Public Sector Purchase Programme Case
| Judge | Voßkuhle,Huber,Hermanns,Müller,Kessal-Wulf,König,Maidowski,Langenfeld |
| Court | Federal Constitutional Court (Germany) |
| Docket Number | (Cases Nos 2 BvR 859/15, 2 BvR 1651/15, 2 BvR 2006/15, 2 BvR 980/16) |
| Date | 05 Mayo 2020 |
Federal Republic of Germany, Federal Constitutional Court (BVerfG), Second Senate.
(Voßkuhle, President, Huber, Hermanns, Müller, Kessal-Wulf, König, Maidowski and Langenfeld, Judges)
(Cases Nos 2 BvR 859/15, 2 BvR 1651/15, 2 BvR 2006/15, 2 BvR 980/16)
Economics, trade and finance — European Monetary Union — Fiscal sovereignty — Public debt — Monetary policy — Economic policy — European Union — Asset purchase programme — Quantitative easing — Central banks — European Central Bank — European System of Central Banks — Bundesbank
Treaties — Treaty-making powers — Constitutional limitations on treaty-making powers — Transfers of powers by States to intergovernmental and other transnational authorities — Whether compatible with constitutional prerogatives of national parliament — Overall budgetary responsibility — Basic Law of Germany
International organizations — European Union — Powers — Member States as masters of the treaties — Principle of conferral — Whether Union having competence to determine or extend its own powers — Principle of subsidiarity — Court of Justice of the European Union
Relationship of international law and municipal law — European Union law — Interpretation — Application — Judgment of Court of Justice of the European Union — Weiss — Principle of proportionality — Whether application of EU law having absolute primacy — Whether German Federal Constitutional Court having absolute duty to follow judgment of Court of Justice of the European Union — Compatibility with Basic Law of Federal Republic of Germany — Openness of German Basic Law to European integration — Whether purchase programme ultra vires — Whether ultra vires acts applicable in Germany — Whether having binding effect in relation to German constitutional organs
Jurisdiction — European Union institutions — Whether jurisdiction of German Federal Constitutional Court extending to Court of Justice of the European Union and European Central Bank — Whether acts of EU institutions subject to national constitutional review — Ultra vires review — Review of core identity of national constitution — Whether application of EU law having absolute primacy — Whether absolute duty to follow judgment of Court of Justice of the European Union — The law of Germany
Summary:1The facts:—A total of 1,747 applicants brought four constitutional complaints before the Federal Constitutional Court (the “Constitutional Court” or “BVerfG”), which the Constitutional Court consolidated for joint adjudication. They challenged the constitutionality of the European Central Bank's Public Sector Purchase Programme (the “PSPP”), particularly the inaction of the German Federal Government, the Bundestag (German Parliament) and the Bundesbank (German Central Bank) concerning the PSPP. The European Central Bank (“ECB”) launched the PSPP on 22 January 2015.
At the time of the judgment, the PSPP was one of five asset purchase programmes of the ECB. In March 2020, the ECB added the 750 billion Pandemic Emergency Purchase Programme. At the end of April 2020, the PSPP accounted for approximately 81 per cent of the total volume of these programmes. Its size of 2.7 trillion euros was equivalent to approximately 15 per cent of Eurozone GDP. Nine applicants also challenged the ECB's Corporate Sector Purchase Programme which the Court reserved for separate decision by order dated 20 January 2020. Both that Programme and the PSPP were part of the Expanded Asset Purchase Programme (“EAPP”) which consisted of four asset purchase programmes.
The PSPP involved Eurosystem central banks purchasing government securities of euro area Member States on the secondary market. The legal framework for the programme set out eligibility criteria, including maturity (1–30 years) and issuer creditworthiness, although the ECB could waive this requirement for euro area Member States with financial assistance programmes. Moreover, purchases were limited to 33 per cent per security identified by International Securities Identification Number (“ISIN”). National central banks (“NCBs”) accounted for more than 90 per cent of purchases. The ECB bought the remainder of the securities. NCBs purchased according to the ECB capital key. Limited exceptions apart, NCBs only purchased securities of their own governments. The Bundesbank accounted for about one quarter of the total securities.
From March 2015 to March 2016, EAPP purchases of eligible securities averaged 60 billion euros. In April 2016, the ECB modified the programmes to increase monthly purchases to 80 billion euros until March 2017. In
December 2016, the ECB extended the time frame for purchases until the end of 2017. From April 2017 to December 2017 purchases were 60 billion euros per month. From January 2018 to September 2018 monthly purchases amounted to 30 billion euros. In September 2018, the ECB reduced monthly purchases to 15 billion euros for the period October 2018 to December 2018. In December 2018, the ECB ended new purchases with effect from the end of 2018. It also decided to reinvest the principal of maturing securities with no end date. In September 2019, the ECB restarted purchases as from November 2019 at 20 billion euros per month.The applicants argued that the decisions of the ECB that established the PSPP were ultra vires under the German Basic Law (the Grundgesetz, “GG”). German constitutional organs, including the Bundesbank, could play no part in their implementation. They also alleged that the PSPP breached the prohibition of monetary financing in Article 123(1) of the Treaty on the Functioning of the European Union, 2007 (“TFEU”)2 as well as the principle of conferral in Article 5(1) of the Treaty on the European Union, 1992 (“TEU”),3 and were incompatible with German constitutional identity in so far as they limited the Bundestags overall budgetary responsibility.
Premised on the ECB having exceeded its mandate for monetary policy, the applicants focused on the inaction of the German Federal Government, the Bundestag and the Bundesbank. They contended that as part of their responsibility for European integration (Integrationsverantwortung) that Government and Bundestag were bound to take steps for the repeal or the discontinuance of the PSPP, to prevent the implementation of these two programmes in Germany, or to limit, to the greatest extent possible, their impact in Germany. Nine applicants challenged the continued participation of the Bundesbank in the PSPP. Three applicants also requested a declaration that the judgment of the Court of Justice of the European Union (“CJEU”) in Weiss4 was inapplicable in Germany as an ultra vires act.
The Constitutional Court invited various institutions to make submissions. It only received a submission by the Federal Government, and statements in response to the Court's questions by the Bundesbank and the ECB prior to the oral hearing. However, the ECB chose not to participate in the oral hearing.
The Federal Government maintained that the complaints did not implicate the right to vote guaranteed in Article 38 of the Basic Law. There was no risk for the federal budget, and no manifest excess of powers by virtue of the ECB decisions that established the PSPP. The Bundesbank rejected the allegation that the PSPP distorted the sovereign debt market by harmonizing yields across issuers. Instead, yields had fallen across all issuers because of the PSPP. In its answers, the ECB relied only on information in the public domain. It emphasized the deliberate ambiguity for market participants under the PSPP as regards issuer, timing and volume of asset purchases, the separation between risk management and operational decision-making on asset purchases, and the absence of market distortions for specific issuers.
On 18 July 2017, the Constitutional Court suspended its proceedings and referred the following questions to the CJEU for a preliminary ruling:
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(1) Did the legal framework for the PSPP and the waiver on the eligibility of Greek debt securities breach Article 123(1) TFEU?
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(2) Did the relaxation over time of the conditions applicable to the PSPP breach Article 123(1) TFEU?
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(3) Did the PSPP's significant effect on borrowing costs of euro area Member States breach Articles 1195 and 127 TFEU6 because the ECB exceeded its mandate for monetary policy? Did the ECB pursue an economic policy objective with the PSPP? Did the PSPP's strong economic policy effects breach the principle of proportionality? (The BVerfG underscored the lack of a specific statement of reasons by the ECB in support of the PSPP, and the resulting impossibility of assessing the need for the PSPP and its proportionality).
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(4) Did the volume of purchases and the two-year implementation of the PSPP, with the associated economic policy effects, affect the need for the PSPP and its proportionality?
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(5) In case an EU Member State defaults, did the sharing of risks between national central banks that the PSPP's legal framework potentially provides for breach Articles 123 and 125 TFEU?
In its judgment of 11 December 2018 (Weiss and Others, Case C-493/17), the Grand Chamber of the CJEU found that the ECB had not exceeded its monetary policy mandate. The fifth question on risk sharing was inadmissible because it concerned a hypothetical question.
Concerning the ECB's duty to state reasons pursuant to Article 296 TFEU,7 the CJEU emphasized that due to the ECB's broad discretion procedural safeguards were crucial. For measures of general application such as the PSPP, this duty did not require an examination of every relevant point of law or fact, but merely a clear statement of the essential objective. This was to be assessed by reference to the context and all applicable rules. The CJEU found that the ECB decisions on the PSPP, together with various other documents that the ECB published, met this standard.
As regards monetary and economic policy, the CJEU underscored the...
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