Pringle judgment breaks new ground

EU LAW UPDATE:The judgment from the European Court of Justice in the Pringle case (C-370/12, November 27th, 2012) was of huge economic, political and legal importance.

The case originated in a challenge to the European Stability Mechanism (ESM) treaty before the Irish courts by Independent TD Thomas Pringle.

The ESM treaty, signed in February 2012 by euro zone states, created a permanent bailout fund to finance governments unable to access financial markets when such support is vital to safeguard the financial stability of the euro zone and its member-states.

This formed a crucial part of the EU’s euro crisis response, replacing the existing temporary bailout funds (the European Financial Stability Facility and the European Stability Mechanism). Before the High Court and Supreme Court, Mr Pringle claimed that Ireland’s ratification of the ESM treaty would breach the Constitution and Ireland’s EU law obligations.The Supreme Court ultimately dismissed the constitutionality arguments, but referred the EU law points to the European Court.

Rejected

The European Court of Justice rejected Mr Pringle’s arguments.

The crux of the case centred on whether the ESM treaty interfered with the EU’s role and the provisions of the Treaty on the Functioning of the EU (TFEU) as regards economic and monetary policy.

One issue was the ESM treaty’s compatibility with the “no bailout” clause (article 125 TFEU) prohibiting the EU or its member-states from assuming liability for another member-state’s financial commitments.

Despite tensions between this clause and the ESM treaty, the European court held that if strict conditions were imposed to ensure assistance did not reduce the recipient state’s incentive “to conduct a sound budgetary policy”, no EU law problems arose. The European court also rejected Mr Pringle’s challenge to the European Council’s decision amending the TFEU to state that the ESM’s establishment is compatible with that treaty.

This represented the first use of the simplified procedure for treaty amendment, introduced by the Lisbon Treaty, which allows certain amendments to take place by European Council decision rather than the standard procedure of intergovernmental conference and ratification.

The court upheld the use of the simplified procedure, reasoning that the ESM amendment did not increase the EU’s competences but simply clarified the status quo.

The outcome in the Pringle case shows the European court’s acute awareness of the need to tread carefully in a field of extreme economic and political sensitivity.

Exceptional measures

Also noteworthy are the exceptional measures taken in Dublin and Luxembourg to prioritise the case.

The High Court’s ruling was given 10 days after the hearing’s conclusion; the Supreme Court (in its seven-judge formation) heard the matter 15 days later, with the Luxembourg reference following five days after the hearing. This is impressive speed for a case of this complexity.

The Irish Supreme Court was the only national court to make a reference on the matter, although similar cases came before the German Constitutional Court and the Estonian Supreme Court.

Before the European court, the matter was fast-tracked via the court’s accelerated procedure, with judgment less than four months after receiving the reference – a remarkable achievement as the court, unusually, sat in its plenary formation of 27 judges.

In this sense, the case will go down in the history books as an example of how efficiently justice can work – at EU and national levels – in exceptionally sensitive cases.

Suzanne Kingston is a member of the Irish Society for European Law