The legality of the “fiscal treaty”

This afternoon after Prime Minister’s questions Bill Cash MP (what would we do without him?) has secured a debate in Parliament about the legality of the “fiscal treaty” – the new agreement between EU member states other than Britain (and the Czech Republic) intend to guarantee fiscal discipline in the Eurozone.

Here’s the text published on 31 January, by the way – with comments from me. Its official title will be the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union.

Cash’s argument will surely be that the Treaty’s use of EU institutions – specifically the European Court of Justice, the European Commission and the European Central Bank, to all of which it assigns a role – is in breach of EU law. This is something the UK government initially said it would take issue with, but which it has now let drop at least unless Britain’s interests are affected.

This series of posts on the Open Europe blog gives helpful background to the “institutions” controversy, and important aspects of the argument are set out by Denis Cooper in his comments at the EU Observer, Sovereignty Bill (run by Bill Cash himself) and Douglas Carswell blogs.

The complaint is that the institutions cannot be given new tasks by this draft treaty because of Article 13.2 of the Treaty on European Union (TEU), which says

Each institution shall act within the limits of the powers conferred on it in the Treaties.

That reference to the Treaties does not include this new fiscal treaty, by the way – Article 1 of the TEU makes clear that the Treaties means the existing EU treaties, the TEU itself and the Treaty on the Functioning of the EU (TFEU). That, then, is the legal basis of the argument that’s expressed politically by saying that the institutions belong to the whole EU, and cannot be used for other purposes by some of the member states.

There are counter-arguments that the contracting states can use, though. First, they can argue that a Parliament v Council & Commission case from 1993, in which the European Parliament failed in a challenge to member state’s collective assignment of humanitarian aid tasks to the Commission, shows that member states can legally do that sort of thing.

Second, in relation to the European Court they can argue that Article 273

The Court of Justice shall have jurisdiction in any dispute between Member States which relates to the subject matter of the Treaties if the dispute is submitted to it under a special agreement between the parties

permits the use of the ECJ. The draft treaty text clearly relies on this argument: draft article 8.3 expressly refers to Article 273 and draft article 8.1 allows member states, but not the Commission, to invoke the ECJ’s jurisdiction – which is clearly designed to comply with Article 273. It’s an open question whether disputes under the fiscal treaty relate to the subject matter of the existing Treaties. On one view they do, since the Euro and budgetary discipline are covered by the TFEU; on another view, the need to draw up a new treaty shows that its subject matter goes beyond what’s in the existing ones.

A final important consideration is how the UK could take legal action to dispute the fiscal treaty – it is not in itself an act of any EU institution, and so may well be safe from annulment proceedings. There’s no issue about the member state’s external competence to conclude this treaty, since it does not involve negotiations with non-EU states (if it did, arguably only the EU itself could act), and the draft treaty is carefully worded so as to avoid any conflict with existing EU law, so it’s difficult to argue that other states by reaching this agreement have breached their duty of sincere cooperation with EU objectives.

I think all the UK would be left with would be a challenge to the actual actions of the Commission or Bank in pursuance of this treaty – although arguably nothing the draft treaty tasks them with doing amounts to more than a recommendation or opinion, and so may not be subject to legal challenge under Article 263 TEU:

The Court … shall review the legality of … acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions

Finally, rather than conferring tasks on the European Council or its President, the draft treaty has neatly created a new Euro Summit and a post of President for it. No doubt Herman van Rompuy will get that job.

An interesting technical legal debate then, about EU law – but a fairly abstract one. I don’t expect any legal challenge to the fiscal treaty – and if one was made, I doubt it would succeed.