Karlsruhe’s ultra vires ruling: How did Europe’s legal equilibrium unravel?

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A lot has been written on the recent German Constitutional Court ruling on the PSPP. Does the bomb that the German Court dropped on the EU legal order last week, represent a shift in judicial ideology or in German attitudes towards EU membership or rather a breakdown in judicial dialogue? Prof. Dr. Arthur Dyevre explains.

Two weeks after the German Constitutional Court issued its momentous ruling on the PSPP (the ECB’s quantitative easing scheme), commentators are still wondering what kind of bomb the German Court has just detonated. Will the blast bring down the Euro along with the European Union? Or will a makeshift arrangement of some sort allow the EU to kick the can down the road and muddle through, at least until the next crisis flares up (that would be déjà vu)? Whether the ruling ends up triggering a much-feared thermonuclear chain reaction marking the end of the European project will depend in large part on the response of other EU and German institutions and their ability to persuade the judges in Karlsruhe that the PSPP meet their exacting proportionality test.

Yet, even if the frantic efforts to find a way out of the hole dug by the ruling were to succeed, there is no doubt that, by pronouncing the Weiss ruling of the Court of Justice an ultra vires act, the German Court has already caused considerable, and possibly irreversible, damage to the authority of EU law. True, top courts in other member states – notably the Czech Republic – have made similar pronouncements in the recent past. But this is not just any constitutional court. This is the German Constitutional Court we’re talking about, Europe’s only judicial superpower (beside the Court of Justice).

Within its political system, the German Constitutional Court commands a level of authority unparalleled in any other country in the world. Whatever it says carries the weight of Germany’s economic and political clout. And, for that reason, its rulings attract international and pan-European media attention like no other judicial body, save for the Court of Justice. In part because German lawyers and judges are supposed to embody the tradition of the Rechtsstaat, the PSPP ruling carries great symbolic significance, legally as well as politically, not least, of course, in the places – like Hungary and Poland – were governments have openly defied the EU’s basic values and principles. The influence of the German Court beyond its borders is attested by the fact that several apex courts, from the Danish Hojesteret to the Czech Constitutional Court, have imported its doctrines, including the ultra vires doctrine it first spelled out in its Maastricht judgment, into their own case law. So a domino effect, with devastating consequence for the effectiveness of EU policies, is a real possibility.

The Court’s shifting rhetoric

But what motives could possibly have spurred the German Court to make such a move? As is well known, the German Court has ruled on the place of EU law in the German legal system on many occasions. To illustrate the Court’s shifting stance towards the EU and compare the rhetoric of the PSPP ruling to that of its predecessors, I ran a Latent Semantic Analysis of the text of these landmark rulings starting with the Court EEC ruling in 1967 and including dissenting opinions (but I made sure to remove the parties’ arguments before running my computer script). The algorithm examines how word usage differs across rulings and assigns them scores reflecting how word usage and documents diverge. The first plot below shows, for a handful of selected words, how distinctive these are of certain rulings (compared to the average for the 26 opinions), whereas the second plot depicts the resulting ranking of the rulings.

Not surprisingly, words like “sovereignty” (Souveränität), “sovereignty of the people” (Volkssouveränität), “constitutional identity” (Verfassungsidentität), “enumerated powers” (Einzelermächtigung) and “ultra vires” are more closely associated with the Court’s more Eurosceptic judgments, like Maastricht and Lisbon, whereas “duty to refer” (Vorlagepflicht), “direct” (unmittelbar), “effect” (Wirkung), “export” (Ausfuhr), “good” (Ware) are more closely associated with integration-friendly rulings, like Kloppenburg, Banana or Lütticke. Based on the variation in word usage (all words occurring in the judgments, not just the ones displayed in the first plot) and assuming that the first dimension of the model measures Europhilia, the PSPP ruling clearly scores as the most Eurosceptic ever. While it borrows much from the state-centric sovereignty rhetoric of prior Eurosceptic rulings like Maastricht and Lisbon, it also emphasises what the economist and Financial Times columnist Martin Wolf has characterised as a “litany of conservative concerns”: public debt (Staatsverschuldung), personal savings (Sparguthaben) and pension and retirement schemes (Altersvorsorge). These are themes that indubitably find a strong echo in large sections of the German public, in a country known for its high saving rate, quasi-religious fear of inflation and staunch adherence to rigid monetary policy.

Change in judicial ideology or breakdown in judicial dialogue?

Looking at the evolution of the Court’s position on European integration up to 5 May 2020, what is striking is that the Court has alternated EU-friendly and EU-less-than-friendly rulings but with a trend towards increasing defiance since the mid-2000s. In 2014, the Court submitted its first-ever request for a preliminary ruling to the Court of Justice regarding another ECB’s bond-buying scheme – the Outright Monetary Programme (OMT). Yet, the language of the reference was itself emphatically defiant, foreshadowing the decision on PSPP.

One way to rationalise the trajectory and occasionally abrupt shifts in the German Court’s evolving case law has been to conceptualise its relation with the Court of Justice in terms of a pacific coexistence equilibrium in which the two courts accommodate each other’s red lines by trading issues across time. In this view, the Eurosceptic rhetoric and ultra vires threats served to signal the importance the German Court attached to an issue, inviting the judges in Luxembourg to exert greater restraint. The prospect of mutually assured constitutional destruction acted as a strong incentive to seek judicial dialogue, thereby guaranteeing the non-compliance threat would never be put to execution.

Although some scholars dismissed the German Court as a dog that barks but never bites, there was some evidence that the Court of Justice paid attention to the warning shots coming from Karlsruhe. It articulated new EU fundamental rights in response to the first Solange judgment and seemed to hold back its activist impulse after the Maastricht ruling. While actively bargaining with the Court of Justice over the terms of further integration, the Karlsruhe judges made sure, by announcing (in Kloppenburg) a constitutionally enforceable right to one’s “natural judge”, that other German courts behaved as rule stickler when it came to referring questions to the European Court. German courts, including its five supreme courts, effectively became the most reliable purveyors of preliminary references. As integration deepened, the warning shots turned more frequent. But all this could be viewed as part of the same implicit deal.

However, there were conditions for this equilibrium to be sustainable which may point to possible explanations for the PSPP ruling. One condition was that the two courts would attach greater benefits to long-term cooperation than to an escalated conflict in the short run. Maybe the judges sitting on the Court have become more sceptic of the long-term benefits of European integration. Both Gertrude Lübbe-Wolff and Michael Gerhardt, who wrote dissents in the OMT case, left the Court in 2014. These departures may have affected the Court’s ideological centre of gravity. Or maybe growing public disaffection with the EU in Germany has lowered the costs of an escalated war with EU judges. By choosing a narrative championing the interests of German savers and tax payers, the Court has made it hard for German politicians to evade the consequences of its ruling. By grounding much of its reasoning into the Constitution’s eternity clause, the Court has also shielded it against any attempt to override it through a constitutional amendment.

Paradoxically perhaps, another condition for this legal equilibrium was the belief that the German Court would be willing to press the big red button in case the Court of Justice would unilaterally deviate from the equilibrium path. As in the Cold War, deterrence credibility guaranteed that peace would prevail. It could be that, at some point – maybe in Weiss or Gauweiler – the Court of Justice started to doubt this premise and to treat the German ultra vires threats as mere bluff. If so, then the Court of Justice may have been the first to deviate from the normal equilibrium path of play. This, in turn, suggests that the bomb that the German Court dropped on the EU legal order last week reflects a breakdown in judicial dialogue, rather than a shift in judicial ideology or in German attitudes towards EU membership.

It cannot be excluded that a form of judicial dialogue will be restored. But that is likely to be under terms and in an equilibrium much less favourable to the Court of Justice and to the authority of supranational rule-makers.

Arthur Dyevre is a Professor in the Centre for Legal Theory and Empirical Jurisprudence at the Leuven Centre for Public Law (KU Leuven) and Principal Investigator of the ERC-funded EUTHORITY Project.

Arthur DYEVRE, "Karlsruhe’s ultra vires ruling: How did Europe’s legal equilibrium unravel?", Leuven Blog for Public Law, 15 May 2020, https://www.leuvenpubliclaw.com/karlsruhes-ultra-vires-ruling-how-did-europes-legal-equilibrium-unravel (geraadpleegd op 17 January 2022)

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