Opinion of the European Central Bank of 7 January 2020 on national defence (CON/2020/2)
Date: 2020-01-07
Institutions: European Central Bank
Subjects: Estonia, banking supervision, central bank, competence of the institution, defence policy, financial stability, national law

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 January 2020 

on national defence 

(CON/2020/2) 

Introduction and legal basis 

On 6 November 2019 the European Central Bank (ECB) received a request from the Estonian Ministry of 
Justice for an opinion on a draft law on national defence1 (hereinafter the ‘draft law’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC2, as 

the  draft  law  relates  to  Eesti  Pank  and  the  ECB’s  tasks  concerning  the  prudential  supervision  of  credit 

institutions pursuant to Article 127(6) of the Treaty. 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. 

1. 

Purpose of the draft law  

1.1  The draft law revises and updates the legal framework for organising the defence of the Republic of 

Estonia  in  defence  situations.  The  stated  purpose  of  national  defence  and  thereby  the  measures 

envisaged in the draft law is to preserve the independence and sovereignty of the State of Estonia, 

the  ‘inseparable  and  indivisible’  integrity  of  its  land,  territorial  waters  and  airspace  and  its 

constitutional order. 

1.2  According to the draft law, a defence situation is an event or chain of events the consequences of 

which  are  a  direct  threat  to  the  independence  and  sovereignty  of  the  Republic  of  Estonia,  to  its 

territorial  integrity,  constitutional  order  or  to  society  as  a  whole,  the  resolution  of  which  is  not 

possible  without  applying  the  organisational  measures  envisaged  in  the  draft  law,  limiting  the 

fundamental  rights  and  freedoms  of  persons,  and  without  the  involvement  of  additional  persons 
and  material  resources3.  Under  the  draft  law  the  Government  of  the  Republic  of  Estonia  is 
responsible  for  assessing  whether  a  defence  situation  exists4.  In  addition,  for  the  purposes  of 

resolving  a  defence  situation,  the  draft  law  allows  the  Estonian  Parliament  to  declare,  on  the 

proposal  of  the  President  of  the  Republic  of  Estonia,  a  state  of  emergency  or,  in  the  case  of  an 

armed  or  equivalent  attack  or  aggression  against  the  independence,  sovereignty  or  territorial 

1  
2  

3  
4  

Riigikaitseseadus, eelnõu. 
Council  Decision  98/415/EC  of  29 June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

See Section 3(1) of the draft law. 
See Section 9(1) of the draft law.  

 
 
 
 
                                                 
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integrity of the Estonian State, a state of war, if it is not possible to resolve the relevant situation 

without  having  recourse  to  additional  powers  or  measures  included  in  the  draft  law  limiting  the 
fundamental rights and freedoms of persons5.  

1.3  The draft law introduces the concept of a defence task. Such tasks are either permanent or ad hoc 
and  are  necessary  to  resolve  or  support  the  resolution  of  a  defence  situation6.  According  to  the 

draft  law,  Eesti  Pank  is  assigned  the  following  permanent  defence  tasks:  (1)  to  help  define  the 

monetary  policy  of  the  Union  and  to  implement  the  monetary  policy  set  by  the  ECB’s  Governing 

Council; (2) to hold and manage official reserves in foreign currency; (3) to promote the stability of 

the  financial  system  and  exercise  macroprudential  supervision  over  the  financial  system;  (4)  to 

regulate the circulation of money, facilitate the issuance of euro banknotes and issue euro coins; 

(5) to collect and publish the statistics necessary for the performance of Eesti Pank’s functions; (6) 

to  contribute  to  the  efficient  functioning  of  payments  systems;  and  (7)  to  ensure  the  continuity  of 

payment  services  and  cash  circulation  services  as  vital  services.  Eesti  Pank  already  has  such 
tasks under existing legislation7.  

1.4  The  draft  law  assigns  to  Finantsinspektsioon  (the  Financial  Supervisory  Authority)  the  following 

permanent defence tasks: (1) financial supervision over credit institutions and branches of foreign 

credit institutions in Estonia that are providers of vital services (currently four credit institutions are 

so  designated,  three  of  which  are  significant credit  institutions  and  one  is  a  less-significant  credit 

institution);  and 
Finantsinspektsioon already has such tasks under existing legislation8. 

resolution  of  a 

the 

(2) 

financial  crisis  during  a  defence  situation. 

1.5  The draft law does not include further details on how the performance of such permanent defence 

tasks should occur and how this differs from the fulfilment of these obligations in circumstances not 
covered by the draft law. According to the explanatory memorandum to the draft law9, the national 
defence plan will specify the defence duties and the manner in which these are to be fulfilled10. The 

national defence plan  is not a legal act, but  a  document  coordinating  activities among  and  giving 

guidance  to  relevant  entities,  institutions  and  persons.  The  explanatory  memorandum  states  that 

the  primary  aim  of  assigning  permanent  defence  tasks  is  to  ensure  that  an  entity  assigned  a 

permanent defence task has the necessary resources and personnel to fulfil the tasks assigned to 
it11. 

1.6 

In the event of a defence situation the authorities tasked with permanent defence tasks, including 

Eesti Pank and Finantsinspektsioon, must carry these out at the order of the head of the defence 

5  
6  

7  
8  

9  
10  
11  

See Sections 12(1) and 14(1) of the draft law. 
See Section 52(1) of the draft law. Any reference in this opinion to a defence situation also encompasses states of 
war and emergency, unless specified otherwise. 
See Section 2(2) of the Law on Eesti Pank (Eesti Panga seadus, RT I 1993, 28, 498, RT I, 19.03.2015, 39).  

See Section 6 of the Law on the Financial Supervisory Authority (Finantsinspektsiooni seadus, RT I 2001, 48, 267, 
RT I, 04.12.2019, 5). 
Riigikaitseseaduse eelnõu seletuskiri. 

See the explanatory memorandum to the draft law, p. 28. 
See the explanatory memorandum to the draft law, p. 11. 

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situation  (the  prime  minister).  In  the  event  of  a  state  of  emergency  or  of  war  the  carrying  out  of 
permanent defence tasks is at the initiative of the obliged entity12.  

1.7  During  a  defence  situation  the  authority  managing  the  defence  situation  (a  governmental  agency 

assigned  by  the  Government  of  Estonia  to  manage  the  defence  situation)  may  issue  orders  to 

entities. For constitutional institutions, such as Eesti Pank, such an order may be issued only if this 
does not interfere with the fulfilment of their main tasks13. The draft law does not define what such 

main  tasks  are.  This  provision  does  not  apply  to  orders  given  by  the  authority  managing  the 

defence situation to Finantsinspektsioon as it is not a constitutional institution, ministry or security 

authority. Rather, Finantsinspektsioon is an agency with autonomous competence and a separate 

budget,  which  operates  at  Eesti  Pank,  meaning  that  Eesti  Pank  does  not  have  control  over 

Finantsinspektsioon, and that, under Estonian law, Finantsinspektsioon is not considered to be part 
of  Eesti  Pank14.  The  draft  law  envisages  that  the  defence  tasks  of  Finantsinspektsioon  are  to  be 

specified  in  the  national  defence  plan  taking  into  account  that  Finantsinspektsioon  acts 
independently in  the conduct of financial supervision15. In  addition, the explanatory  memorandum 

to the draft law states that when the tasks of Finantsinspektsioon are specified the fact that it is a 
part of the Single Supervisory Mechanism must be taken into account16. 

1.8  Under the draft law, persons are obliged to comply with measures taken during defence situations, 

and  an  administrative  authority  may  issue  orders  to  ensure  the  fulfilment  of  measures  taken  for 
resolving a defence situation17.  

1.9 

In addition, entities entrusted with permanent defence tasks have a preparedness obligation. The 

preparedness obligation  obliges an  entity assigned  with  a  permanent  defence task to prepare for 

the  performance  of  the  permanent  defence  task,  this  includes  ensuring  that  it  has  the  requisite 
supplies  and  personnel  for  fulfilling  its  tasks18.  According  to  the  explanatory  memorandum  to  the 

draft  law  entities  entrusted  with  permanent  defence  tasks  must  prepare  and  plan  for  carrying  out 

their defence tasks. The explanatory memorandum goes on to state that this may include the need 

to  acquire  necessary  supplies  or  to  ensure  contractually  the  delivery  or  access  to  necessary 

resources. Upon being appointed to perform a permanent defence task such entities have a duty to 

designate  personnel  and  material  resources  for  the  fulfilment  of  defence  tasks.  The  explanatory 

memorandum notes that the draft law does not specify how the preparedness obligation has to be 

fulfilled. It is intended that the relevant authorities should fulfil their preparedness obligations taking 
into account the national defence plan and strategic development documents of national defence19. 

12  
13  
14  
15  
16  
17  
18  
19  

See Section 55(1) and (2) of the draft law. 

See Section 20 of the draft law. 
See Section 4(1) of the Law on the Financial Supervisory Authority. 

See Section 133 of the draft law. 
See the explanatory memorandum to the draft law, p. 196. 
See Sections 29 and 109(1) of the draft law. 

See Section 53 of the draft law. 
See the explanatory memorandum to the draft law, pp. 104-105. 

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The national defence plan is to function as a supra-institutional plan that gives guidance on how an 
entity having a permanent defence obligation should plan its activities related to national defence20. 

1.10  The draft law does not define the specific tasks and how Eesti Pank or Finantsinspektsioon would 

have to perform these in order to fulfil their preparedness obligation. Moreover, the draft law does 

not  regulate  the  extent  to  which  Eesti  Pank  or  Finantsinspektsioon  would  be  included  in  the 

national  defence  planning  and  to  what  extent  their  permanent  defence  tasks  and  the  related 

preparedness  obligations  must  be  specified  in  the  national  defence  plan  and  other  strategic 

national defence documents. 

1.11  The  draft  law  does  not  specify  any  additional  arrangements  for  supervising  the  fulfilment  of  the 

preparedness obligation. For Eesti Pank this means that the supervisory board of Eesti Pank would 
supervise  the  fulfilment  of  the  preparedness  obligation21.  Similarly  for  Finantsinspektsioon  its 
supervisory board would supervise the actions of Finantsinspektsioon22. 

1.12  The  draft  law  specifically  requires  that  the  Council  of  the  European  Union  and  the  European 

Commission  must  be  notified  if  measures  taken  under  the  draft  law  could  undermine  the 

functioning  of  the  internal  market  within  the  meaning  of  Article  347  of  the  Treaty.  The  draft  law 

envisages that such notification should take place prior to measures being implemented; however, 

if measures are needed immediately then notification can take place as soon as possible after the 
measures are adopted23.  

1.13  After the draft law is adopted, delegated regulations, the national defence plan and other strategic 

defence documents must also be adopted. 

2. 

General observations  

2.1  The ECB notes that under the Treaty several competences are conferred irrevocably on the Union. 

This includes the exclusive competence for monetary policy for Member States whose currency is 
the  euro24,  and  such  Member  States  may  not  therefore  adopt  unilateral  measures  in  this  field25. 

Therefore, in adopting the euro a Member State irreversibly transfers to the Union monetary policy 

and  other  powers  enumerated  in  the  Treaty  and  the  Statute  of  the  European  System  of  Central 

Banks  and  of  the  European  Central  Bank  (hereinafter  the  ‘Statute  of  the  ESCB’)  with  regard  to 

European  System  of  Central  Banks  (hereinafter  the  ‘ESCB’)  tasks.  In  these  fields,  including 

defining and implementing monetary policy, promoting the smooth operation of payment systems, 

conducting  foreign  exchange  operations  consistent  with  the  exchange-rate  policy  for  the  euro  in 

relation to non-Union currencies, holding and managing the official foreign reserves of the Member 

States,  and  authorising  the  issuance  of  euro  banknotes,  certain  policy-making  and  legislative 

powers, including contingency planning with respect to the continued performance of these tasks, 

20  
21  
22  
23  
24  
25  

See the explanatory memorandum to the draft law, p. 27. 
See Section 9 of the Law on Eesti Pank.  

See Section 7 of the Law on the Financial Supervisory Authority. 
See Section 10(2) of the draft law. 
See Article 3(1)(c) of the Treaty. 

See  paragraph  2.1  of  Opinion  CON/2014/24.  All  ECB  opinions  are  published  on  the  ECB’s  website  at 
www.ecb.europa.eu. 

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belong  exclusively,  under  Articles  8  and  12  of  the  Statute  of  the  ESCB,  to  the  decision-making 
bodies of the ECB26. Moreover, under Article 127(6) of the Treaty and Council Regulation (EU) No 
1024/201327  specific  tasks  concerning  the  prudential  supervision  of  credit  institutions  have  also 

been conferred upon the ECB. As previously noted by the ECB, pursuant to the principle of sincere 

cooperation under Article 4(3) of the Treaty on European Union, the Member States are obliged to 

assist the ECB in carrying out tasks which flow from the Treaties. This implies that Member States 

should  refrain  from  taking  any  measures  which  could  jeopardise  the  ECB’s  or  the  ESCB’s 
objectives28. 

2.2  Article 347 of the Treaty envisages that a Member State may be called upon to take action in the 

event  of  serious  internal  disturbances  affecting  the  maintenance  of  law  and  order,  war,  serious 

international tension constituting a threat of war, or in order to carry out obligations it has accepted 

for  the  purpose  of  maintaining  peace  and  international  security.  Accordingly,  in  the  event  of 

emergency conditions under Article 347, which may include situations that would be classified as 

defence  situations  under  the  draft  law,  national  authorities  may  be  justified  in  exercising,  on  a 
temporary basis, powers that fall within the exclusive competence of the ESCB29. 

2.3  Any reliance on Article 347 of the Treaty must take place strictly under conditions laid down in the 

Treaty itself, as interpreted by the Court of Justice of the European Union. As has been expressed 

earlier, this Article deals with exceptional cases which are clearly defined and are to be interpreted 

in a restrictive manner, and it can therefore be understood only as a ‘hedging clause’ and not as an 
expression  of  any  residual  Member  State  competence30.  Moreover,  the  Court  of  Justice  of  the 

European Union has held that when acting due to urgency in areas of exclusive Union competence 

Member  States  may  act  only  as  ‘trustees  of  the  common  interest’  and  not  bring  into  force  any 
interim  measures  except  as  part  of  a  process  of  collaboration  with  the  Union31.  Due  to  the 

exceptional  nature  of  Article  347  of  the  Treaty,  Member  States  should  refrain  from  adopting 
preventive legislation in the absence of the conditions prescribed by Article 347 of the Treaty32. If 

the national legislature wishes to rely on this provision it is for the Member State to ensure that the 

conditions for applying Article 347 of the Treaty are specifically fulfilled at the time of adopting the 

measure that conflicts with that Member State’s Treaty obligations.  

2.4  The  ECB  understands  that  the  national  legislature  approaches  national  defence  taking  a  holistic 

approach  whereby  national  defence  includes  not  only  the  actions  of  specific  defence  authorities 

such as the armed  defence forces and other specifically designated authorities, but also includes 

26  

27  

28  
29  
30  

31  

32  

See  paragraph  9  of  Opinion  CON/2002/27,  paragraph  8  of  Opinion  CON/2006/6,  and  paragraph  2.1  of 
Opinion CON/2014/24.  
Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank 
concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63). 
See paragraph 2.1 of Opinion CON/2018/46. 
See paragraph 2.2 of Opinion CON/2014/24. 
Judgment  of  the  Court  of  Justice  of  19  December  1968,  Salgoil,  13/68,  ECLI:EU:C:1968:54;  Gilsdorfer  and 
Brandtner,  ‘Vorbem.  zu  den  Artikeln  296  bis  298  EG’,  No  3-5,  in  Bardenhewer-Rating,  Grill,  Jakob  and  Woelker 
(eds.), EG- und EU-Kommentar, 6th ed. (2004), p. 1534; paragraph 13 of Opinion CON/2006/6. 
See  e.g.  judgment  of  the  Court  of  Justice  of  5  May  1981,  Commission  v  UK,  804/79,  ECLI:EU:C:1981:93, 
paragraph 30; paragraph 13 of Opinion CON/2006/6. 

See C. Zilioli, ‘National Emergency Powers and Exclusive Community Competences – A Crack in the Dam?’ Legal 
Aspects of the European System of Central Banks, ECB, 2005, pp. 115-133, at pp 131-132. 

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within  national  defence  the  actions  of  other  public  bodies  and  private  persons  within  their 
respective fields of competence33. As part of such a national defence policy the functions fulfilled by 

public  bodies  in  usual  circumstances,  including  central  banking  and  prudential  supervisory 

functions, support the resolution of national defence situations. This approach should not lead to a 

breach  of  Treaty  obligations  applicable  to  a  Member  State.  By  adopting  the  euro,  Estonia 

transferred  irreversibly  to  the  Union  monetary  policy  and  other  powers  enumerated  in  the  Treaty 

and the Statute of the ESCB. The decision-making for those tasks, including contingency planning 

with  respect  to  the  continued  performance  of  those  tasks,  belongs  exclusively,  under  Article  8  of 

the Statute of the ESCB, to the decision-making bodies of the ECB. Furthermore, Regulation (EU) 

No  1024/2013  conferred  on  the  ECB  specific  tasks  concerning  policies  relating  to  the  prudential 

supervision of credit institutions. According to Article 4 of the TEU, Member States have a duty to 

facilitate  the  achievement  of  the  Union’s  tasks  and  to  refrain  from  any  measure  which  could 

jeopardise the attainment of the Union’s objectives.  

2.5  Under  the  draft  law  both  Eesti  Pank  and  Finantsinspektsioon  are  assigned  permanent  defence 

duties that correspond primarily to the tasks that these authorities already perform under applicable 

Union and national law. This cannot lead to setting aside or altering the obligations of Eesti Pank 

under  the  Treaty,  specifically  any  obligations  which  Eesti  Pank  has  due  to  its  membership  in  the 

ESCB. In this respect, the ECB understands that, with the exception of the new national defence 

preparedness obligation (see section 3 below), the draft law does not aim at changing the existing 

obligations of Eesti Pank, including specifically under Union law, and merely seeks to ensure that 
the necessary resources and organisational arrangements for defence situations are in place34.  

2.6  The  same  considerations  apply  in  respect  of  Finantsinspektsioon  with  regard  to  its  duties  arising 

from  Article  127(6)  of  the  Treaty  and  Regulation  (EU)  No  1024/2013.  As  the  permanent  defence 

tasks  which  the  draft  law  assigns  to  Finantsinspektsioon  have  been  partially  conferred  upon  the 

ECB,  the  national  legislative  bodies  might  consider  clarifying  the  draft  law  to  confirm  that  this  is 

without  prejudice  to  the  tasks  and  powers  conferred  on  the  ECB  for  prudential  supervisory 

purposes  under  the  Treaty  and  Regulation  (EU)  No  1024/2013.  Also,  the  ECB  notes  that  Article 
4(4)  of  Directive  2013/36/EU  of  the  European  Parliament  and  of  the  Council35  requires  Member 

States to ensure that the competent authorities have the expertise, resources, operational capacity, 

powers  and independence  necessary to carry  out the  functions  relating  to  prudential  supervision, 

investigations  and  penalties  set  out  in  that  Directive  and  in  Regulation  (EU)  No  575/2013  of  the 
European Parliament and of the Council36. In addition, under the Basel Core Principles for effective 
banking supervision37, the supervisor should have adequate resources for the conduct of effective 

33  
34  
35  

36  

37  

Explanatory memorandum to the draft law, p. 7. 
Explanatory memorandum to the draft law, p. 104.  
Directive 2013/36/EU of  the  European  Parliament and of the Council of 26  June 2013 on access  to the activity  of 
credit 
firms,  amending 
Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ L 176, 27.6.2013, p. 338). 

the  prudential  supervision  of  credit 

institutions  and 

institutions  and 

investment 

Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on  prudential 
requirements  for  credit  institutions  and  investment  firms  and  amending  Regulation  (EU)  No  648/2012  (OJ  L  176, 
27.6.2013, p. 1). 
The Basel Core Principles for effective banking supervision are available on the Bank for International Settlements’ 
website at www.bis.org. 

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supervision and oversight. As also Finantsinspektsioon is assigned with a preparedness obligation, 

the consulting authority could consider clarifying in the draft law that the preparedness obligation is 

without  prejudice  to  the  effective  performance  of  the  prudential  supervisory  tasks  and  powers  of 

Finantsinspektsioon under relevant Union law. 

2.7 

In  addition,  the  draft  law  could  further  clarify  that  it  does  not  interfere  with  the  independence  of 

Eesti Pank under the Treaty. As noted above, the central government, as the authority managing 
the defence situation, has the power to issue orders, including potentially to Eesti Pank38. The ECB 

understands that as the draft law does not allow for any interference with the performance of the 
‘main tasks’ of Eesti Pank as a constitutional  institution39, there could  be  no  interference  with  the 

tasks  and  duties  of  Eesti  Pank  as  part  of  the  ESCB.  This  point  should,  however,  be  explicitly 

clarified, for the avoidance of any doubt. 

2.8  The ECB welcomes the fact that the draft law requires the Council of the European Union and the 

European  Commission  to  be  notified  in  certain  cases.  However,  it  is  for  the  Member  State  to 

ensure that the  draft legislation is  not in  breach  of the Treaty  when it  is  adopted,  meaning  that  it 

does not introduce preventive legislation (see paragraph 2.3).  

3. 

Conferral of a new task on Eesti Pank 

3.1  New task of Eesti Pank 

3.1.1  The draft law confers upon Eesti Pank the task of preparing for the performance of defence tasks 

(the preparedness obligation). The draft law does not specify the tasks falling within the scope of 

this obligation. The draft law instead requires an authority or a person assigned with a permanent 

defence task to  prepare for  the  performance  of  a  permanent defence task and indicates that this 

includes  ensuring  that  persons  with  this  obligation  have  the  resources,  reserves  and  staff 

necessary  to  fulfil  the  preparedness  obligation  (see  paragraph  1.9).  Based  on  the  explanatory 

memorandum  to  the  draft  law,  the  ECB  understands  that  the  preparedness  obligation  vis-à-vis 

Eesti  Pank  could  be  specified  in  the  national  defence  framework,  including  the  national  defence 

plan and other strategic national defence documents. Although these documents are not legislative 

acts,  the  ECB  understands  that  they  could  lead  to  changes  in  the  actions  of  Eesti  Pank  (see 

paragraph  1.9).  In  addition,  the  ECB  understands  that  the  preparedness  obligation  would 

necessarily  require  the  co-ordination  of  Eesti  Pank’s  activities  with  the  wider  Estonian  national 

defence framework and that this would likely lead to a need for Eesti Pank to contribute to Estonian 

defence planning.  

3.1.2  The  proposed  national  defence  preparedness  task  of  Eesti  Pank  would  differ  from  internal 

contingency  planning  undertaken  by  ESCB  central  banks  such  as  Eesti  Pank.  Contingency 

planning  for  the  discharge  of  ESCB  and  other  central  banking  tasks  can  take  the  form  of  an 

internally  driven  process  whereby  the  ESCB  central  banks  evaluate  for  themselves  which 

resources  they  would  need  and  how  they  should  prepare  for  various  emergency  situations, 

38  
39  

See Section 20 of the draft law. 
See Section 20(3) of the draft law. 

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including situations that could be characterised as defence situations, based on their  own targets 

and  strategies.  By  contrast,  the  proposed  national  defence  preparedness  task  of  Eesti  Pank  is 

driven  by  external  strategic  plans  and  aims  set  by  the  Estonian  Government,  and  would  require 

Eesti Pank to take into account considerations external to Eesti Pank, most notably the overarching 

national  defence  framework.  This  could  lead  to  Eesti  Pank  acquiring  resources  it  might  not 

otherwise  have  considered  relevant,  participating  in  planning  processes  it  would  not  otherwise 

have  taken  part  in  and/or  developing  processes  it  would  not  otherwise  have  introduced.  This 

means,  in  effect,  that  the  national  defence  preparedness  task  introduces,  alongside  any  internal 

contingency planning process, an additional process driven by the national defence framework. As 

such, the proposed national defence preparedness task would differ from an internal contingency 

planning  performed  by  Eesti  Pank,  including  within  the  framework  of  the  ESCB,  and  therefore 

involves the conferral of a new task on Eesti Pank.  

3.1.3  The  national  defence  preparedness  task  envisaged  in  the  draft  law  also  differs  from  the  current 

tasks of Eesti Pank under Estonian law. It is noted that, according to a decree of the Government 

of the Republic of Estonia, up to 50% of the employees of Eesti Pank are considered as fulfilling 
positions  with  national  defence  relevance40.  The  ECB  understands  this  to  mean  that  Eesti  Pank 

should be ready to fulfil its usual tasks also in national defence situations, but potentially with only 

up to 50% of its staff. Eesti Pank also participates in defence planning and preparations based on 

the  Law  on  emergencies  as  it  is  responsible  for  organising  the  continuity  of  payment  and  cash 
circulation  services  as  vital  services41.  This  differs  from  the  national  defence  preparedness  task 

envisaged in the draft law. Under existing Estonian law, there is no specific legal obligation on Eesti 

Pank  to  follow  the  national  defence  framework,  and  to  contribute  to  plans  developed  within  the 

national defence framework, in particular for a wide range of Eesti Pank’s tasks.  

3.1.4  The ECB underlines that a proposed conferral of new tasks on a national central bank (NCB) in the 

ESCB  must  be  assessed  against  the  prohibition  on  monetary  financing  under  Article  123  of  the 

Treaty.  For  the  purposes  of  that  prohibition,  Article  1(1)(b)(ii)  of  Council  Regulation  (EC) 
No 3603/9342 defines ‘other type of credit facility’, inter alia, as ‘any financing of the public sector’s 

obligations vis-à-vis third parties’. 

3.1.5  Ensuring that Member States implement a sound budgetary policy is one of the key objectives of 
the  monetary  financing  prohibition,  which  may  not  be  circumvented43.  Therefore,  the  task  of 

financing  measures,  which  are  normally  the  responsibility  of  the  Member  States,  and  which  are 

financed from their budgetary sources rather than by the NCBs, must not be entrusted to NCBs. To 

decide what constitutes financing of the public sector’s obligations vis-à-vis third parties, which can 

be translated as the provision of central bank financing outside the scope of central bank tasks, it is 

necessary  to  carry  out,  on  a  case-by-case  basis,  an  assessment  of  whether  the  task  to  be 

40  

41  
42  

43  

See Section 2(1)(2) of the decree of the Government of the Republic of Estonia dated 23 September 2016, No 103 
(RT I, 27.09.2016, 2, RT I, 26.04.2019, 12). 

See Section 36(3) of the Law on emergencies (Hädaolukorra seadus RT I, 03.03.2017, 1, RT I, 22.05.2018, 5).  
Council  Regulation  (EC)  No  3603/93  of  13  December  1993  specifying  definitions  for  the  application  of  the 
prohibitions referred to in Articles 104 and 104b(1) of the Treaty (OJ L 332, 31.12.1993, p. 1).   

Article  123  of  the  Treaty  also  serves  the  objective  of  maintaining  price  stability  and  reinforces  central  bank 
independence. 

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undertaken  by  an  NCB  is  a  central  bank  task  or  a  government  task,  i.e.  a  task  within  the 

responsibility  of  the  Member  States.  In  other  words,  adequate  safeguards  must  be  in  place  to 

ensure that circumventions of the objective of the monetary financing  prohibition of maintaining a 

sound budgetary policy of Member States do not take place. 

3.1.6  As part of its discretion in the exercise of its duty, on the basis of Article 271(d) of the Treaty and 

Article 35.6 of the Statute of the ESCB, to ensure that NCBs honour the obligations laid down by 

the Treaty, the Governing Council has endorsed safeguards of that kind in the form of criteria for 

determining  what  may  be  seen  as  falling  within  the  scope  of  a  public  sector  obligation  within  the 

meaning of Article 1(1)(b)(ii) of Regulation (EC) No 3603/93 or, in other words, what constitutes a 

government task as follows: 

First, central bank tasks are in particular those tasks that are  related to the tasks that have been 

conferred upon the ECB and the NCBs by the Treaty and the Statute of the ESCB. These tasks are 

mainly defined in Article 127(2), (5) and (6) and Article 128(1) of the Treaty, as well as Article 22 

and Article 25.1 of the Statute of the ESCB. 

Second, as Article 14.4 of the Statute of the ESCB allows NCBs to perform ‘other functions’, new 

tasks, i.e. tasks that are not related to tasks that have been conferred upon the ECB and the NCBs, 

are  not  precluded  per  se.  However,  new  tasks  that  are  undertaken  by  an  NCB  and  which  are 

atypical of NCB tasks or which are clearly discharged on behalf of, and in the exclusive interest of 

the government or of other public sector entities should be considered government tasks. 

Third, an important criterion for qualifying a new task as atypical of an NCB task or as being clearly 

discharged  on  behalf  of  and  in  the  exclusive  interest  of  the  government  or  other  public  sector 

entities  is  the  impact  of  the  task  on  the  institutional,  financial  and  personal  independence  of  that 

NCB. 

In particular, the following aspects should be taken into account: 

(a)   whether  the  performance  of  the  new  task  creates  conflicts  of  interest  with  existing  central 

bank tasks which are not adequately addressed and does not necessarily complement those 

existing  central  bank  tasks.  If  a  conflict  of  interest  arises  between  existing  and  new  tasks, 

sufficient  safeguards  to  mitigate  that  conflict  should  be  in  place.  The  complementarity 

between a new task and the existing central bank tasks should not be interpreted broadly, so 

as  to  lead  to  the  creation  of  an  indefinite  chain  of  ancillary  tasks.  Such  complementarity 

should be examined in relation to the financing of those tasks; 

(b)  whether without new financial resources the performance of the new task is disproportionate 

to  the  NCB’s  financial  or  organisational  capacity,  and  may  have  a  negative  impact  on  the 

capacity to perform properly the existing central bank tasks; 

(c)   whether the  performance  of the  new  task fits into  the institutional set-up  of the  NCB in  the 

light of central bank independence and accountability considerations; 

(d)   whether the performance of the new task harbours substantial financial risks; 

(e)   whether the performance of the new task exposes the members of the NCB decision-making 

bodies  to  political  risks  which  are  disproportionate  and  may  also  have  an  impact  on  their 

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personal  independence  and,  in  particular,  on  the  guarantee  of  term  of  office  set  out  in 

Article 14.2 of the Statute of the ESCB. 

3.1.7  Based on the criteria set out above, the following paragraphs assess whether the new task of Eesti 

Pank is in line with the prohibition of monetary financing. 

3.2  Tasks related to the tasks conferred upon the ECB and the NCBs by the Treaty and the Statute of 

the ESCB 

3.2.1  According  to  the  draft  law  the  purpose  of  national  defence  is  to  preserve  the  independence  and 

sovereignty  of  the  Estonian  State,  the  inseparable  and  indivisible  integrity  of  its  land,  territorial 

waters and airspace and its constitutional order. The functions of the NCBs under the Treaty and 

the  Statute  of  the  ESCB  do  not  encompass  these  aims.  The  preparedness  task  is  not  therefore 

related to the tasks that have been conferred upon the ECB and the NCBs by the Treaty and the 

Statute of the ESCB.  

3.3  Tasks which are atypical of NCB tasks 

3.3.1  While  the  majority  of  NCBs  of  the  ESCB  do  not  appear  to  have  been  assigned  national  defence 

preparedness  tasks,  NCBs  in  several  Member  States  have  been  assigned  national  defence 
preparedness tasks which are similar to the new task assigned to Eesti Pank44. Based on this the 

44  

In 10 Member States (Bulgaria, the Czech Republic, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Slovakia 
and  Slovenia)  NCBs  have  been  assigned  some  type  of  national  defence  preparedness  obligations.  In  Bulgaria, 
pursuant to Article 42 of the Law on defence and armed forces of the Republic of Bulgaria, the Bulgarian National 
Bank (BNB) shall: (i) develop rules and norms for providing for the activity of the banking system during war time; (ii) 
in coordination with the Minister of Defence develop a plan for preparing the BNB in readiness for working during war 
time; and (iii) direct methodically the planning for preparing the banking system to be ready to work during war time. 
In the Czech Republic preparedness for crisis situations arises from Act No. 240/2000 Coll., Crisis law (Article 13) 
and from 241/2000 Coll., On Economic Measures for Crisis Situations (Article 23) and includes e.g. an obligation of 
the central bank to cooperate with the government, to adopt a proper crisis plan and to establish and operate a crisis 
crew.  In  Finland,  the  Law  on  emergency  powers  (2011/1552)  applies  to  public  organs  and  institutions  such  as 
Suomen  Pankki,  but  only  in  emergency  situations,  and  confers  specific  tasks  on  them.  Emergency  situations  are 
explicitly  defined  in  the  Law  on  emergency  powers.  The  Law  on  emergency  powers  also  sets  out  a  general 
preparedness obligation. In Greece, an Emergency Planning Office was established in the Bank of Greece in 1975, 
by virtue of Decision No 670/5/222984/24.9.1975 of the Minister of National Defence that was issued on the basis of 
Article  12  of  Legislative  Decree  17/1974  on  emergency  planning.  The  Emergency  Planning  Office  deals  with 
emergency planning policy issues including the design of emergency planning to the extent this is associated with 
the  Bank  of  Greece’s  competences,  the  measures  to  be  taken  during  peace-time  with  a  view  to  implementing 
emergency  planning  policy,  and  the  monitoring  of  preparedness  as  regards  the  execution  of  emergency  planning 
policy.  In  Hungary,  according  to  Article  18(3)  of  Law  CXIII  of  2011  on  national  defence  and  the  Hungarian  armed 
forces  and  the  measures  adoptable  under  a  special  legal  order  (Law  on  national defence),  Magyar  Nemzeti  Bank 
shall participate in the preparation for national defence in the performance of its tasks, in its area of operations, but 
shall  be  exempted  from  the  requirement  of  economic  and  material  service  obligations.  In  Latvia,  the  functions  of 
Latvijas  Banka also  apply  in  national  defence  situations and  thus  Latvijas  Banka  plans  the  preparedness  for  such 
situations,  inter  alia,  within  contingency  planning.  Latvijas  Banka  also  participates  in  national  defence  planning  at 
national level. In Lithuania, according to the Law on mobilisation and adoptive country support, Lietuvos bankas is a 
civil  mobilisation  institution.  Paragraph  3.5  of  the  Government  resolution  on  the  State  mobilisation  tasks  for  State 
municipal  institutions  and  Authorities  of  the  Republic  of  Lithuania  determines  the  mobilisation  tasks  for  Lietuvos 
bankas as follows: to ensure (i) the supervision of activities of essential financial market participants supervised by 
Lietuvos bankas; (ii) the management and usage of the foreign financial assets of Lietuvos bankas; (iii) the delivery 
of  cash  for  subjects  of  the  mobilisation  system  who  perform  vital  State  functions;  (iv)  the  performance  of  credit 
operations  of  Lietuvos  bankas  as  well  as  the  effective  operation  of  the  necessary  information  systems  and 
databases;  (v)  the  functioning  of  the  necessary  payment  systems  of  Lietuvos  bankas;  (vi)  international  relations 
related  to  financial  support  for  the  Republic  of  Lithuania,  as  well  as  representation  of  the  Republic  of  Lithuania  in 
international institutions. In Poland, under Article 11 paragraph 5 point 2 of the Law on Narodowy Bank Polski, the 
President  of  Narodowy  Bank  Polski  (NBP)  must  perform  tasks  resulting  from  the  universal  duty  to  defend  the 
Republic of Poland. Also, on the basis of Article 18 paragraph 3 and Article 22(1) of the Law on the general defence 
obligation and Article 11 paragraph 5 point 2 of the Law on Narodowy Bank Polski (and in some cases on the basis 
of  Council  of  Ministers  regulations),  the  President  of  NBP  has  issued  various  defence  related  ordinances.  In 
Slovakia, according to Article 23 of Law No 179/2011 Coll. on economic mobilisation, as amended, Národná banka 
Slovenska (NBS) shall prepare and carry out measures in times of crisis in the foreign exchange field, including the 

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proposed  national  defence  preparedness task  of Eesti Pank  could  be  considered  a  task  which  is 

not atypical of NCB tasks. In several Member States the related costs for the NCBs are required to 
be reimbursed by the central government45. 

3.4  Tasks clearly discharged on behalf of and in the exclusive interest of the government 

3.4.1  According  to  the  draft  law,  the  purpose  of  national  defence  is  to  preserve  the  independence  and 

sovereignty  of  the  Estonian  State,  the  inseparable  and  indivisible  integrity  of  its  land,  territorial 

waters  and  airspace  and  its  constitutional  order.  Eesti  Pank’s  proposed  national  defence 

preparedness  task  would  be  clearly  discharged  on  behalf  of  and  in  the  exclusive  interest  of  the 

Estonian Government.  

3.5  Extent to which performance of the new task creates conflicts of interest with existing central bank 

tasks 

3.5.1  The performance of the national defence preparedness task would be unlikely to give rise to any 

conflicts  of  interest  with  Eesti  Pank’s  existing  central  bank  tasks.  Rather,  it  could  be  seen  as 

contributing to the fulfilment of Eesti Pank’s current tasks. However, it should be ensured that the 

assignment  of  permanent  defence  tasks  to  Eesti  Pank  does  not  conflict  with  Union  law  (see 

paragraph 2.5).  

3.5.2  In addition, any supervision over the fulfilment of the national defence preparedness task rests with 

the  supervisory  board  of  Eesti  Pank.  This  also  means  that  Eesti  Pank  would  be  shielded  from 

possible conflicts of interest and that Eesti Pank would be in a position to determine if the national 

defence preparedness task has been discharged properly.  

3.6  Extent to which performance of the  new task is disproportionate to the  financial  or  organisational 

capacity of Eesti Pank 

3.6.1  As  previously  noted  by  the  ECB46,  the  principle  of  financial  independence  requires  that  Member 

States may not put their NCBs in a position where they have insufficient resources to carry out both 

their  ESCB-related  tasks  and  their  national  tasks,  from  an  operational  and  financial  perspective. 

Furthermore,  when  allocating  specific  new  tasks  to  NCBs,  each  NCB  concerned  should  have 

protection of foreign reserve assets. NBS shall also (i) provide the cash banking services necessary for the activities 
of  the armed  forces of  the  Slovak Republic, armed security  corps, the  Slovak Intelligence Service and  the Military 
Police, upon written agreement concluded with the Ministry of Finance and the State Treasury; (ii) control, within its 
field of competence, the performance of the measures of economic mobilisation; (iii) process and update information 
necessary for the performance of the measures of economic mobilisation within the specific application program of 
the unified information software; (iv) process the emergency plan of economic mobilisation according to instructions 
provided  by  the  Ministry  of  Economy  and  determine  access  rights  for  other  users  within  the  specific  application 
program of the unified  information software.  In Slovenia, Banka Slovenije is engaged in national defence planning 
during  peacetime.  According  to  the  Law  on  defence,  the  government,  which  adopts  the  country’s  defence  plan, 
prescribes in detail the process of drawing up and the content of defence plans and the planning of production and 
services during wartime. This is done by the Decree on defence planning, which defines the scope and content of 
the  defence  plan,  and  the  responsibility  for  defence  planning  (the  scope  of  tasks  related  to  the  functioning  of  the 
defence system in emergency situations, war or crises). 
In Bulgaria, Article 13 of the Law on defence and armed forces of the Republic of Bulgaria provides that the financial 
provision for defence activities shall be borne by the State budget and other sources, provided for in a law or act of 
the Council of  Ministers.  In Lithuania, Article 31 of  the Law on mobilisation and adoptive  country  support provides 
that the Ministry of Defence, the Mobilisation Department, the Lithuanian Army and civil mobilisation institutions shall 
be financed from the State budget for the implementation of the mobilisation system tasks established by the Law. In 
Slovakia,  according  to  Article  1(2)  of  the  Decree  of  the  Ministry  of  Economy  of  the  Slovak  Republic  No  552/2011 
Coll.  all  expenses  incurred  by  Národná  banka  Slovenska  (NBS)  as  a  result  of  economic  mobilisation  shall  be 
reimbursed to the NBS from the State budget. 
See, for example, paragraph 4.6.1 of Opinion CON/2018/21. 

45  

46  

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sufficient financial and human resources at its disposal to ensure that the tasks can be carried out 

without impacting on the NCB’s financial or operational capacity to perform its ESCB tasks. In order 

to ensure that Eesti Pank’s capacity to perform its ESCB-related tasks is not impaired, Eesti Pank 

must,  therefore,  be  in  a  position  to  avail  itself  of  the  necessary  resources  to  carry  out  its  duties 

under  the  draft  law.  At  this  stage,  it  is  not  possible  for  the  ECB  to  comment  what  additional 

resources, if any, Eesti Pank will require in order to perform its new national defence preparedness 

task under the draft law. It is noted nevertheless that the draft law does not provide for Eesti Pank 

to be reimbursed for the costs of carrying out this new task, while in at least three Member States 

reimbursement  mechanisms  for  the  performance  of  similar  tasks  have  been  included  in  the 

relevant national legislation (see paragraph 3.3.1). Although the ECB is not aware that the potential 

financial burden on Eesti Pank will be significant, also considering that the performance of the task 

will  be  supervised  Eesti  Pank’s  supervisory  board,  the  ECB  invites  the  consulting  authority  to 

consider the impact of the draft law on the resources of Eesti Pank and to include a reimbursement 

mechanism in the draft law in order to avoid any potential breach of Article 123 of the Treaty. 

3.7  Extent to which performance of the new task fits into the institutional set-up of Eesti Pank, in the 

light of central bank independence and accountability considerations 

3.7.1  The  potential  impact  of  the  new  task  on  the  institutional,  financial  and  personal  independence  of 

Eesti  Pank  must  also  be  taken  into  consideration.  However,  based  on  the  draft  law  and  the 

explanatory memorandum thereto, the ECB does not consider the new task as being in conflict with 

the institutional set-up. First, the supervision over the fulfilment of the task falls to the supervisory 

board of Eesti Pank, which in turn means that no other authority will gain control over Eesti Pank’s 

performance of this task. Second, the draft law does not include detailed and specific obligations 

that  Eesti  Pank  would  have  to  undertake  in  order  to  comply  with  its  preparedness  obligations. 

Hence,  it  would  fall  primarily  on  Eesti  Pank  itself  to  decide  which  specific  actions  are  relevant  to 

comply with the preparedness obligation. Nevertheless, given that national defence obligations can 

be  specified  in  implementing  acts,  due  consideration  for  the  independence  of  Eesti  Pank  should 

also be considered when drafting acts of this kind.  

3.8  Extent to which the performance of tasks harbours substantial financial risks 

3.8.1  The  draft  law  does  not  contain  any  specific  provisions  on  liability  in  relation  to  Eesti  Pank’s 

fulfilment of its national defence preparedness task. Furthermore, this task would seem to primarily 

require  planning  and  coordination  within  Eesti  Pank  and  with  the  competent  national  authorities. 

Hence the ECB is not aware of significant financial liabilities for Eesti Pank arising out of this task.  

3.9  Extent to which the performance of the new task exposes members of the decision-making bodies 

of Eesti Pank to disproportionate political risks and impacts on their personal independence 

3.9.1  The ECB does not consider that the new task would expose the members of the decision-making 

bodies  of  Eesti  Pank  to  disproportionate  political  risks  or  that  it  would  impact  on  their  personal 

independence.  As  previously  noted,  the  supervision  over  the  fulfilment  of  the  national  defence 

preparedness  task  rests  with  the  supervisory  board  of  Eesti  Pank.  Moreover,  national  defence 

preparations  and  planning  are  primarily  the  tasks  of  other  authorities  and  the  additional 

involvement  of  Eesti  Pank  in  national  defence  preparations  will  likely  not  be  substantial.  In  such 

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circumstances  any  impact  on  the  members  of  Eesti  Pank’s  decision-making  bodies  should  be 

limited.  

3.10  Conclusion 

3.10.1 Although the proposed national defence preparedness task of Eesti Pank could be considered to 

be a task which is not atypical to NCBs in the ESCB, this task would be clearly discharged in the 

exclusive  interests  of  the  Estonian  Government,  in  order  to  preserve  the  independence  and 

sovereignty  of  the  Estonian  State,  the  inseparable  and  indivisible  integrity  of  its  land,  territorial 

waters  and  airspace  and  its  constitutional  order.  Given  that  this  task  goes  beyond  the  internal 

contingency  planning  tasks  of  a  central  bank,  it  is  a  government,  rather  than  a  central  banking, 

task.  Therefore,  similar  to  the  arrangements  existing  in  a  number  of  Member  States  which  have 

conferred  comparable  tasks  on  their  NCBs,  the  draft  law  should  introduce  a  mechanism  for  the 

reimbursement of Eesti Pank for any costs incurred in the performance of this government task. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 7 January 2020. 

[signed] 

The President of the ECB 

Christine LAGARDE 

13