Alexander Arabadjiev[1]


The editorial article is intended to inform the Review’s readers on the draft Treaty on stability, coordination and governance in the Economic and Monetary Union, finalized on 30 January 2012 and to be signed in March.

The article refers to the volume 1(2011) of the ETR presentation of the rescue package which comprises Regulation No. 407/2010 of the Council, based on Article 122(2) TFEU on the European Fi­nancial Stabilization Mechanism(EFSM), the European Financial Stability Facility(EFSF), founded as a special Purpose Vehicle un­der Luxembourg law and the European Stability mechanism(ESM) seeks to evade the ad hoc quality of the emergency measures. It is/ has been specified that the creation of the ESM has been enabled by the new Article 136(3) TFEU inserted by a Treaty amendment fol­lowing a simplified revision procedure under Article 48(6) TFEU.

A brief reference has also been added as to the legal doubts that have been expressed as to the compatibility of the rescue packages with important provisions of the TFEU and the no bail-out clause contained in Article 125(1) of that Treaty, in particular.

In the run-up to the December 2012 European Council the need for measures leading to a „closer fiscal union“ based on en­hanced commitment to budgetary discipline and economic policy coordination, including strengthening of preventive measures and sanctions which went beyond the existing legal framework, was seen as vital for the survival and for the future of the economic and monetary union. Of the three main options for achieving that goal that emerged – to replace Protocol No on the excessive budget procedure on the basis of the existing revision procedure under Ar­ticle 126(14) TFEU; amendments to the existing Treaties, using the ordinary or simplified revision procedure contained in Article 48 TFEU and, thirdly, adoption of a treaty under international law which would stand outside the existing legal framework- the final option was resorted to.

Agreed at the December 2011 European Council, the Treaty on Stability, Coordination and Convergence in the Economic and Monetary Unionis intended to be an intergovernmental treaty which stands outside existing EU legal framework. The agreement is actually among the eurozone countries, together with any other Member States(apart from the UK and the Czech Republic) that wish to participate.

The article does not aim to provide a detailed account of the substantial provisions of the draft treaty and the extent to which these overlap with the EU’s own competences. In this respect the text only signals the risk of duplication and inconsistencies.

The fundamental obligation placed on member states by the com­pact is to achieve and then maintain a budgetary position which is balanced or in surplus (Article 3, paragraph 1, a) of the draft). This new „fiscal compact“ includes enshrinement of the commitment to a balanced central government budget in national law „through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary procedure“(Article 3, paragraph 2 of the draft Treaty). The Contracting Parties shall also put in place an automatic correction mechanism in the event of deviation.

It will hardly be an overstatement to say that the most impor­tant legal concern raised by the draft treaty lies in its relationship with EU law. In this respect, already the preamble expresses the intention of the Contracting Parties to incorporate its provisions as soon as possible into the Treaties on which the European Union is founded. This commitment is directly reflected in Article 16 which envisages that within five years -at most- of the treaty’s entry into force, on the basis of an assessment of the experience with its im­plementation, the necessary steps will be taken, with the aim of incorporating its substance into the legal framework of the Union.

On the other hand, it should be pointed out that the draft treaty seeks to give a clear message that it builds upon the EU Treaties. Ti­tle Il(“Consistency and Relationship with the Law of the Union“) specifically proclaims that the treaty will be applied in conformity with EU maw, shall only apply insofar as compatible with EU law and shall not encroach upon the Union’s competences to act in the area of the economic union.

The editorial article focuses on one of the objections raised in the course of the drafting process, namely the prospect of using Union institutions for the purposes of non- Union agreement. The role of the Commission and of the Court of Justice in the imple­mentation of the compact is regarded as crucial for stren of preventive measures and sanctions.

The draft confers jurisdiction upon the Court of Justice as re­gards compliance with the Contracting Parties’ obligation to en­shrine the commitment to a balanced central government budget into national law at „preferably“ at constitutional or equivalent level. The preamble to the draft specifically states that the provision (Article 8, paragraph 1) is based upon Article 273 TFEU, according to which the ECJ 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 of the parties.“ While paragraph 3 of Article 3 of the draft specifies that „this article constitutes a special agreement between the Contract­ing Parties within the meaning ofArticle 273 TFEU“, it is disput­able whether the relevant provisions of the draft agreement do not formally have the character of Union law and cannot, therefore, be considered to fall directly within the subject matter of the Treaties. Recourse should be had, therefore, to a broader interpretation of Article 273 TFEU, given the fact that most of the relevant provi­sions of the draft Treaty actually share a policy relationship with the system of economic coordination provided for under the TEU and TFEU. In this regard, the Editorial comments refer to the ju­risdictional provisions of the EFSF Framework agreement but does not examine precedent already set up by other international agree­ments which could, eventually be followed.

The drafting history of the text agreed upon on January the 30th 2012 notwithstanding, the text that is being discussed carefully avoids implication of the Commission at the stage directly related to bringing an action for an alleged infringement of Article 3(2) before the ECJ. Insofar as Article 273 TFEU seems to envisage only actions between Member States excluding thus the possibil­ity of standing for other institutions, Article 8(1) of the text under discussion provides that the „matter“ will be brought to the Court of Justice of the European Union by one or more of the Contract­ing Parties. Normally, according to the first two sentences of Ar­ticle 8(1), this action will be preceded by a report presented by the Commission, where it, after having given the Contracting Party concerned the opportunity to submit its observations, concludes that the Contracting Party concerned has failed to comply with Article 3(2). A Contracting Party may also bring the matter before the Court of Justice following its own assessment, independently of the Commission’s report. Article 8(2) provides that if, on the basis of is own assessment or of an assessment by the European Commis­sion, a Contracting Party considers that another Contracting Party has not taken the necessary measures to comply with the judgment of the Court of Justice, it may bring the case before the Court of Justice and request the imposition of financial sanctions. The sanc­tions that the Court may impose are a lump sum or a penalty pay­ment that shall not exceed 0,1 % of the GDP of the Contracting Party concerned. It is to be noted with regard to the sanctions that the request for their imposition is to follow the criteria established by the Commission in the framework of Article 260 TFEU. While this reference may be considered as another example of alignment of the draft Treaty with Union law, it should be reminded that the Court of Justice is not bound by the proposals which the Commis­sion makes on the basis of the criteria which it has established.

Finally, it should be added that any commentary on the impli­cation of the Court of Justice in the implementation of the draft Treaty may prove to be premature so long as, as indicated in the Communication by euro area Member States of 30 January 2012, a further arrangement is to be decided in the mean time about the procedure to be followed to bring to the Court of Justice a case of non- compliance with the (draft) Treaty.

According to the Communication by euro area Member States the treaty represents „…a major step forward towards closer and ir­revocable fiscal and economic integration and stronger governance in the euro area.“

The present editorial article insists, in conclusion, on the need for a closer scrutiny of the implications of the adoption and im­plementation of the envisaged treaty on Union’s political and legal order and for a (re-) orientation towards the core principles of Eu­ropean Union law.


[1] Judge at the Court ofjustice of the European Union, President of the Bulgarian Association for European Law.