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)
Date: 2002-10-31
Institutions: European Central Bank
Subjects: Finland, central bank, competence of the institution, financial supervision, national law, state of emergency

EN

A.

1. 

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)

Background

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  Emergency

Powers 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  and

human  rights,  and  to  safeguard  the  territorial  integrity  and  independence  of  Finland  in

emergency conditions. The purpose of the proposal is to insert new provisions in the Emergency

Powers Act regarding the regulation of  the  Finnish  financial  markets as  well as  the  insurance

industry 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  of

29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities

regarding  draft  legislative  provisions1,  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 of

the Rules of Procedure of the European Central Bank, the Governing Council of the ECB has

adopted this opinion.

Description of the proposal.

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

B.

3. 

1 

OJ L 189, 3.7.1998, p. 42.

                                                     
markets 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  competencies

enumerated  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 authority

to implement such decrees. In addition, according to the amended version of Section 13 of the

Act 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,  according  to  Sections  2  and  3  of  the  Emergency

Powers  Act,  only  when  the  following  three  cumulative  conditions  are  met:  (a)  an  emergency

situation occurs; (b) the established authorities cannot  control  the  situation using  their  regular

powers;  and  (c)  the  President  of  the  Republic  adopts  a  decree  recognising  the  situation  and

authorising the use of the powers provided for in the Emergency Powers Act.

The  emergency  situations  within the  meaning  of  the  Emergency  Powers  Act  are  exhaustively

enumerated in its Section 2 and comprise:

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

an armed attack against Finland, as well as war or the aftermath of war,

a  serious  violation  of  the  territorial  integrity  of  Finland  or  a  threat  of  war  against  the

country,

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, or

other specific circumstances outside Finland having a comparable effect, if they may pose

a grave danger to the underlying foundations of society and the population’s well-being,

as referred to in Section 1(1) of the Act,

a serious threat to the livelihood of the population or  to  the  foundations  of  the  national

economy  brought  about  by  hampered  or  interrupted  import  of  indispensable  fuels  and

other sources of energy, raw materials and goods or by a comparable serious disruption of

international trade, and

(cid:1) 

a catastrophe.

5. 

The  new  competencies  to  be  attributed  to  the  Government  by  the  proposal  would  include,  in

particular, the power:

(cid:1) 

to  prohibit  or  impose  conditions  and  other  requirements  on  the  export  and  import  of

foreign currency and other means of payment, securities or bonds,

2

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

(cid:1) 

to oblige a natural or legal person resident in Finland to repatriate, against compensation,

to  Finnish  state  authorities  different  currencies,  securities  or  bonds  located  or

administrated abroad,

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  in

Finland,

to regulate the interest rates applicable in the financial markets,

to regulate and restrict lending and deposit-taking activities by credit institutions,

to prohibit or restrict issuance and trade of securities and book-entry securities,

to suspend or restrict the functioning of clearing and settlement systems,

to  restrict  and  regulate  payment  transfers  and  payment  systems.  According  to  the

Statement of Reasons, this power could cover also the Finnish component of TARGET,

to  lay  down  provisions  concerning  the  accounting  and  financial  statements  of  credit

institutions,

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 of

the  European  System  of  Central  Banks  and  of  the  European  Central  Bank.  According  to  that

Article a national central bank (NCB) may perform functions other that those specified in the

Statute. Furthermore, according to the Statement of Reasons, the requirement of independence

of  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 be

regarded as being part of the functions of the ESCB.

Moreover, the Statement of Reasons states that even if such additional tasks to be performed by

an NCB could not be justified under Article 14.4 and would contradict the acts and instruments

adopted 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  the

conditions  for  their  application  are  met.  In  particular,  the  proposal  states  that  under  the

emergency conditions mentioned in Article 297, such as serious internal disturbances affecting

the maintenance of law and order, or in the event of war, a Member State could even be entitled

to control all of the foreign reserves held and managed by its NCB.

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C.

7. 

D.

8. 

The emergency situation

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 Powers

Act  are  not  identical  to  those  referred  to  in  Article  297.  The  circumstances  justifying  the

invocation  of  Articles  58  and  297  must  be  construed  and  interpreted  strictly  as  has  been

established by the consistent case law of the Court of Justice of the European Communities. The

ECB notes that Section 10 of the Emergency Powers Act significantly limits the application of

the emergency powers provided for by the Act. According to that Section, the application of the

emergency powers under the Act ‘shall be subject to the restrictions on the scope of the law of

Finland  based  on  international  agreements  binding  on  Finland  and  on  the  generally  accepted

rules  of  international  law’.  In  this  context  the  ECB  submits  that,  from  the  perspective  of  the

operation of the financial markets, the most significant such obligations binding Finland are to

be  found  in  the  Treaty  and  the  Statute.  However,  the  Statement  of  Reasons  indicates  that  no

clear demarcation line may be drawn between crises and disturbances in normal conditions and

in  emergency  conditions,  therefore  giving  the  impression  that  the  emergency  powers  in  the

proposal may also apply in circumstances not expressly mentioned in Community law. To the

extent that the emergency events contemplated in the proposal diverge from the events foreseen

in  the  Treaty,  they  cannot  be  legally  justified  by  it.  In  particular,  the  ECB  would  like  to

emphasise that purely economic reasons neither justify exceptions to the application of Treaty

provisions  nor  fall  within  the  scope  of  circumstances  under  which  Articles 58  or  297  can  be

invoked2.

The regular exercise of powers by the established authorities

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  competent

authorities, in accordance with Finnish legislation, responsible in Finland for the tasks conferred

on the ESCB by the Treaty and the Statute. Consequently, both of them should be understood as

being included in the definition of ‘authorities’ in the Emergency Powers Act. Therefore, to the

extent that emergency events would not deprive them of the capacity to perform their tasks by

using their statutory powers, this second condition would not be met and the Emergency Powers

Act  could  not  apply  to  them  with  regard  to  the  ESCB  field  of  competence.  A  different

interpretation, following which the Emergency Powers Act could be applied with regard to the

tasks  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. 

4

                                                     
decision-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 the

tasks of the ESCB. The decision-making for those tasks belongs exclusively, under Article 8 of

the  Statute,  to  the  decision-making  bodies  of  the  ECB.  The  decisions  taken  by  those  bodies

apply to the whole euro area, and this is as it should be because in a monetary union measures

that were to be adopted unilaterally by one participating Member State would be bound to have

immediate consequences in the other participating Member States. Conversely, common action

by  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  with

other ESCB members to manage foreign reserves abroad rather than compulsorily repatriating

such  assets  to  Finland  could  better  contribute  to  the  efficient  managing  of  an  emergency

situation in Finland. Therefore, the proposal could perhaps impose, rather than repatriation, an

obligation 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 part

of 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, the

example of the joint ESCB action together with international cooperation proved very effective

in  preventing  and  solving  temporary  liquidity  shortages  in  the  aftermath  of  the  11  September

terrorist  attacks,  and  protected  the  stability  of  the  global  financial  system.  Thus,  unless  the

emergency events impeded the ESCB from performing its tasks, action by national authorities

could be justified neither on economic grounds nor under Community law.

For  reasons  of  legal  certainty  and  clarity,  the  ECB  suggests  that  the  proposal  explicitly

stipulates 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  proposal

contemplates a certain role for Suomen Pankki in the case of an emergency, but to the extent

that Suomen Pankki could use its regular powers, the Emergency Powers Act could not apply to

it.  Only  in  the  event  of  either  the  ECB  or  Suomen  Pankki  being  rendered  unable  to  function

because of an emergency event could the provisions of the Emergency Powers Act apply with

respect 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 of

the  emergency  powers  in  accordance  with  the  Emergency  Powers  Act,  the  ECB  submits  that

fundamental principles and provisions of Community law must be respected.

5

In  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 any

measure  which  could  jeopardise  the  attainment  of  the  objectives  of  the  Treaty.  The  Court  of

Justice  has  held  in  cases  where  Member  States  acted  due  to  urgency  on  matters  of  exclusive

Community competence3 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 by

the 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 emergency

situations4.  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 field

of  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 of

the Treaty providing for exceptions must be construed and interpreted strictly. In the domain of

exchange controls, the concepts of ‘public policy’ and ‘public security’ used in Article 58 of the

Treaty  must  be  interpreted  restrictively5.  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  emergency

powers  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 be

in line not only with Community law provisions on consultation of the ECB (Article 105(4) of

the  Treaty),  but  also  with  the  duties  to  which  the  abovementioned  Article  10  of  the  Treaty

refers.

In  addition,  the  ECB  submits  that  the  obligation  of  mutual  consultation  referred  to  in

Article 297 of the Treaty should be read in this context and, as regards the tasks of the ESCB,

3 
4 
5 
6 
7 

See e.g., Case 804/79 Commission vs. UK, paragraph. 30.
See e.g. Articles 59, 100(2) and 120 EC.
See e.g. Case 95/81 Commission vs. Italy, Case C-394/97 Heinonen, and Case C-423/98 Albore. 
See Article 298 EC.
See Article 298 EC.

6

                                                     
that 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 scope

of Article 14.4 of the Statute. Thus Article 14.4 does not provide a correct legal  basis  for the

proposal  in  this  regard.  Such  tasks  should  remain  within  the  competence  of  the  ESCB  to  the

extent that the emergency situation allows its functioning. Furthermore, the ECB recalls that the

application of Article 14.4 is always subject to the possibility of the Governing Council of the

ECB 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 ESCB

tasks. The ECB understands that pre-existing national legislation on emergency powers in other

Member States, if any, has to be interpreted and applied in consistency with the principles and

rules of Community law as it stands after the adoption of the Treaty of Maastricht.  

14.  Since the proposal affects some very core principles of Community law, the ECB would like to

suggest that the Commission of the European Communities, as the guardian of the Treaties, is

also 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

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