Mattias Wendel (Leipzig University)
First things first: the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) has cleared the way for Germany’s participation in Next Generation EU (NGEU). In its decision of 15 April 2021, published on 21 April 2021, the Court’s Second Senate rejected an application for preliminary injunctions challenging the domestic statute approving the ratification of the Own Resources Decision, a necessary condition for the entry into force of the NGEU. The preceding order of 26 March 2021, by which the BVerfG had prohibited the Federal President from signing and promulgating the statute, was thus overturned. German ratification was completed immediately afterwards.
Even if the decision of 15 April 2021 has ultimately paved the way for ratification, it is only a decision on preliminary injunctions that leaves important constitutional questions open. It seems likely that the BVerfG could, once again, take the road to Luxembourg by means of a preliminary reference. The BVerfG’s final constitutional assessment of the NGEU might therefore not be available until a few years from now. By that time, however, not only will a large part of the NGEU already be in force, reducing the political impact of the BVerfG’s final ruling, as was the case with the ESM a few years earlier. The Court’s Second Senate will then also be composed differently. In particular, Judge Peter M. Huber, who significantly influenced numerous cases such as OMT and PSPP as judge rapporteur, will no longer be a member of the Second Senate.
Double interim protection
Some observers were surprised that the BVerfG issued not one, but in fact two interim decisions on the NGEU. In its order of 26 March 2021, the Second Senate first prohibited the German Federal President to sign and promulgate the statute of approval, hence preventing ratification temporarily. This order was certainly unusual, though not so much in its content as in its form. In terms of content, it is rather logical that the Federal President is prevented from signing and promulgating a parliamentary statute of approval that is still under review by the BVerfG. Otherwise, the situation could arise in which Germany binds itself externally under EU or international law while at the same time violating the Basic Law internally. However, the usual procedure consisted in an informal arrangement between the BVerfG and the Office of the Federal President to postpone the signing and promulgation of the statute of approval until the decision on preliminary injunctions was issued. The fact that the BVerfG deemed it appropriate this time to issue a formal decision ahead of the actual decision on preliminary injunctions (so-called Hängebeschluss) was apparently due to communication difficulties at the working level. An increased danger that the BVerfG would stop NGEU, as it was sometimes speculated in the media, could at any rate not be derived from the mere existence of the order of 26 March 2021, the reasoning of which was not even published.
Ultra vires and Identity Review
As is often the case in the BVerfG’s EU related case law, the constitutional complaints were brought before the Court by several thousand individuals. Among them were, once again, publicly known right-wing politicians and economists, who regularly try to impose their EU-critical policies, which have no majority support in either parliament or the population, by appealing to the BVerfG. In terms of procedural law, the BVerfG has opened the door to such actions step by step and created, over the years, a de facto actio popularis with regard to Germany’s participation in the EU. In essence, the constitutional complaints contain two lines of reasoning. The first relates to constitutional identity. According to the complainants, Germany’s participation in NGEU violates the inalienable core of the Basic Law by undermining the budgetary autonomy of the Bundestag. Secondly, the complainants argue that NGEU was enacted ultra vires. In their view, the NGEU exceeds the legal bases relied upon by the EU and also violates a principle allegedly enshrined in the Treaties that prohibits the EU from borrowing. It is important to distinguish between these two lines of reasoning, identity and ultra vires review, both in relation to the outcome of the decision of 15 April 2021 and to further developments.
A (new) distinction between identity and ultra vires review for interim legal protection
In order to understand the decision of 15 April 2021, one should be aware of the fact that the BVerfG applies a particular standard of review when deciding on preliminary injunctions. According to this particular standard, the BVerfG may, on the one hand, reject an application for preliminary injunctions if it considers the constitutional complaints to be inadmissible or manifestly unfounded on the merits from the outset. In relation to NGEU, however, this is precisely what the BVerfG did not do, because it held the complaints to be plausible at least to a certain degree. If, on the other hand, the outcome of the main proceedings appears to be open (non liquet) from the Court’s point of view, as was the case with NGEU, the standard of review consists of balancing the consequences of the two conceivable “cases of disaster”: The disadvantages that would occur if the BVerfG were to grant the preliminary injunctions but the constitutional complaints ultimately proved unsuccessful (first case of disaster) are weighed against the disadvantages that would occur if the BVerfG were not to grant the preliminary injunctions but the constitutional complaints were ultimately successful (second case of disaster). In special cases, however, the BVerfG goes beyond a mere balancing of consequences and conducts a so-called “summary review”, i.e. already evaluates the prospects of success in the main proceeding. The expression “summary” does not mean “superficial” with regard to the legal examination, but “cursory” with regard to the investigation of the facts, for there is not enough time in order to fully process and evaluate the facts, e.g. by hearing experts. A well-known and much-discussed example of such a summary review is the ESM decision of 12 September 2012, by which the BVerfG paved the way for the ratification of the ESM Treaty under certain conditions.
In its decision of 15 April 2021, the BVerfG remarkably only carried out a summary review with regard to identity. It concluded that a violation of constitutional identity would ultimately not be established with a high degree of probability in the main proceeding. As a result, although a violation of German constitutional identity is still considered possible in theory, the identity claim is in fact largely off the table. With regard to ultra vires review, however, the BVerfG did not carry out a summary review and accordingly did not thoroughly engage with the ultra vires claim on the merits. On the basis of finding a violation of constitutional identity to be at least “not highly probable” and not conducting a summary review with regard to the ultra vires claim at all, the BVerfG consequently carried out an all-out balancing of consequences, coming to the convincing conclusion that the political and economic disadvantages of non-ratification (assuming the subsequent unsuccessfulness of the constitutional complaints) would weigh considerably more heavily than the disadvantages of ratification (assuming the subsequent success of the constitutional complaints).
Distinguishing between identity and ultra vires review with regard to the necessity of a summary review is a novelty. In the present case, this new approach results in the BVerfG not having to go into the substance of the ultra vires claim. All in all, there are strong indications that the BVerfG ultimately considers the ultra vires claim to be the more substantiated and solid argument and in this respect may still want to refer a preliminary question to the ECJ.
Only time will tell whether the distinction between identity and ultra vires control in the context of interim measures is a distinction of general significance or whether it is merely due to the special circumstances of the case at hand. In any event, the constitutional justification for such a distinction is highly questionable. According to the BVerfG, a summary review is required with regard to the identity review, because the non-granting of legal protection on the assumption of a (ex ante) high probability of an identity violation would be tantamount to a “serious disadvantage for the common good”, which the BVerfG must prevent. This line of argument can already be found in precedents such as the ESM decision of 2012. In contrast, with regard to ultra vires review, the BVerfG now argues that there was precisely no need to conduct a summary review, because the ECJ could still annul an ultra vires act at EU level or the BVerfG could declare it inapplicable at the domestic level. However, according to its own case law, the BVerfG could also declare NGEU inapplicable in Germany if it violated constitutional identity. Moreover, the BVerfG should – indeed must – also first refer the matter to the ECJ by way of a preliminary reference before deciding that EU law violates German constitutional identity. This holds true despite the fact that the scope of protection of Article 4 (2) TEU is, according to the BVerfG, not identical with German constitutional identity. Moreover, the mode of ultra vires review in the NGEU case is a so-called principal ultra vires review: It is not accessory to the claim that a fundamental right, e.g. freedom of profession, has been violated (Honeywell case law), but a self-standing mode of review which is conceptually based on an alleged violation of the inalienable core of the principle of democracy. This is because an evident and structurally significant transgression of competences at EU level can, according to the BVerfG, violate German constitutional identity if the citizens were exposed to a sovereign power that, acting ultra vires, would not be democratically legitimised (OMT and PSPP case law). In other words, the so-called principal ultra vires review is conceptually anchored in German constitutional identity.
Against this background, it seems more convincing to treat identity review (here with regard to the budgetary autonomy of the Bundestag) and principal ultra vires review (here with regard to compliance with legal bases and prohibitions under the Treaties) equally in the context of interim legal protection. This would mean either carrying out a summary review in both cases (then with reference to otherwise looming serious disadvantages for the common good) or refraining from a summary review in both cases (then with reference to the possibility that the BVerfG could ultimately declare the legal act in question inapplicable in Germany anyway).
The Key Concern: NGEU as an ultra vires act
The decision on preliminary injunctions of 15 April 2021 suggests that the BVerfG’s more serious constitutional concerns are with the ultra vires claim. Seen in this light, the distinction between ultra vires and identity review with regard to carrying out a summary review allows the BVerfG to permit ratification already at this stage, while at the same time still ensuring itself sufficient time and argumentative leeway to deal with the ultra vires review later. In essence, the court is concerned with the question of whether the NGEU – and the borrowing capacity in particular – manifestly exceeds the legal bases relied upon by the EU, i.e. Art. 311 (3) and Art. 122 (2) TFEU, or violates the principle of “prohibiting borrowing or debt” (Verschuldungsverbot) which could allegedly be derived from EU law, according to the complainants. Interestingly, Article 310 TFEU, which has been intensively discussed in other countries such as Finland (see here), has so far only barely played a role in the reasoning of the Federal Constitutional Court. With regard to ultra vires review, the BVerfG has so far rather limited itself to echoing the reasoning of the complainants and thus focused on Article 311 (3) TFEU and Article 125 (1) TFEU. However, somewhat similar to the OMT and PSPP saga, the bottom line will once again be the question of an obvious and structurally significant transgression of competences, be it with regard to the legal bases, be it with regard to provisions or principles such as the alleged prohibition of “borrowing”.
The fact that the BVerfG’s reasoning in the decision on preliminary injunctions has so far rather one-sidedly reproduced the reasoning of the complainants and parts of legal doctrine, must not be mistaken as a pre-determination of the BVerfG. Within the particular framework of interim legal protection, the BVerfG was so far predominantly concerned with demonstrating why the complainants’ reasoning could be seen least as plausible and why the Court therefore could not rule out a violation of the constitution from the outset.
The task of the many who (rightly) consider NGEU to be in conformity with EU law both in terms of competence and substance is now to demonstrate, in the run-up to a preliminary reference or to the final judgement of the BVerfG, why NGEU can be based in a legally sound manner on the chosen legal bases and why there is no (general) prohibition of borrowing under the Treaties, as the complainants claim. In this respect, the Council’s legal opinion of June 2020 still needs to be substantially supplemented and underpinned by doctrinal work.
By contrast, the BVerfG was already able to largely invalidate the identity claim within the framework of a summary review. Even if the BVerfG keeps the decision on constitutional identity formally open and points out explicitly that a violation of constitutional identity cannot be ruled out from an ex ante perspective, it is in fact unlikely that the court would ultimately come to the conclusion that NGEU violates the inalienable limits of the German constitution. This has to do in particular with the fact that under the BVerfG’s own standards the budgetary autonomy of the Bundestag would have to be utterly depleted as a result of European liabilities. In the case of the NGEU, this cannot be assumed even for the darkest scenario, in which practically all other EU Member States except Germany were not able to fulfil their financial obligations (but the EU still existed…). Furthermore, as in the ESM decision, the BVerfG, similar to ESM, emphasised parliamentary discretion in assessing the risks associated with the NGEU.
No Conferral of Competences
The decision of 15 April 2021 also contains an important statement on the question of whether or not Germany’s participation in NGEU should be seen as a “conferral of sovereign rights” within the meaning of the German EU clause, Article 23 of the Basic Law, requiring a qualified majority. The BVerfG answered this question in the negative. This is conceptually convincing, since the Own Resources Decision is, despite the requirement of national ratification, an application of the Treaties, the provisions of which were already themselves the subject of a “conferral of sovereign rights”. Consequently, a qualified (constitutional) majority in the Bundestag and Bundesrat was not required for the approval of the ratification of the Own Resources Decision. In practice, the qualified majority was in fact achieved anyway (the Bundesrat even approved it unanimously). However, during the preparatory phase, the German legislator had explicitly considered a qualified majority not to be constitutionally required. The difficult question of whether the mere (de facto) attainment of a qualified majority is sufficient in itself to meet the requirements of Article 23 (1), sentences 2 and 3, or whether a parliamentary statute of approval must also be expressly designated in advance as a statute requiring a qualified majority (e.g. for reasons of transparency), was ultimately left open by the BVerfG, which already did not qualify the ratification of the Own Resources Decision as a conferral of sovereign rights.
Outlook: Preliminary reference
As a result, the BVerfG has allowed German participation in NGEU without having resolved all relevant constitutional questions. It would not be surprising if the BVerfG were to refer one or more questions on the ultra vires character of the NGEU to the ECJ in the near future. May this dialogue proceed in a constructive manner this time…
Mattias Wendel is professor of Public Law, EU Law, International Law, Migration Law and Comparative Law at Leipzig University.
The views expressed in this blog reflect the position of the author and not necessarily that of the Brexit Institute Blog.