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)
Date: 2006-02-16
Institutions: European Central Bank
Subjects: Finland, competence of the institution, financial stability, monetary policy, national law, state of emergency

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 powers and other laws amending certain 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/EC 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 concerning rules on currency matters, means of payment, 

national central banks, payment and settlement systems 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 Rules 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  particular,  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  affecting  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  

2  
3  

Komiteanmietintö 2005:2, Ehdotus uudeksi valmiuslaiksi, Valmiuslakitoimikunnan mietintö, Oikeusministeriö Helsinki 
2005. 
OJ L 189, 3.7.1998, p. 42. 
Valmiuslaki, 1080/1991 of 22 July 1991. 

  
 
 
                                                      
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 emergency 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 Emergency Powers Law (‘armed threat’),  

a  particularly  serious  event  or  threat  impacting  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  comparable  to  those  of  a  serious  major 

accident (‘major accident or communicable disease’). 

5. 

In these situations, once the Government has established, in consultation with Finland’s President, 

the existence of emergency conditions, it can adopt a decree activating certain emergency powers. 

Powers  are  only  authorised  that  are  (i)  necessary  and  proportionate  to  achieve  the  purpose  of 

protecting the population and its subsistence and the national economy, maintaining legal order and 

human rights as well as safeguarding Finland’s territorial integrity and independence in emergency 

conditions;  and  (ii)  proportionate  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  Government  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 (Sections 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 ‘armed attack’ and ‘armed threat’, responsibility 

is vested in  Suomen Pankki for practical  measures required for exchange controls, such as 

granting permission to take actions impacting 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 

2 

threat’ and ‘economic crisis’, the Government Decree could e.g. (i) provide for interest rates 

to be observed by credit institutions, financial institutions and other similar bodies on various 

types  of  financial  claims  so  that  these  would  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 assets; 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  Supervision  Authority  and  the  Insurance  Supervisory 

Authority willensure enforcement of these rules in their respective fields of operations. 

• 

Section 18 of the draft law provides that in all the foreseen emergency conditions securities 

markets  could  be  subject  to  restriction.  The  Financial  Supervision  Authority  will  be 

responsible  for  enforcing  these  rules  regarding  securities  markets.  Moreover,  Section  19 

provides that in the same cases payment transactions could be restricted. Suomen Pankki and 

the Financial Supervision Authority will ] enforce these rules. 

• 

Section 20 of the draft law provides that in all 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  materially  compromise  their  operations.  In 

addition, according to Section 22 of the draft law, the Government Decree may provide for 

exceptions to the ordinary legal requirements concerning bankruptcy, liquidation, accounting 

and  financial  statements  applicable  to  credit  and  financial  institutions,  management 

companies,  investment  firms,  the  stock  exchange,  the  central  securities  depository,  option 

corporations,  insurance  and  pension  institutions.  The  Financial  Supervision  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,  Arvopaperikeskus  (‘APK’),  which  holds  all  book-entry 

Finnish  securities,  providing  that  APK  maintains  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 conditions. 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 irreversibly to the Community monetary policy and 

other powers enumerated in the Treaty and the Statute with regard to ESCB tasks. In these fields 

(setting  reference  rates,  injecting  or  withdrawing  liquidity  in  the  market,  ensuring  efficient  and 

3 

sound clearing and payment systems, managing foreign 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  have  a  duty  to  facilitate  the  achievement  of 

Community’s tasks and must abstain from any measure which could jeopardise the attainment of 

the objectives of the Treaty.  

9. 

Already  in  2002,  the  Finnish  authorites  consulted  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  conflicted  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  definition  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 should be referred to as authorities that 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  capabilities  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  Government  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  take  action  before  national  emergency  powers 

affecting  the  ESCB  tasks  can  be  activated.  The  ECB  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 emergency 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  still  functioning.  Whereas  the  draft  law’s  statement  of  reasons  use 

both  expressions  ‘or’  and  ’and’,  they  generally  provide  the  impression  that  the  purpose  of 

Section 26 is indeed to ensure the primacy of Community action meaning that also the ECB should 

4 

be  incapacitated  to  act  before  the  decree  on  emergency  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 would need to be brought into line with Community 

law, as specified in more detail below.  

13.  According  to  settled  case-law,  Member  States  may  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  rules  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 interpreted 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  acted  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  any  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  the  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 trigger 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  strongly  recommends  amending  the  draft  law  so 

that the powers that fall within the ESCB’s exclusive 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  own  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  reference  is  made  to  the  euro.  The  ECB 

considers  that  the  euro,  as  a  single  currency,  should  be  referred  to  as  such  and  that  the  wording 

4  

5  

6  
7  

8  
9  

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. 
Article 297 of the Treaty provides for a consultation obligation 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. 
Case C-13/68 Salgoil v Italian Ministry of Foreign Trade [1968] ECR 453. 
Gilsdorfer/Brandtner,  ‘Vorbem.  zu  den  Artikeln  296  bis  298  EG’,  No  3-5,  Bardenhewer-Rating/Grill/Jakob/Woelker, 
EG- und EU-Kommentar, 6th ed. (2004), p. 1534. 
See e.g., Case 804/79 Commission v UK, paragraph 30. 
‘The exchange rate for the relevant currency applied by Suomen Pankki when exchanging the relevant currency in euro at 
the time of transfer would be observed’. 

5 

                                                      
‘Finnish  currency’  should  be  replaced  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 the 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  Decree  of  a  generalised  exception  to  ordinary 

solvency  requirements  for  credit  institutions  provided  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 central securities depository licensed in Finland to 

maintain in Finland the book-entry information technology 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 eligible 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 200110.   

18.  The ECB also proposes adjusting the list of definitions 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  Section  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 shall be considered parties resident 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, the ECB recommends also clarifying in Section 26 

of the draft law that the Decree it refers to will be applicable only 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 with regard to consolidation in central counterparty clearing.  

6 

                                                      
that  there  are  ESCB  emergency  and  contingency  plans,  according  to  which  the  ECB,  in  general, 

will act in emergency situations. 

20.  Article 26 of the draft law provides that the Government Decree affecting the ESCB competences 

may  only  be  enacted  if  the  ECB,  or  Suomen  Pankki  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  additional  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 the 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 exogenous 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 
law11 that the detailed provisions on index clauses will apply for other than statistical purposes.   

22.  Since the draft law affects some very core principles of Community law, such as the principle of 

the  free  movement  of  capital,  the  ECB  proposes  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  provides  among  others  that  ‘more  detailed  provisions  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’. 

7