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The Supreme Court: Provision of the Treaty establishing the European Stability Mechanism contested by the Chancellor of Justice deemed constitutional

12.07.2012

 

With its judgment today, the Estonian Supreme Court en banc dismissed the application of the Chancellor of Justice to declare Article 4 (4) of the Treaty Establishing the European Stability Mechanism (ESM Treaty) to be in conflict with the Constitution. The Supreme Court is of the position that although the contested article restricts the financial competence of the Estonian parliament (Riigikogu), the principle of rule of law and the sovereignty of Estonia, the restriction is justified.

 

On March 12, 2012 the Chancellor of Justice filed to the Supreme Court an application for constitutional review as he considered the provision in question to be in conflict with the Constitution*.  Generally, financial assistance, under ESM, is granted at the consent of all contracting parties. However, Article 4 (4) of the ESM Treaty states that in exceptional circumstances, when the economic and financial sustainability of the euro area are threatened, it shall be possible to grant a contracting party financial assistance under an emergency procedure which requires a qualified majority of 85% of the votes cast. Thus, financial assistance may be granted regardless of the opposition of Estonia.

 

Upon assessment of the constitutionality of Article 4 (4) of the ESM Treaty, the Supreme Court considered the restriction arising from the article, i.e. the decrease of the power to decide the use of public finances. On the other hand, the Supreme Court considered the purpose of the contested article – to ensure an efficient decision-making procedure in case of a threat to the financial stability of the euro area, including Estonia. The economically and financially unstable euro area would pose a threat to the financial and economic stability of Estonia.  Stability is necessary in order for Estonia to be able to perform its obligations arising from the Constitution, including ensuring the fundamental rights of people.

 

By acceding to European Stability Mechanism (ESM), the Riigikogu shall assume a financial obligation to Estonia, the maximum limit of which is provided by the ESM Treaty. The ratification of the Treaty shall narrow the options of the Riigikogu to make other costly choices upon organising state matters in the future. On the other hand, a stable economic environment expected to be ensured by Article 4 (4) of the ESM Treaty is essential for ensuring constitutional values and fundamental rights. The Supreme Court en banc took into account the fact that even in the emergency procedure financial assistance shall be granted in stringent terms which also include respective decisions of the European Central Bank and of the European Commission.

 

The Supreme Court en banc indicated that the problem of unconstitutionality may not only arise upon ratification of the Treaty but also upon performance of the tasks provided for in the ESM Treaty. For example, the Riigikogu needs to decide how to finance the performance of the Treaty. The Supreme Court is also competent to examine the constitutionality of performance of the ESM Treaty, should it be contested in the future.

 

The Supreme Court also noted that the Constitution of the Republic of Estonia Amendment Act adopted in a referendum of 2003 does not enable unlimited delegation of Estonia’s competence to the European Union. If the founding treaty of the European Union is amended or a new founding treaty is entered into and if it brings about more extensive delegation of Estonia’s competences to the European Union and more extensive interference of the Constitution, the consent of the bearer of the supreme political authority, i.e. the people of Estonia, shall be requested and the Constitution probably has to be amended again.

 

The Supreme Court en banc also pointed out the procedural requirements to be followed by the Riigikogu upon ratification of the ESM Treaty. It is up to the Riigikogu to decide whether Estonia accedes to ESM.

 

THE JUDGEMENT OF THE SUPREME COURT EN BANC and DISSENTING OPINIONS

In Estonian, English translations available at www.riigikohus.ee/?lang=en  after 3 September 2012

 

 

For further information contact


Eveli Kuklane
Head of the Public Relations Department
Phone +372 730 9042
Eveli.Kuklane@riigikohus.ee

 

* The Constitution of the Republic of Estonia states that the Chancellor of Justice shall be, in his or her activities, an independent official who shall review the legislation of the legislative and executive powers for conformity with the Constitution and the laws (§ 139 (1) of the Constitution). The Constitutional Review Procedure Act  provides the Chancellor of Justice with the right to submit an application to the Supreme Court to declare an international agreement which has been signed or a provision thereof to be in conflict with the Constitution (§ 6(1)4)).