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Das Foto vom Donnerstag (26.01.2012) zeigt die beiden Türme des Europäischen Gerichtshofs in Luxemburg. Foto: Thomas Frey dpa/lrs
Image: picture-alliance/dpa

Ireland takes on ESM

Daphne Grathwohl / crl
September 26, 2012

Ireland is taking its challenge of the European Stability Mechanism to the highest authority. Unlike previous challenges, this case will go before the European Court of Justice, with potential implications for the ESM.


He is quick to respond to emails and calls, and even answers them himself - regardless if it is Saturday night and he's out on the road. What he is up to is not only obvious on his website, but also on his Facebook page and, of course, is reported in the Irish media. His words are both assertive and engaging. Thomas Pringle, the independent member of the Irish House of Commons, is a full-blooded politician. His biggest task at hand today is his legal case against the European Stability Mechanism (ESM).

The case against the ESM, has grown out of Ireland, a country which requested financial help in 2010. Thomas Pringle believes that Ireland will not benefit from the EU bailout, and even less so from the ESM. "I do not think the terms of the ESM are in the interests of Ireland. The ESM is designed in a way that will divide the EU and result in its destruction.” The EU is based on good grounds," says Pringle, "and the EU must make decisions which respect the rights of all the countries and their laws, as is enshrined in the EU Treaties.

Arguments against the ESM

That the ESM contravenes the EU treaties is the basis of Thomas Pringle's case, which he initially made to the High Court in April 2012. After his case was dimissed, Pringle immediately referred it to the higher authority of the Supreme Court of Ireland. Pringle argues that the Irish government broke the law when it agreed to the ESM. In addition, he argues that the Finance Minister, as the national representative, is on the EMS Board of Governors and that is not constitutional. Pringle says the ESM breaches EU treaties not just because the ‘no bail out' clause has been violated and because there is no legal protection against the ESM, but also because the ESM is a new instrument which exists beyond the reach of EU treaties.

Thomas Pringle, Abgeordneter des irischen Unterhauses. Copyright: privat
Independent MP Thomas Pringle will challenge the ESM in the European Court of JusticeImage: privat

Although the Supreme Court dismissed some of Pringle's arguments, the Court did refer his case to the European Court of Justice (ECJ) in Luxembourg. The trial date is expected to take place on October 23. The 45-year-old Pringle is glad that Luxembourg will now be handling the matter: "Here in Ireland we have a unique situation that the EU treaties are part of our own constitution. Therefore, the Irish courts are obliged to appeal to the Court before they can decide on the impact of EU law," says Pringle.

A case for potential disaster

The Irish government contradicts Pringle's arguments. It points to the urgency of the ratification of the ESM – not just for Europe but also for the current economic situation in Ireland. The country, which was one of the first countries to receive euro bailout funds under the European Financial Stability Facility (EFSF), has been slowly recovering from the debt crisis. Even the German government aligned itself with this euro-rescue instrument during the case against the ESM. And that's not the only place where Matthias Kumm, a European law expert, sees parallels to the German constitutional complaint. "Like the case that went before the German constitutional court it is also a potentially explosive case."

Kumm, who is a law professor at the Social Science Research Center in Berlin, (WZB) and currently a fellow at the European University Institute in Florence, argues that theoretically the ECJ could rule against the ESM. "It's not possible to resolve the euro debt crisis by creating non-European institutions and procedures outside EU treaties,” he said.

Prof. Dr. Mattias Kumm, Juraprofessor am Wissenschaftszentrum Berlin für Sozialforschung (WZB), derzeit Gastprofessor am European University Institute in Florenz. Copyright: privat
Mattias Kumm, law professor at the Social Science Research Center in Berlin, says it's theoretically possible that the European Court could rule against the ESM.Image: privat

It's the first time that the ECJ in Luxembourg will rule on the ESM. The German Federal Constitutional Court - unlike the Irish Supreme Court – has not submitted European legal questions to the Luxembourg judges. Andreas Vosskuhle, the President of the Constitutional Court and Chairman of the Second Senate, stated when he presented his decision on the ESM in mid-September that the court had not examined questions of European law.

Challenges to the European Court of Justice

As one can see, Thomas Pringle is not alone with his concerns. The German plaintiffs have also brought action on account of the fact that provisions of EU treaties weren not adhered to, such as with the ‘no bail out' clause. But the issue of the ESM's legality so far has not been resolved. According to Mattias Kumm, national constitutional courts are limited in their examination as to whether the ESM is compatible to their country's laws. "It may well be that the ESM is problematic in European legal terms, but that's not relevant for national constitutional courts as long as the their constitution is not violated," he noted.

Kumm concedes that there has also been a level of competitiveness evident between national courts and the ECJ. Germany's Federal Constitutional Court has never presented a question of law to the European Court of Justice, the law professor says. "The practice of the highest constitutional courts shows that the highest courts are particularly keen to have precedents." There are definitely certain conflicts of authority around the question of who has the right of final decision, says Kumm, adding that Ireland's special legal situation makes the Pringle case to the ECJ in Luxembourg compelling.

Unlawful bailout?

At the very least, the role the ECJ plays will be strengthened in the fiscal pact, especially given it's authority to examine the case. However, the court does not have this right to decide on the permanent euro bailout fund and that, in particular, is a problem, according to Mattias Kumm: "There are decisions largely decided by the will of the EU member states without the involvement of European institutions, without the involvement of parliaments, and without judicial review by the ECJ."

President of the German Constitutional Court (Bundesverfassungsgericht ) Andreas Vosskuhle (5th L) announces the ruling on the European Stability Mechanism (ESM) and the fiscal pact at the court in Karlsruhe September 12, 2012. Germany's Constitutional Court said on Wednesday the country can ratify the euro zone's new rescue fund and budget pact as long it can guarantee there will be no increase in German financial exposure to the bailout fund without parliament's approval. Ruling that an injunction against the ESM and fiscal compact was largely unfounded, the court said one condition for allowing ratification was that any increase in German liability beyond 190 billion euros must first be approved by the Bundestag lower house of parliament. REUTERS/Kai Pfaffenbach (GERMANY - Tags: BUSINESS POLITICS CRIME LAW)
The German Constitutional Court ruling on ESM made another 'yes, but' rulingImage: Reuters

Thomas Pringle hopes that the Luxembourg judges take his stand on this matter when it goes to court on October 23. He and his lawyer Joe Noonan will, of course, be present. He explains he wants to see his case strongly argued in this particular court of law. He expects the ECJ will take much time to consider his arguments fairly and will check whether the ESM treaty complies with EU treaties, because, in the end, it's the court which will be entrusted with the protection of the treaties. “I believe that the ESM isn't compatible with the EU treaties and I hope that the ECJ also sees it this way," says Pringle.

Mattias Kumm, however, puts somehwat of a damper on these expectations: “It is highly unlikely that the ECJ will do something that would undermine the effectiveness of the ESM.” He says it could be that European law will end up being adjusted to fit with the ESM. This would amount to another “yes, but” decision, only this time from Luxembourg.

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