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German ruling potentially a fatal threat to EU law

On 5 May 2020, the German Federal Constitutional Court issued a judgment in which it declared a European Court of Justice (ECJ) decision ultra vires in Germany, write Eimear Burke (Partner) and Dearbhla Walsh (Trainee) at Fieldfisher Ireland.

The ruling focused on the legality of aspects of the European Central Bank’s (ECB) Public Sector Purchase Programme (PSPP). The legality of this programme had previously been referred to the ECJ, wherein it had been determined lawful.

The recent ruling of the German Federal Constitutional Court has received widespread attention, as it poses a potentially fatal threat to the future of one of the main characteristics of the EU – namely, the principle of supremacy of EU law over the national law of its member states.

Violated principles

In rejecting the ECJs ruling, the German Federal Constitutional Court found that the ECJ had violated principles of legal interpretation, and held that the ECJ had failed to properly apply the EU’s proportionality principle.

In particular, the German Federal Constitutional Court indicated that the ECJ had failed to ensure that the ECB applied its own proportionality analysis when assessing the likely impact of its policies on both monetary and broader economic outcomes.

The German Federal Constitutional Court claimed that the ECJ’s interpretation of the principle of proportionality in its judgment of 11 December 2018 “manifestly exceed the judicial mandate conferred upon the CJEU in article 19(1)”, thus resulting in “a structurally significant shift in the order of competences to the detriment of the member states’ (para 154).

Not binding

For this reason, the German Federal Constitutional Court concluded that the CJEU’s “aforementioned judgment thus constitutes an ultra vires act that is not binding upon the Federal Constitutional Court” (para 163).

This German Federal Constitutional Court ruling is final, as it is not subject to appeal to any other court.

The European Commission responded to the German Federal Constitutional Court ruling, stating that, “notwithstanding the analysis of the detail of the German constitutional court’s decision today, we reaffirm the primacy of EU law and the fact that the rulings of the European Court of Justice are binding on all national courts”.

Chaotic situation

Furthermore, the CJEU noted in a recent press statement that it has always held that the legality of the acts of EU bodies can only be determined by the ECJ – and not national courts – in order to prevent the chaotic situation in which EU acts are legal in one member state, but not another.

The court states: “Divergences between courts of the member states as to the validity of such acts would indeed be liable to place in jeopardy the unity of the EU legal order and to detract from legal certainty. Like other authorities of the member states, national courts are required to ensure that EU law takes full effect. That is the only way of ensuring the equality of member states in the union they created.”

Major blow

It is reasonable to anticipate that paragraph 163 of this ruling will become one of the most cited paragraphs in the analysis of the supremacy of EU law in the coming years.

It is worth nothing that this is not the first time that a national court has found an ECJ judgment to be ultra vires, or at least concluded that it has no legal basis in domestic law. For example, the Danish Supreme Court reached a similarly controversial conclusion in 2016 in the Dansk Industri case.

However, given the central role of Germany in the EU, this recent decision is a major blow from the heart of the EU.