Thomas Pringle Q&A: ESM Constitutional Challenge

Legal Proceedings have taken by Thomas Pringle TD, member of the Dáil for the Donegal South-West constituency, challenging the Irish Government on fundamental aspects of a far-reaching amendment to the EU treaties. Both the European Stability Mechanism (ESM) Treaty and the Stability, Coordination and Governance in the Economic and Monetary Union (Fiscal Compact) Treaty are under consideration.

Q: Who are the solicitors acting for you on this case?

A: Noonan Linehan Carroll Coffey, 54 North Main Street, Cork
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Q: What aspect specifically are you challenging?

A: An amendment to Article 136 of the Treaty on the Functioning of the European Union and the approval of ESM treaty without a referendum in Ireland.
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Q: You welcomed the Referendum, are you no doing a U-turn?

A: I, Thomas Pringle, welcomed on the public record the Government’s decision to submit the issue of the Fiscal Treaty to the people by way of referendum. BUT I have grave concerns, due to the intense pressures on Government at this time, that the need to put the amendment to Article 136 of the Treaty on the Functioning of the EU and the ESM Treaty to a referendum may not yet have been fully scrutinised.

In order to assist in that scrutiny, I have asked for legal advice to set out some particular points for consideration.
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Q: What are your concerns?

A: That there are serious legal difficulties with regard to the proposed amendment to Article 136 TFEU both at the level of EU treaty law and at the level of Irish Constitutional law.

• There are a number of further areas of concern – outlined here:-
  
  Legal nature of the ESM Treaty:
  
  The Treaty establishing the European Stability Mechanism (‘the ESM Treaty’) is a treaty under international law. It sets out in binding treaty form the details of an agreement made between 17 States, each of which is a member of the EU and each of which has the euro as its currency.
  
  The ESM Treaty, like the Stability Coordination and Governance in the Economic and Monetary Union Treaty (‘the SCG Treaty’) to which it is explicitly linked, is not an EU treaty.
  
  For this reason in my view it does not come within the scope of the license contained in Article 29.4.3 to 29.4. 8 of the Irish Constitution (Bunreacht na hÉireann).
  
  This is by reason of the Treaty’s content, and particularly the permanent nature and the range and scale of the authority conferred on the new agency established under the ESM Treaty.
  
  The linked SCG Treaty:
  
  The ESM Treaty is explicitly linked to the SCG Treaty. Both treaties are designed to operate in a complementary manner and are interdependent.
  
  Each treaty acknowledges this to be the case.
  
  The Government duly obtained the advice of the Attorney-General on the SCG Treaty. Having received that advice and having considered it at Cabinet, on February 28th the Dáil was informed that because the SCG Treaty was outside the EU treaty architecture it would be necessary to put it to the people by way of referendum. I respectfully agree with the tenor of the Attorney-General’s advice.
  
  The SCG Treaty is clearly outside the ambit of Article 29.4.3 to 29.4.8. It therefore must be assessed by reference to the provisions of the Constitution governing domestic competence and decision-making in economic, fiscal and budgetary matters.
  
  Ratification of the ESM Treaty in Ireland:
  
  The indication given by Government before it received the Attorney-General’s advice on the SCG treaty was that both treaties would be ratified by way of legislation. Clearly that is no longer sufficient in the case of the SCG Treaty. In our view the same approach must be followed for both treaties.
  
  They are interdependent and they cannot be severed when the question of ratification is being addressed.
  
  Like the SCG Treaty, the ESM Treaty is not an EU treaty. It thus falls outside the scope of Article 29.4.3 to 29.4.8 of the Irish Constitution and must be assessed in that light.
  
  Under the treaty an agency called the European Stability Mechanism is to be established.
  
  This would be a new international treaty-based institution having legal personality. This institution is given power under the ESM Treaty treaty to call on Ireland (at a time of that institution’s choosing) to make capital contributions to the institution of up to €11,145,400,000.
  
  That initial commitment in Ireland’s case is the equivalent of approximately one-third of Government Tax Revenue in 2011.
  
  That enormous figure may be further increased by the ESM institution at its own sole discretion at any time in the future. There is no limit in the ESM Treaty as to what may be sought from its members in time. The institution and its staff are granted wide-ranging immunities in the exercise of their powers.
  
  In effect therefore the new ESM institution is to be given legal power to direct Ireland to raise sovereign debt and to give the money so raised to the institution, which will then decide where, when, whether and how it is to be spent. Ireland will not have power to control those decisions regarding the disposition of the funds raised by it. It is hard to conceive of something that could be more plainly outside the framework of the Irish Constitution whereby economic, fiscal and budgetary powers are entrusted by the people to the Executive. These powers cannot be alienated in this way.

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Q: What are you suggesting by way of Referendum? Or an Alternative course of action?

A: The decision to refer the SCG Treaty ratification question to the Irish people by way of referendum was undoubtedly correct.

The SCG Treaty is one of two interdependent treaties.

The second treaty with which it is so intertwined must also be submitted to referendum.

Because of the EU Treaty issues and the Constitutional issues raised above, the Government is not in our view entitled to seek to approve the proposed amendment to Article 136 as it stands. Those difficulties require to be addressed further at EU level at least initially.

Recognising that these issues are exceptionally complex and exceptionally grave matters and the pressures from all sides is acknowledged as being unrelenting and intense, nonetheless these pressures must not be permitted to override the requirements of Bunreacht Na hÉireann as they have been interpreted particularly by the Supreme Court in Crotty v An Taoiseach.

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Q: Why are you seeking legal advice in respect to Constitutional limits?

A: The Constitutional limits on the type of international agreements that may be entered into by the Government on behalf of the State without the approval of the people by way of referendum are found in the judgments of the Supreme Court in Crotty v An Taoiseach [1987]

They are encapsulated in this comment by Hederman J: “The State's organs cannot contract to exercise in a particular procedure their policy-making roles or in any way to fetter powers bestowed unfettered by the Constitution. They are the guardians of these powers - not the disposers of them.”

Walsh J addressed the central issue in this part of the case as follows –

"... It is not within the competence of the Government, or indeed of the Oireachtas, to free themselves from the restraints of the Constitution or to transfer their powers to other bodies unless expressly empowered so to do by the Constitution. They are both creatures of the Constitution and are not empowered to act free from the restraints of the Constitution."

As Walsh J observed "To the judicial organ of Government alone is given the power conclusively to decide if there has been a breach of constitutional restraints."

It is clear that the ESM Treaty could only be ratified by Ireland if ratification first secures the approval of the people by way of referendum.

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• The Article 136 TFEU amendment:
  
  It has been suggested that an amendment to Article 136 TFEU could legitimate the ESM in EU law terms. That suggestion is legally misguided.
  
  An amendment to Article 136 TFEU is proposed using the simplified treaty amendment procedure under Article 48(2) TEU.
  
  This was formally agreed at a European Council meeting in March 2011.
  
  The amendment provides, in part: The following paragraph shall be added to Article 136 of the Treaty on the Functioning of the European Union: "The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole."
  
  Validity of this amendment:
  
  This simplified treaty revision procedure has never before been used for an amendment on such a weighty matter having profound Constitutional implications both at EU and national level.
  
  The simplified amendment procedure was not intended or designed to be used for the present purpose and in law it is not capable of being used for this purpose.
  
  Article 48(6) TEU allows the simplified treaty revision procedure to be used only in relation to the"‘internal policies and action of the Union". The amendment fails that test.
  
  The proposed amendment to the TFEU does not constitute a sufficient or proper legal base within the EU treaties to permit the establishment of a European Stability Mechanism in the form now envisaged. This is a matter that goes to the core of the Union, which itself is a community construct constituted under law.

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Q: This is coming at a time when the date for the referendum has been set? Why take this case now?

A: In my opinion "The Devil is in the Detail”

The ESM Treaty breaches both the inclusivity requirement of the amendment to Article 136 to include all eurozone members and the requirement that the Stability Mechanism only be activated if "indispensible to safeguard the stability of the euro area as a whole".

Taking this approach further difficulty immediately becomes apparent, which is the effect on Article 125 TFEU, commonly called the “no bailout” clause.

Article 125 states that “The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State.”

The amendment to Article 136 TFEU is intended to circumvent the provisions of Article 125.

The Article 136 amendment purports to amend the TFEU so as to permit the creation of a bailout fund through the establishment of a Stability Mechanism by way of a new institution set up under a new treaty which is not an EU treaty.

It is internally contradictory to use the proposed amendment to the TFEU to that end, so as to evade the clear terms of the existing Treaty Article 125.

By setting up the ESM as a new independent agency outside the EU system, the European Union is weakened not strengthened.

This is a breach of EU law obligations and it is inconsistent with the terms of Article 29.4.4 of the Constitution of Ireland (Bunreacht Na hÉireann). By virtue of that Article, Ireland as a member State of the Union having an embedded Constitutional commitment to that Union cannot agree to a measure which would subvert the Union. In addition, the amendment does not enjoy the immunity provided by Article 29.4.6 of the Constitution since such immunity could only apply to valid acts of the Institutions.

This weakening effect on the Union is further illustrated by the provision in the ESM Treaty mentioned above, mirroring a provision in the Fiscal Treaty, allowing the treaties to come into effect for a subgroup of the signatory States once a specified minimum level of ratification is achieved.

This approach envisages and provides for what may be then be a sub-group (possibly as few as eight) of a sub-group of EU members (the 17 eurozone States) striking off in a particular direction through the vehicle of a non-EU institution and while doing so, purporting to give that body legal authority to avail of Union institutions.

Putting the matter positively, if it is intended to establish a bailout mechanism consistent with the existing EU treaties, then Article 125 should be deleted or suitably amended and replaced.

If the EU States were unanimously agreed on the need to establish the ESM (and indeed the Fiscal Pact), then both would be entirely capable of achievement within the EU treaty framework and with due regard to the existing EU and Irish and other member State Constitutional norms.
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Q: If the SCG Treaty referendum in Ireland is lost...?

A: The Government claims that in the event that the people reject the Fiscal Treaty, the State will then be ineligible to seek any ESM funding which it might require after mid-2013.

With all due respect such a claim is misleading.

The State has no entitlement to access the ESM now.

The ESM does not even exist yet.

Irish approval and indeed the approval of other States is still required so as to ratify both the Article 136 amendment and the ESM Treaty. The supposed ineligibility is a direct consequence of the change made in February 2012 (and signed by Ambassadors) to the wording of the original ESM Treaty signed by the Minister for Finance and his counterparts in July 2011.

This change is found in the preamble to the current version of the treaty at Recital No. 5 and renders access to the ESM conditional upon prior ratification of the Fiscal Compact.