Open Europe Blog

A draft of the new European treaty proposed by France and Germany has been leaked and attention has immediately turned to the thorny issue of the role of the EU institutions in enforcing or policing the new deal – remember the UK’s line is broadly that they can’t, a key source of potential leverage in future talks.

The proposed document would see a role for the European Court of Justice in judging whether national governments have transposed a new “balanced budget” obligation and, if this is breached, an automatic “correction mechanism” into national law. The new treaty states:

NOTING that compliance with the obligation to transpose the “Balanced Budget Rule” into national legal systems at constitutional or equivalent level should be subject to the jurisdiction of the Court of Justice of the European Union, in accordance with Article 273 of the Treaty on the Functioning of the European Union.

The question is whether this is allowed under EU law, can the ECJ be used for this? (NB, the draft foresees no role for the ECJ in enforcing any sanctions but simply judging whether the new rules have been adequately transposed into national law.)

Article 273 of the EU Treaties, cited by the new treaty, states that:

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.

So this EU Treaty article clearly provides the new group with a hook on which to try and hang the new arrangement and get the ECJ involved. Article 273 would allow the ECJ to be used to judge a dispute (in this case whether the “balanced budget” rule has been adequately transposed), as long as the subject of the dispute is “related” to the EU Treaties. The question is whether this 0.5% rule can reasonably be seen as “related” to the Treaties. This is where the legal grey area begins and where it seems that the justification for ECJ involvement is iffy to say the least.

The existing EU Treaties contain obligations for governments to remain within a 3% deficit limit and a 60% debt to GDP limit. But there is no mention of the new 0.5% “structural deficit” limit proposed by the new treaty.

The 0.5% limit is a new obligation. It is therefore a legal stretch to say that this falls under the category of things to which the EU Treaty “relates”. Using the ECJ to judge whether this new obligation has been transposed properly is therefore also a huge legal stretch and one that the UK would be well advised to investigate and possibly challenge. If Cameron does wave the proposal through it will certainly raise political questions about what his veto actually achieved.

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