the Union to establish such a mechanism. (see paras 179, 180, operative part 2)