The financial and economic crisis unfolding since 2008 has had a huge impact on European states and societies and has justified a monumental and controversial legal response by the European Union and its member states. The critical rearrangement that this reaction has produced in the organisation and exercise of public power in Europe, as well as the devastating consequences in the living conditions of European citizens, has probably and with just cause been the main topic of consideration in recent legal and political science literature. The present article aims to contribute to this extensive debate by bringing attention to the potential role that legal certainty and individuals’ expectations may play in this context. It is in three sections. In the first, we seek to connect legal certainty with the prevailing theoretical approaches adopted thus far by the doctrine, trying to illuminate its potential. In the second, it is submitted that emergency law is an appropriate framework within which to address this complex EU response to the crisis; and that legal certainty and legitimate expectations have an important say in that framework. The third section analyses why legal certainty and legitimate expectations are experiencing some difficulties in operating successfully in EU law. Finally, there are some concluding remarks.
The potential of a legal certainty and legitimate expectations approach to the EU response to the crisis: focusing on individuals’ tools
The EU response to the crisis (or crisesFootnote 1 ) has been reflected in legal writing.Footnote 2 This has mainly opted for fundamental approaches, pointing to core issues in the EU legal, political and institutional setting and leading both to decisive critical conclusions and to the examination of the essential challenges which the EU currently faces. These scholars have, rightly, put the emphasis on the departure from those fundamental principles which underpin the legality and legitimacy of the EU multilevel system of governance. They point also to the appearance of severe democratic and accountability loopholes; the hidden mutation of European constitutional law; the degradation of basic legal values such as the rule of law; and the infringement of fundamental rights, among others. These theoretical frameworks might, however, inadvertently lead to the wrong impression that this legal debate stops at the ‘eminent principles’ level. If so, that would overshadow the repercussions that, at the final stage of the legal chain, this EU response has over all sorts of individuals’ rights and the legal remedies available to European citizens. Among these legal tools, legal certainty occupies a privileged position, because it represents a bridge between the individual and many of these prominent principles. In particular, concerning the rule of law, the Council of Europe’s Venice Commission has identified legal certainty as one of its six major components.Footnote 3
This is especially the case in EU law, where legal certainty is a general principle that binds EU institutions and member states when implementing EU law.Footnote 4 As is well known, this general principle requires ‘that rules of law be clear and precise and predictable in their effect, so that interested parties can ascertain their position in situations and legal relationships governed by EU law’.Footnote 5 According to the European Court of Justice case law, it also provides individuals with at least these weapons:Footnote 6
(a) as a condition to the validity and/or enforceability of legal norms, individuals can bring an action seeking to strike down a rule not complying with some formal requirements such as clarity, precisionFootnote 7 or official publication;Footnote 8
(b) as protecting predictability, the legal certainty principle may not prevail over a substantive legal choice, but it may prevent its subjective application on grounds such as being retroactiveFootnote 9 or against individuals’ legitimate expectations. These might be created by previous legislationFootnote 10 and also by non-legally binding positions taken by public authorities.Footnote 11 In cases (a) and (b), this individual right might even lead to a right to compensation;Footnote 12
(c) as part of the legal system, legal certainty operates not only in relation to direct rules but also to indirect legislation, entitling individuals to claim against a prejudicial application, even at the interpretative level;Footnote 13
(d) legal certainty also relates to the right to an effective judicial remedy and to a fair trial, since it requires a prior clear determination of the competent courtFootnote 14 or may preclude legislative changes which either curtail the period within which a legal action can be broughtFootnote 15 or interfere in pending judicial proceedings.Footnote 16
Consequently, if a degradation of the rule of law and other fundamental principles is present in the EU legal response to the crisis, as some authors have convincingly claimed,Footnote 17 an approach focused on the general principles of legal certainty and legitimate expectations may prove rather useful in order to explore the individual’s dimension.Footnote 18 However, legal certainty concerns seem to have played a very modest role so far. In my opinion, this may be traced to the legal framework where this response has, without serious objection, been anchored: the so-called emergency law.
Emergency law as a ‘mandatory’ legal framework
It is generally accepted that the EU faced an economic emergency, particularly in 2012 when the entire Eurozone was at risk. The events of spring 2015, when the Grexit became a too real possibility, proves that this risk has not been completely banished. It is submitted here that emergency law is the appropriate analytical framework for dealing with the EU response to this crisis for two main reasons. First, the economic and financial crisis has put the EU and its member states in a situation of necessity, i.e. the affirmation of the occurrence of a threatening situation for which no adequate legal means of reaction was foreseen, justifying then the articulation of a legal response through unorthodox but necessary means. This is the key trigger of emergency law.Footnote 19 Secondly, even if the current academic revival of interest in emergency law is largely driven by the post-9/11 securitised governments’ agenda defying constitutional values in liberal democracies,Footnote 20 economic emergencies are not strange to this analytical framework. Since the constitutional confrontation in economic emergencies is usually formulated and/or perceived in less dramatic terms,Footnote 21 they can easily be instrumental in different purposes, economic, political or other.Footnote 22 Thus, the emergency law framework dealing with the notion of necessity is still very useful for approaching critically this phenomenon in legal and constitutional terms, especially in legal systems built on the rule of law and normative Constitutions such as that of the EU and those of EU member states (Articles 5 and 7 TEU).Footnote 23
In an emergency context, the law accepts the ‘bending’ of the ordinary legislative process and the setting aside of individual rights if they are in conflict with the general interest. This overriding general interest is defined by executives endowed with expanded powers, while parliaments and judiciaries seem to show a generous leniency, at least during the emergency. It is a sort of a légalité élargie, both procedural and substantive, reflecting badly on the incisiveness of judicial scrutiny and democratic accountability.
This legal framework undoubtedly impacts on legal certainty and individual normative expectations, but it does not deprive them of any effect. For instance: (a) the activation of emergency law apparently alters radically every individual right or legitimate expectation based on previous legislation, but legal certainty may yet attract some limits as to the admissible derogations; and (b) increased executive powers rearrange the position of the individual vis-à-vis the exercise of public authority, suggesting the need to reassess whether individual guarantees (grounded in legal certainty) against the emergency legislation are still operational and respected. However, the analysis of these two aspects in EU law requires prior consideration of some specific features of EU emergency law that have been highlighted by the financial and sovereign debt crisis.
EU emergency law: between the constitutional and international approaches
Constitutional and international law adopt different approaches towards emergencies; and EU emergency law does not fit within either, which is not without its consequences. National constitutions’ regulation of emergencies is, even inside the EU,Footnote 24 too motley to allow us to deduce any categorial legal classification going beyond merely taxonomic purposes. What is constitutionally relevant to emergencies is the appearance of a threat to the very preservation of the ‘body politic’ that cannot be overcome by ordinary means, demanding instead a temporary adaptation that makes possible a swift and effective response capable of guaranteeing the continuance of the political system and a return to its regular functioning. Any analysis of this extreme situation is thus entirely dependent on an appropriate understanding of a concrete political system as a cultural, historical, legal, sociological and political phenomenon (similarities and differences might be taxonomic but not properly categorial). So, in constitutional terms, it is not about requiring a legal basis for reacting to the emergency (which implicitly derives from the preservation of the ‘body politic’), but about managing the reaction, with the understanding that this reaction itself might turn into a threat for that preservation (ending in a constitutional mutation).Footnote 25 The real issues are thus whether the legislative, the executive or a certain combination of both should rule this reaction ex ante; whether there are any uncrossable constitutional limits thereto; and what is the appropriate role for the judiciary before, during and after emergency law obtains.
In contrast, international law treats national emergencies as an excuse for non-compliance. This, sometimes described as a sovereign powers’ recovery, is the purpose of the escape, safeguard, derogation or flexibility clauses contained in most treaties. It is a more limited perspective, for it intends that international commitments (and, accordingly, normative expectations based thereon) do not hinder whatever steps the state needs to take to overcome the emergency, albeit under the discipline of the treaty itself. The international law approach presents two relevant differences from the constitutional one. First, the kind of emergency situation loses all importance compared to the legal basis issue. International law shows no obstacle in admitting minor emergencies (economic or other) or accepting different legal effects therefrom, provided that this flexible treaty regime has previously been agreed on.Footnote 26 Secondly, whereas the internal reallocation of powers is mostly irrelevant for international law, the limits laid down in a treaty assume greater importance, since emergency clauses do not aim at preserving the state but the treaty. Substantive limits appear in the form of non-derogatable treaty obligations or the application of principles, such as proportionality. Procedural guarantees aim at braking unilateral state action, pointing to the management and ultimate dominion of the conventional flexibility.Footnote 27
EU emergency law, for its part, shows a mixed situation between international and constitutional approaches. The EU Treaties contain several provisions in order to deal with potentially unexpected circumstances, entitling EU institutions to deal with them by extraordinary means (e.g. Articles 66, 78.3, 122 or 146 TFEU). These few clauses envisage, so to speak, ‘restricted emergencies’ and, in a very modest way, they follow a constitutional approach, where the Council’s prevalent position should be noticed. Contrarily, and rather naturally, the general EU law approach to emergencies has been (and still is) international in spirit, allowing a member state to escape from its EU obligations in certain extraordinary circumstances, but under close control by EU institutions. Although some of these clauses became obsolete and disappeared,Footnote 28 they still pervade the Treaties (paradigmatically Article 347 TFEU) and secondary legislation. The intense institutional control (and particularly the position of the European Court of Justice as the ultimate guarantor of respect for procedural and substantive limits) should not be confused with a constitutional approach. The fundamental idea here is that these more frequent emergency clauses do not endow EU institutions with more powers but, quite differently, they enable a Member State to escape from its EU commitments. This is the reason that, in EU law, finding a legal basis for the emergency measures and respecting the procedure and limits of the existing clauses become the crucial points.
However, the financial and sovereign debt crises have gone far beyond a national emergency, threatening the whole Eurozone and therefore the EU (an existential emergency). This has thrown the mixed nature of EU emergency law and its legal limitations into sharp relief. The single recovery of sovereign powers by a member state by itself could hardly be a solution capable of assuring the conservation of the common project. At the same time, the EU clearly lacks a comprehensive constitutional approach, the development of which involves institutional expanded powers and which seems extremely difficult in a system based on the principle of conferral. An example may illustrate this conundrum. Regarding the European banks’ rescue, the EU could neither have prevented a member state from going ‘Icelandic’ (or compelled it not to do so) nor have articulated a proper bank aids’ saving scheme with European funds; instead, the EU had to proceed to channel the concerted member states’ action through the ‘emergency clauses’ allowing for state aids that are deemed compatible with the internal market; that is, to permit member states to derogate from their obligations following the specific procedure set forth in the Treaties.Footnote 29
The hidden rise of the EU emergency law dimension throughout the crisis
The EU has reacted with a formidable redefinition of the rules governing the European Monetary Union on both private and public branches, affecting core parts of the internal market as well.Footnote 30 The noteworthy fact is that, except for the slight modification of Article 136 TFEU (unnecessary according to the Pringle ruling),Footnote 31 this legal redefinition has been done ‘without touching the Treaties’. However, this has not prevented EU law from allowing a significant increase of powers, both within the EU executive agencies and institutions and within the member states’ executives. This is a widely shared conclusion that has been endorsed by the European Court of Justice, without sufficiently emphasising the exceptional nature of those powers from an EU constitutional law point of view or attending to their problematic consequences for legal certainty. Four cases will be briefly reviewed with two purposes: (1) highlighting the emergence of these expanded powers; and (2) showing its repercussions on legal certainty and individuals’ expectations.
(1) Naturally, the Pringle ruling stands out in this context. This judgment saved member states’ competence to conclude the Treaty on the European Stability Mechanism, without finding any conflicting relation between financial assistance and EU excessive deficit rules. At the same time, the Court held that conditionality or an adjustment programme is not coordinating economic policies, but that they are the premises on which the compatibility of financial assistance and the bailout prohibition (in Article 125 TFEU) can be assessed in relation to the aim (pertaining to this coordinating competence) of guaranteeing the financial stability of the Eurozone as a whole.Footnote 32 Indeed, this controversial recourse to international law instrumentsFootnote 33 and the indeterminacy of the EU’s competence to coordinate member states’ economic policies have both proved to be the most useful legal tools in reacting to the crisis. From the perspective taken here, Pringle is important in three aspects. First, it approves what was probably the only solution for the conundrum of the legal basis of emergency law. Using an international law instrument solved the lack of EU competence and gave a legal ground for a concerted reaction encapsulating a rather imaginative solution for the emergency. (The state in receipt of financial assistance is in fact greatly deprived of the power to define its own economic policy instead of being allowed to recover its sovereign powers through getting rid of EU commitments). Secondly, it recognises the consequent emergence of executives’ expanded powers: (a) within the member states, by deciding outside EU law when assistance is needed for safeguarding the financial stability of the Eurozone as a whole (the Cypriot bailout is usually pointed to as a debatable case meeting this condition) and what economic coordination entails in that case; and (b) within the EU institutions, by endorsing that their heavy involvement in the process does not run against the institutional balance, because they are not entrusted with powers but only with ‘tasks’Footnote 34 . Thirdly and finally, by considering that this is a somehow ordinary non-EU law matter where the Charter does not apply and, correlatively, not the EU law general principle of legal certainty either, the European Court of Justice impairs both the identification of the substantive limits to this response and any questioning of its legal articulation.Footnote 35
(2) The ESMA judgment has opened a new avenue for European agencies’ regulatory powers.Footnote 36 The European Court of Justice has widened to EU agencies the so far relatively undifferentiated possibilities of Articles 290 and 291 TFEU, in what can be seen as a reformulation of the Meroni-Romano doctrine under the new rules of the Lisbon Treaty. The European legislature thus enjoys a rather wide discretion to entrust agencies, through secondary law, with extensive regulatory powers (no matter how normative or executive they are). The result is general and/or individual binding decisions, provided that they are subject to ‘conditions and criteria limiting their discretion’ and that there is some technical knowledge involved in it.Footnote 37 However, legal doctrine has pointed out that legal certainty concerns arise as to the official publication of those decisionsFootnote 38 and as to its judicial control.Footnote 39 But, more importantly from an emergency law perspective, the European Court of Justice has approved the use of an ordinary legal basis such as Article 114 TFEU for lifting implementation powers from the national level to the EU level, that is, for the replacement of national decision making with EU level decision making, as the Advocate General correctly puts it.Footnote 40 This is, admittedly, an exceptional situation, but anyway granting exceptional powers does not invariably require amending EU primary law or using the flexibility clause.
(3) The Banco Privado Português case dealt with the stronger role that the Commission has exercised regarding the controversial banking state aids based on letter (b) of Article 107.3 TFEU (‘serious disturbance in the economy of a member state’).Footnote 41 Here, the Commission has not engaged in its usual ‘negative’ use of power, banning a particular state aid because of its incompatibility with the internal market. Rather, it has acted in a rather positive managerial way, by setting conditions for its compatibility, linked to the future fulfilment of certain economic requirements.Footnote 42 The European Court of Justice has implicitly assumed that this managerial power naturally remains within the Commission, which additionally enjoys a wide discretion.Footnote 43 But above all the European Court of Justice has not considered that this expanded power may have an impact on individuals’ legitimate expectations, which are based on the very fact that public authorities abide by the law. Turning what is legally a conditional decision into a merely provisional one (a new type without further qualification of subsequent Commission’s competencesFootnote 44 ) blurs the obligatory effects of that decision for the State and shifts the consequences of the State infringement to third parties (other than the very bank involved). This ignores their legitimate expectations that the State will abide by this EU managerial law.Footnote 45 Although the legal context involved in the banking state aids of the Kotnik case differs from Banco Privado Português (it does not concern a state aid recovery but the binding legal effects and validity of the conditions set forth in the Commission Banking Communication), the recent Opinion of Advocate General Wahl represents a substantially diverse approach within the European Court of Justice, maybe one which initiates a trend.Footnote 46
(4) The OMT judgment, however, replicated the former picture. The European Court of Justice avoids any emergency feeling: the threat of a break-up of the Euro area seems unimportant for the reasoning of the Court, a selective State bonds purchase in the secondary market is as regular as any other means laid down in the Treaties for the European Central Bank to pursue the monetary policy aim of maintenance of price stability and no meaningful institutional connection with the ESM design or implementation is founded. The Court felt then no need to check the respect of the institutional balance, as Cruz’s Opinion rightly did,Footnote 47 but it underlined instead the broad discretion that the European Central Bank enjoys as to the fulfilment of the principle of proportionality and paid only lip service to the obligation to state reasons.Footnote 48 The link between legal certainty and the obligation to state reasons must be recalled here, as the proper fulfilment of this obligation is crucial to avoid arbitrariness and in assessing misuse of powers. This is especially so when the involvement of the European Central Bank in financial assistance implementation remains unrestricted (for example, in a case of rejecting state bonds as collateral in Emergency Liquidity Assistance requests unless a financial programme is being undergone or agreed). Additionally, the legal effects of European Central Bank press-releases remain uncertain, since it could be argued that, if they are liable to be declared void, they should also be capable of grounding legitimate expectations, which have been recently denied by the General Court in the Accorinti case.Footnote 49
It is suggested that some conclusions may be drawn from the somewhat cursory review just made. Even if EU emergency law has faced the limits derived from its mixed nature, it has shown a certain capacity to host expanded powers activated under extraordinary circumstances. Concerning its judicial scrutiny of this response, the European Court of Justice has given rather deferential treatment to the European executives (including member states’ governments), which is not at all odd in the context of an emergency. Probably a more straightforward and openly constitutional approach by the Court would have been beneficial, in order to acknowledge the exceptional nature of the power and better to identify its constitutional limits. Anyway, the appearance of those powers, their exercise (or how they are legally articulated) has not been without effect on individuals’ rights and guarantees that derive from the general principles of legal certainty and legitimate expectations. It is submitted that these have been too neglected by the Court. Exploring this impact further gains relevance because the legal challenge to those measures will mostly rely on individuals (and not institutions or member states) claiming that their rights have been breached.
Exploring the absent component in EU emergency law: legal certainty and legitimate expectations
Exploring this legal certainty dimension in EU emergency law is possibly the most pressing issue, since the European Court of Justice might turn out to be a rara avis inside the European judicial scene. Most constitutional and supreme courts have done it (i.e., explored this dimension) and, when dealing with executives’ expanded powers, they have ruled on the infringement of constitutional limitations, procedural (e.g. the Italian Constitutional Court) or substantive (notoriously the Portuguese Constitutional Court), even if affording governments a remarkable margin of appreciation (conspicuously the Spanish Constitutional Court).Footnote 50 The Court of Justice of the European Free Trade Association did nothing different about the Icelandic management of the banking collapse (Icesave saga);Footnote 51 and the same path was followed both by the European Court of Human Rights in the Koufaki and Da Conceiçao Mateus casesFootnote 52 and by the European Committee of Social Rights in several cases on Greek pension cuts.Footnote 53 Four kinds of legal certainty and individuals’ normative expectations concerns will be reviewed in this section.
(a) Predictability in legislation is probably the weakest point of the EU legal response. It should be recalled that legal certainty requires individuals to be able to ascertain unequivocally what their rights and obligations are.Footnote 54 Conversely, finding these rights and obligations is not an easy task since they seem to be scattered throughout different sources whose legal nature (international, European or national law) and legal effects (direct, indirect or none at all) are anything but clear. This is a major instance of legal certainty failure hardly compatible with the European Court of Justice case law.Footnote 55
Beyond the most disturbing cases of financial assistance,Footnote 56 the functioning of EU economic governance still raises legal certainty concerns as to its legal articulation. The extraordinary flexibility of the competence of coordinating member states’ economic policies has seemingly enabled the European Semester to be turned into a legal ‘chewing gum’. Its intricacy, reiteration and technicalities in procedures, diversification in obligations, decision-making anomalies and acts with ambiguous legal effects, not to mention the patchy regulatory framework, make it difficult to swallow.Footnote 57 The introduction of coercive fines or deposits in the macroeconomic imbalance procedure (in addition to the existing ones in the excessive deficit procedure) should probably change our assessment of the legal effects of previous stages and of the possibilities of contesting them judicially.Footnote 58
Memoranda of Understanding will be dealt with later; but, focusing now on Council decisions, their legal effects might prove to be indecipherable. The General Court has settled in ADEDY that Council Decision 2010/486 is not of direct concern to individuals, in a disconcerting way. More than justified on the wording of the Decision, what could be inferred from the General Court’s reasoning is that Council Decision 2010/486 is actually a directive.Footnote 59 If so, European Court of Justice case law should then apply to State discretion’s scope in attaining the obligatory result sought by the directive (meaning the Council decision); or in being directly actionable by individuals against wrongful transposition on the grounds of infringing legal certainty or legitimate expectations. Moreover, if an adjustment programme is not part of economic policy coordination or of EU law, but turns out to be binding because included in a Council decision, it would be arguable that we are here in an Oleificio Borelli reversed situation, opening the court doors.Footnote 60 Last but not least, legal certainty and legitimate expectations seem to be the proper legal approach to deal with the ongoing re-evaluation of the adequacy of national economic programmes that are translated into modified Council implementing decisionsFootnote 61 .
(b) The uncertain nature and effects of European Monetary Union legal acts reflects on an unpredictable judicial ‘volet’ making the determination of the right court in which to bring an action and the ascertainment of its chances of success very hazardous. Contending that litigation against those acts should be entirely brought in national courts does not give a complete answer, because it does not solve the question of what the legal framework is for ruling on them and how the preliminary reference should influence those national proceedings.Footnote 62 This issue is more important if we bear in mind that legal certainty standards in EU law and in national laws may well differ from each other (the scope of legitimate expectations is paradigmatic in this regard). So the determination of which standard applies, or prevails in case of conflict between them, retains its significance and so does the question of which court is competent.Footnote 63 The national-biased way in which the European Court of Justice has solved the question that the OMT preliminary reference concerned a press release and not a legal act illustrates this point. Instead of making the press release and the preparatory European Central Bank decision fit within the judicial review under Article 263 TFEU (as the Advocate General didFootnote 64 ), the European Court of Justice has conceded to the national judicial remedy system the power to decide what is challengeable in EU law, in a supposedly win-win answer for the European Central Bank and the German Constitutional Court, the Bundesverfassungsgericht: the European Central Bank’s preparatory decisions are safe unless the German Constitutional Court engages in preventive judicial protection.Footnote 65 So, it is up to other national judicial systems to provide them with this interesting tool.
(c) A third type of legal certainty and individual rights’ concerns come from what can be named the legally disjointed character of the EU legal response. The formal disconnection between the international law response (e.g. a Memorandum of Understanding) and EU emergency law clauses is not without legal consequences. This may be illustrated by Spain’s Deferred Tax Assets scheme applied to the banking sector. This ‘non-formal investigation’ originated in a Spanish MEP’s complaint.Footnote 66 Deferred Tax Assets’ qualification as state aids was really not very controversial, but there was no formal Commission decision affirming Deferred Tax Assets’ compatibility with the internal market. However, the Commission could hardly argue that it never knew about them, since Deferred Tax Assets were agreed in the Memorandum of Understanding.Footnote 67 So, if the content of the Memorandum of Understanding (despite the EU institutional involvement) remains outside EU law, it can never qualify as a legal defence. EU law should apply unaffected. Thus, Deferred Tax Assets should be declared unlawful aids and the recovery should follow unless it conflicts with EU general principles, including legal certainty and legitimate expectations. The very agreement laid down in the Memorandum of Understanding would apparently make a sound case on behalf of the Deferred Tax Assets’ beneficiaries, but the extremely small role that the European Court of Justice has granted legitimate expectations as to the prevention of the actual recovery would make any real chance of success disappear. Hence, the peculiar way in which this question has been resolved.Footnote 68
(d) Finally, the issue of fundamental rights’ standards is a critical one concerning the EU response to the crisis which has been extensively and very well analysed.Footnote 69 This response may be formulated in some cases as a material infringement of fundamental rights. It is, however, especially relevant to call attention to the fact that, dealing with social and economic rights, legal certainty and legitimate expectations play a crucial role in assessing whether a restriction thereof amounts to a disproportionate burden on individuals, as some Constitutional Courts and international human rights bodies have contended. For example, we know that the introduction of cuts in public wages and pensions, sometimes retroactively,Footnote 70 has been a commonplace in adjustment programmes. When individuals (neither institutions nor consenting States) contest those cuts, legitimate expectations may not question those measures as such, but they are still relevant. If the cuts are deemed permanent, retroactive, discriminatory or cumulative, legitimate expectations (alone or in connection with other fundamental rights) could prevent them from being applied or require a transitional period and/or regulation. The Portuguese Constitutional Court is extraordinarily illustrative in relation to both aspects: (a) the legal consequences that should be deduced from the international law nature of the EU response; and (b) the crucial role that legitimate expectations and fundamental rights play in the validity assessment of those measures. This was clearly stated in its landmark judgments 353/2012 of 5 July 2012 and 187/2013 of 30 April 2013.Footnote 71 The European Committee of Social Rights has been no less illustrative when ‘ruling’ on Greek pension cuts, finally holding: ‘as has been done by the Court as concerns the Convention, that any decisions made in respect of pension entitlements must respect the need to reconcile the general interest with individual rights, including any legitimate expectations that individuals may have in respect of the stability of the rules applicable to social security benefits. The Committee concludes that the restrictive measures at stake, which appear to have the effect of depriving one segment of the population of a very substantial portion of their means of subsistence, have been introduced in a manner that does not respect the legitimate expectation of pensioners that adjustments to their social security entitlements will be implemented in a manner that takes due account of their vulnerability, settled financial expectations and ultimately their right to enjoy effective access to social protection and social security’.Footnote 72
Nothing different should be inferred from the European Court of Human Rights case law which has established that legitimate expectations are pertinent and protected under Article 1 ECHR Protocol No. 1 (protection of property),Footnote 73 which is fully operational for pensions reductions.Footnote 74 So, even if the European Court of Human Rights afforded the State remarkable leeway (including when the measure sought to decrease public expenditure), this interference is not without limits since it cannot impose an excessive burden on the individual. In relation to its restraint, the Strasbourg Court considered the temporary duration and the extent of the cuts: ‘in the light of the exceptional and financial crisis faced by Portugal at the material time and given the limited extent and the temporary effect of the reduction of their holiday and Christmas subsidies, the applicants had not borne a disproportionate and excessive burden’.Footnote 75 Thus, the proportionate or disproportionate character of the burden borne by individuals is to be assessed on a case-by-case basis; and here legitimate expectations are key.
The problematic issue revisited: why are legitimate expectations and legal certainty working so ineffectively in EU law?
If the hypothesis contended here is correct and legal certainty or legitimate expectations are relevant in assessing the EU response to the crisis, the question of its so far very modest role should be addressed. As has been mentioned, legal certainty and legitimate expectations have succeeded in other judicial contexts such as some Constitutional Courts or the European Committee of Social Rights, but the European Court of Justice appears still to remain rather impervious to them. Furthermore, it may be surprising that so few significant cases (around a dozen) have so far reached the Court, bearing in mind this frankly impressive legal package.
Two factors may explain this situation: (a) a substantive dimension, concerning the identification of the standard of review of EU emergency measures; and (b) a judicial dimension, regarding the difficulties of individuals in accessing the European Court of Justice. Each of these factors poses different technical problems, but to a certain extent the legal issues involved in both coincide. I shall consider the substantive dimension now.
In constitutional and conventional settings, the identification of the standard of review is quite straightforward: the Constitution or the international treaty is the benchmark against which emergency measures’ legality must be appraised. Thus, the issue is referred to the respect of the legal requirements laid down in the constitution or in the flexibility clause and how broad should be the discretion allowed to governments by courts in the form of judicial self-restraint.Footnote 76 Consequently, that framework defines the scope of legal certainty as a ground for review. This picture is of course familiar to EU emergency law to a great extent and we have considered it in previous sections when contrasting some measures with EU primary law (such as cases regarding state aids and agencies’ regulatory powers). However, the peculiarities of the EU response have introduced a unique problem that seems to affect the legal benchmark definition, be it by pointing to somewhere else (mainly member states’ constitutions) or by simply ruling out the application of EU law. I should like to describe them briefly in the following as ‘the four traps’ and argue that they should not displace EU primary law as the benchmark for legality.
The conferral trap of conditionality
Conditionality seems to pose an insurmountable trap in terms of EU competence, directly affecting the standard of review. If the substantive conditions set out were always to be within the scope of EU competences, the need for conditionality would be very small, since the EU could always achieve the same result (the fulfilment of the condition) by exercising its powers. On the contrary, if the substantive conditions fall outside EU competence, when the member states concerned are honouring them, they are not implementing EU law. Hence, the apparently ineluctable consequence of excluding EU law as the standard of review.Footnote 77 This reasoning underlies the rejection by the European Court of Justice of several preliminary references.Footnote 78 The General Court is supposed to give a brand new answer to this question in the pending Sotiropoulou case, which is related to an action for damages brought against some Council decisions addressed to Greece (concerning some measures in the social security and pension system), on the grounds of breaking the principles of conferral and subsidiarity.Footnote 79
Without taking away from the theoretical importance of conditionality, this trap is not intractable. We should distinguish between two different points. First, the legal basis enabling the EU to resort to conditionality may be found without much ado. It is explicitly mentioned in the Treaty (Articles 122.2, 136.3 and 143.2 TFEU) and it would be implicitly compulsory by virtue of Articles 123 and 125 TFEU in cases of external financial assistance using EU institutions, as interpreted by the European Court of Justice in Pringle and OMT. It is thus not a ‘conferral’ but a ‘competence/task exercising’ issue, where the principles of subsidiarity and proportionality will have to be carefully assessed in the light of the need to respect the national identity clause in Article 4.3 TFEU. This is, of course, a fairly complex and delicate issue that cannot be solved by the (rather debatable) consensual origin of the conditions set out. Maybe the European Court of Justice should endorse the practical solution sometimes adopted: when the implementation of a concrete condition is subjected to specific constitutional procedures, member states are not compelled to set aside those procedures, any further difficulty being dealt with in terms of the loyal cooperation principle. This would avoid direct confrontation with constitutional orders and deal in a less complicated way with the extreme variety of those conditions in terms of concreteness (subsidiarity) and/or constitutional impact (national identity clause).Footnote 80
But, secondly and more importantly, and even without surmounting this conferral trap, the European Court of Justice should engage in the substantive assessment of the conditions in respect of EU primary law, in particular fundamental rights and the general principle of legal certainty. The European Court of Justice should strike down any measure encroaching on them without considering whether it is agreed on or indirectly compulsory by conditionality. The conferral trap is not inescapable for establishing the legality standard of review. International courts facing a somewhat similar problem have drawn a useful distinction between the scope of their jurisdiction (ultimately, Article 37 of the Treaty on the European Stability Mechanism, and Article 8 of the Fiscal Compact) and the law applicable in exercising it.Footnote 81 This solution can easily be imported into the EU legal system if the European Court of Justice is unable to state openly that EU law cannot impose conditions in violation of fundamental rights, no matter what the circumstances may be.
The international law trap
This issue has been almost invariably understood in conferral terms and has provoked all sorts of technical legal problems because its international law ‘parentage’ is, as C. Kilpatrick has insightfully analysed, fairly promiscuous.Footnote 82 Of course, Pringle is around: this is an international law matter which member states can put in place outside EU law as long as they abide by the latter. After the Two-Pack, however, this solution may no longer be applicable.Footnote 83 The conferral connection is confinable to the legal basis issue. The EU has no competence to put in place or set in motion a permanent stability mechanism, but there the conferral limitation ends. So, if member states’ implementation is completely outside the EU framework, Pringle’s ratio decidendi must fully apply as a legal barrier protecting the integrity of the EU legal system. However, when the states involve EU institutions or use EU law for its implementation, they are integrating by reference those legal instruments and institutional tasks in the EU legal systemFootnote 84 and consequently EU primary law must apply as the standard of review. This integration by reference is more visible when no conferral issue is at stake. Unlike in the Ledra Advertising case, in Florescu the European Court of Justice has been straightforwardly asked about the validity and interpretation of certain provisions enshrined in the Memorandum of Understanding agreed between the Commission and Romania in 2009.Footnote 85
It is hard to see the problem for the European Court of Justice in testing the validity of a Council decision implementing an adjustment programme or a Memorandum of Understanding referred to therein, whether this obtains under the European Financial Stabilisation Mechanism, the European Financial Stability Facility or the European Stability Mechanism umbrella or within a balance of payments programme.Footnote 86 How is it possible for EU institutions to perform any ‘tasks’ without abiding by the Charter or EU general principles?Footnote 87 This case law appears inconsistent and should be reversed. Holding that an adjustment programme is not an instrument for coordinating economic policies deserves the same fate.
Thus, as far as the legality benchmark is concerned, international law when integrated by reference into the EU legal system (and the Two-Pack should play in this direction) is nothing more than a trap. Surmounting it would additionally offer a useful tool to deal with the ‘disjointed nature’ of the EU legal response. It is worth noting that the content of the economic and political conditionality package is quite similar whether it is enshrined in Memoranda of Understanding, in Council decisions under the umbrella of an adjustment programme or in Council recommendations for correcting excessive deficits.
The indirect legislation trap
With regard to the determination of the standard of review, the question of indirect legislation is probably easy to answer and difficult to apply. At the same time, it assumes most importance in relation to legal certainty and individuals’ expectations, because it necessarily raises the question of double (EU and national law) standards.Footnote 88 The principle that EU legal acts (indirect as they might be) fall within the scope of EU primary law, including fundamental rights and legal certainty requirements, raises no doubts. That member states, when implementing this indirect legislation must abide by it, should not, either. A simple comparison of the reading of the EU legal norms involved in ADEDY and Åkerberg Fransson unambiguously proves how wrong a different conclusion would be. The question here is where to locate any infringement. As we have learned from the Area of Freedom, Security and Justice (particularly the old ‘third pillars’ acts), the European Court of Justice shows a somewhat contradictory two-fold trend: it feels inclined to reinforce the effectiveness of these indirect instruments but, at the same time, it usually places the burden of complying with fundamental rights and general principles on the implementing national law, refusing to admit that EU legislation has something to do with it.Footnote 89 This is something to be expected here, because indirect legislation in this field frequently incorporates safeguards, reminding us that the implementation of a measure must be in conformity with concrete acts of EU social law or a specific fundamental right (Article 28 of the Charter is invariably mentioned) or must be aware of its social impact on the most vulnerable groups.Footnote 90
However, as already mentioned, predictability in legislation is seriously lacking in this context and a decisive jurisdictional step to clarify this area is more than needed. Through a material assessment, the legal effects of Council acts (decisions, implementing decisions or recommendations that can lead to penalties if not followed) must be unambiguously defined, so that individuals may unequivocally ascertain their rights and obligations and take steps accordingly. Clarification of the hierarchically subordinate position of this extensive executive legal package in relation to any EU legislative act must also be introduced. Finally, the European Court of Justice should invariably keep in mind legal certainty requirements in order, for two reasons. First, to reinforce individuals’ legal defences by hardening a prejudicial interpretation and/or application of national law based on indirect legislation. Secondly, to soften its strict approach towards the emergence of legitimate expectations in the position taken by EU institutions, either in preparatory stages or in instruments with debatable legal effects, such as Memoranda of Understanding. Footnote 91
The Charter trap
It is not necessary to stress the influence of the three previous traps in blurring the centrality of the Charter as the legality benchmark in relation to fundamental rights. Pringle unequivocally asserts it. However, it should be kept in mind that, in so far as legal certainty is concerned and despite some relevant connections with the Charter (mostly Article 41, only applicable to EU institutions and bodies), the principle of legal certainty as such remains external to the Charter. Consequently, the operation of this EU general principle as a ground for review does not depend on the applicability of the Charter.Footnote 92 In addition, the Charter bears additional difficulties with regard to the rights most directly affected in this particular field. Except for Articles 17 (property rights), 25 (protection of the elderly) and 41 (right to a good administration), most of them are placed in Title IV on Solidarity, where the Charter clearly loses its force due to paragraphs 5 and 6 of Article 52Footnote 93 and relies on an already weakened EU social policy secondary law.Footnote 94 This makes a claim for breaching these Charter fundamental rights rather cumbersome, especially when considering the ultimately functional approach to fundamental rights adopted by the European Court of Justice and expressed in Siragusa with shocking frankness.Footnote 95
The judicial remedies dimension: the difficulties of accessing a reluctant Luxembourg court
This disputable standard of review of emergency measures acquires a different meaning when connected with the EU law judicial remedies system, because this legality review relies exclusively on national courts used as filters when it is based on the infringement of individuals’ rights and expectations.
As mentioned, governments and executive EU institutions are not prone to challenge new expanded powers given to them, so litigation coming from these privileged or semi-privileged plaintiffs is not to be expected.Footnote 96 For individuals, in contrast, this is mainly about their rights being overridden. Thus, legal certainty (including the protection of individuals’ expectations and rights) acts mainly as a shield seeking to protect them from unlawful measures and to compensate them for the damage caused. In this regard, the possibilities of individuals getting to the European Court of Justice are, as is well known, remarkably restricted and they have so far proved unsuccessful. Let us briefly review direct actions and preliminary references.
Concerning actions for annulment, the European Court of Justice has confined the application of the Lisbon Treaty’s new rules to an irrelevant occurrence.Footnote 97 It has excluded legislative acts in Inuit Tapiriit Kanatami Footnote 98 and has conditioned paragraph 4 of Article 263 TFEU to a complete absence of any implementing national decision, irrespective of the margin of appreciation left to national authorities, in Telefónica and T & L Sugars and Sidul Açúcares.Footnote 99 So, it is no surprise that all cases brought have failed to meet the direct concern requisite; and, although the non-legislative character of most of these acts is clear, by no means would they pass either the test of individual concern or that of the absence of implementing measures.Footnote 100
Actions for damages may offer a slightly better option. Unlike the Accorinti case, Sotiropoulou will apparently compel the General Court to present a fuller argument, although its odds of success in getting compensation are very low.Footnote 101 The interest still lies in whether or not the General Court will engage in a substantive assessment of the violation of EU primary law (Articles 1, 25 and 38 of the Charter and the principles of conferral and subsidiarity) before dismissing the damages claim. Or, alternatively, whether it will reject subsidiarity and conferral principles as rules intended to confer rights on individuals; and/or rely on the clear lack of direct causation to dismiss the plea avoiding any substantive assessment. The latter option, even if rather prejudicial to individuals fighting in national courts, would open an appeal to the Court of Justice that this time should be tried (unlike what happened in ADEDY).
The scant room for direct actions remits the bulk of the legality litigation to national courts. The consequences of this are far-reaching, in particular taking into account the blurring effect of the four traps mentioned. The fact that not many preliminary references have been sent to the European Court of Justice is not difficult to explain. The tremendous complexity of this legal labyrinth discourages lower courts from engaging in an arduous analysis capable of delivering a solid question, it being ultimately easier to place the case within the national legal framework and disregard any argument based on EU law.Footnote 102 If the European Court of Justice persists in showing no disposition to help lower national courts in this matter, this trend is expected to continue, although the Florescu case (mentioned above) gives the Court a new chance. Supreme and constitutional courts for their part have mostly taken a concomitant path, giving proof of their reluctance to admit any EU factor influencing the final decision because of the sensitive constitutional issues at stake, let alone through a preliminary reference, the result of which would tie their hands. Not only is this understandable (and applauded by some authors), but no doubt is partially justified by the retractile position that the European Court of Justice manifests. So, Constitutional Courts must rule in terms of strict constitutionality arguments with (currently justified) no concern about any European dimension whatsoever.Footnote 103 The result which we are now witnessing, however, is the complete disappearance of the EU law legality benchmark. Among the serious consequences of this disappearance, two in particular deserve careful attention: (a) if it is exclusively judged within the national framework, this entire EU response becomes legally unchallengeable to a substantial extent, be it in its legal articulation at the EU level or in those substantive limits that are not present in national laws; and (b) a serious risk to the autonomy of EU law and the central position of the European Court of Justice is legally grounded. These risks are by no means past. The compensatable nature of infringements of socio-economic rights runs parallel to national courts as the proper litigation channel. Thus, it defers in time the solution to a period when the emergency is not so compelling, incidentally explaining the common trait of courts’ backlash in emergency law.
Concluding remarks
The ‘legal certainty and legitimate expectations’ approach discussed in preceding paragraphs explores a somewhat neglected dimension of the EU legal reaction to the crisis. This allows us to focus on the individual’s dimension, which will channel most of the future litigation on this response, since its challenge by states or EU institutions is not (and has not been) likely or frequent.
This aspect has been analysed using the theoretical framework of EU emergency law, whose international and constitutional mixed nature has legally conditioned this response and has, by the same token, demanded the reassessment of the position of legal certainty within it.
With regard to the first point (its mixed nature), EU law has demonstrated a certain capacity to absorb expanded powers within the EU institutions without requiring the amendment of EU primary law (ESMA, Banco Privado Português or OMT). At the same time, the legal limits stemming from the principle of conferral have necessitated the articulation of a substantial part of this response, using international law and consequently diverting this task and those expanded powers towards member states’ executives (Pringle). In dealing with this legal response, the European Court of Justice has avoided a genuinely constitutional emergency law approach that, acknowledging the necessity for those exceptional powers, would have made possible a better identification of its constitutional foundations and limitations. Moreover, such an approach would have laid the ghost of the normalisation of those exceptional powers, which have to a considerable extent slipped into the apparently ordinary functioning of the EU in general and the European Monetary Union in particular.
With regard to the second issue, it has been argued that legal certainty and individual legitimate expectations should operate as substantive limits to this response, since the emergence of an expanded power rearranges the position of the individual vis-à-vis the exercise of public authority. But, more importantly, it has been contended that, in the current situation, serious concerns have arisen as to its proper place, such as those related to predictability in legislation and to its correlative judicial aspect, the consequences of its legally disjointed (or compartmentalised) character and its repercussions on fundamental rights.
Indeed, this substantive limit is blurred, if not missing altogether, in the European Court of Justice case law, because of four arguments the compelling force of which is rather debatable (the four traps) and facilitated by an EU judicial remedies system that substantially restricts individual access to the EU courts. As a consequence, the bulk of the litigation on this response has been driven towards national courts, particularly Constitutional Courts. The European Court of Justice, being aware of the political delicacy of the issue and the fragile foundations for a ‘constitutional’ approach to EU emergency law, has opted for remitting substantive judicial review to member states’ constitutional courts, whose institutional and legal positions are more deeply rooted. This result might be considered a rational choice, but it implies the absolute disappearance of EU primary law as a legality benchmark and places this litigation exclusively within the national legal framework.
This has, of course, far-reaching consequences. In the first place, the national legal framework is (and to a certain extent it must legally be) oblivious to the serious weaknesses in the EU law level, leaving this entire emergency response unchallenged. The impressive rhetorical power of this category interferes with the basic legal processes of adjudication and legislation, resulting in an enlarged judicial self-restraint and hasty decision-making delegations. This hides the political choices available and impairs the possibility of differentiating between the points at which ‘emergency’ begins and finishes. It consequently makes easier the perpetuation of the emergency powers by restraining the room for political (i.e. democratic) debate. This normalisation of emergency powers points to the EU constitutional arrangements themselves, threatening in the long term an undesirable constitutional transformation.
On the other hand, the risk to the autonomy of EU law and to the European Court of Justice’s central position remains. The problem does not lie in the application of constitutions’ catalogues of fundamental rights or of national standards of legal certainty (the coexistence of both national and EU standards in these fields is actually part of the system). The real risk hides elsewhere: giving that task to Constitutional Courts, only, facilitates a passage to a more dangerous version of the conferral trap, that is, the ultra vires act.Footnote 104
In addition, refusing to exercise any substantial control over member states’ reaction and EU institutions’ involvement therein is a powerful message to all European political and legal actors, because the entire system relies on the free will of every single State and, within the State, of any actors: governments, parliaments and constitutional courts. No less powerful is the message for European citizens, because this case law makes the distance between a legal decision and its subjective acceptability longer, reducing the legitimacy of the EU and weakening the position of the European Court of Justice with it.Footnote 105 It would be naïve to think that this space is not going to be occupied by other courts, be they constitutional or international, using the most powerful argument at their disposal: the protection of fundamental rights or basic principles rooted in the rule of law, such as legal certainty or legitimate expectations. The identification and application of these limits are an essential part of a constitutional legal system, unequivocally underpinned by Articles 2, 4 and 6 TEU. Without it, therefore, no serious claim of autonomy can be made.
For those reasons, the European Court of Justice should reconsider this choice and engage in the difficult, but not unfeasible, task of overcoming the four traps and construing a communicative framework which is flexible enough to affirm the centrality of both EU primary law and the Charter whilst preserving enough room for Constitutional Courts to apply constitutional rules. Furthermore, this is an undoubtedly cooperative enterprise and the European Court of Justice should reconsider its ‘communication policy’. The lack of institutional empathy towards Constitutional Courts or the European Court of Human Rights distilled in recent key pronouncements (from Melloni to OMT and Opinion 2/13) indicates a hostile pluralist environment that will not ensure any spontaneous common approach, making constitutional pluralism look as if it had never been anything but a charming scientific construct.Footnote 106 There appear currently to be some positive signs suggesting that the European Court of Justice might be disposed to reconsider this issue in the near future, such as avoiding answering preliminary references by order (Florescu) or assigning some appeals to the Grand Chamber (Mallis & Malli or Ledra Advertising). Wahl’s Opinion in Kotnik seems to point in the same, and better, direction, too. This is in itself a positive development, although the concrete outcome of this reconsideration is still awaited.
