Law of the EMU and euro

Public Security Exceptions under Economic and Monetary Union

A short while ago the European Banking and Financial Law Journal published my paper on EU Member State’s power to invoke – or not – Article 297 of the EC Treaty to derogate from EC Treaty provisions regarding European Economic and Monetary Union. The abstract may be found below.

 

Atilla Arda, “Public Security Exceptions under Economic and Monetary Union – A legal analysis of invoking Article 297 EC to derogate from EC Treaty provisions regarding European Economic and Monetary Union”, European Banking and Financial Law Journal (Euredia), p. 221-261, 2006/2

 

Abstract

This contribution explores public security exceptions that may be invoked within the framework of Economic and Monetary Union (EMU). The analysis is centered on Article 297 of the EC Treaty, which principally entails a sweeping derogation capable of authorising the temporary suspension of all of the ordinary rules governing EMU in the event of serious threats to Member States’ internal and external security.

 

The analysis shows that Article 297 has to be seen as a last resort. A too-easy invocation of this provision would diminish the importance of several principles of Community law and impair the binding nature of Community law and its uniform application and judicial review.

 

Based on Article 297, a Security Exceptions Roadmap is constructed and applied to the EC Treaty’s EMU Chapter. It is concluded that although Article 297 is in principle applicable within the context of EMU, it is very hard for Member States to invoke Article 297, especially where the “M” part of EMU is concerned.

 

To stress the Community’s preparedness in the face of security threats, it is submitted that the Community may consider adopting a “Regulation on Economic Emergency Powers”, setting out in advance the substantive and procedural provisions according to which emergencies will be handled.

ECB independence still unresolved under EU Reform Treaty

The legal experts preparing a EU Reform Treaty have finalized their work. However, several political issues remain unresolved. One of these issues is the European Central Bank’s independence and institutional position.

 

After the French and Dutch ‘No’, Mr. Ben Bot, the former Dutch Foreign Minister, declared the European Constitution dead. Subsequently, a new Intergovernmental Conference (IGC 2007) was organised, to “draw up a [Reform Treaty] amending the existing [EU and EC] Treaties with a view to enhancing the efficiency and democratic legitimacy of the enlarged Union, as well as the coherence of its external action” (see the IGC’s mandate).

 

However, the ‘constitutional project’ was not entirely abandoned, as evidenced by the IGC’s mandate: “the Reform Treaty will introduce into the existing Treaties … the innovations resulting from the 2004 IGC”.

 

One of such innovations was the Constitutional Treaty’s attempt to classify the ECB as “an institution” (Article I-30(3)), albeit not as one of the five main institutions listed in Article 1-19: European Parliament, European Council, Council of Ministers, European Commission and Court of Justice of the European Union. Consequently, the ECB was not intended to be part of the EU’s “institutional framework”.

 

Instead, the ECB was placed under the heading ‘The Other Union Institutions and Advisory Bodies’. This underlined the ECB’s link with the EU’s institutional framework, while preserving its independence.

 

However, the first draft of the Reform Treaty (July 2007) classified the ECB as one of ‘the Union’s institutions’, together with the five main institutions mentioned above. This may bring the ECB under more political scrutiny.

 

Consequently, the ECB wrote the Portuguese presidency of the Council of the EU, reiterating what was agreed by the 2004 IGC. Moreover, the ECB requested references in the Reform Treaty both to the ECB and the European System of Central Banks (ESCB).

 

Today the ‘final’ draft of the Reform Treaty is published. Neither of the ECB’s requests is taken on board by the legal experts of the IGC 2007. So, this issue may well be followed up in the political arena on October 18 at the summit in Lisbon.

 

For an academic discussion of the ECB’s institutional position see the following two recent papers, authored by Chiara Zilioli and Martin Selmayr:

• ‘The Constitutional Status of the European Central Bank’, Common Market Law Review 44: 355-399, 2007
• ‘Recent Developments in the Law of the European Central Bank’, Yearbook of European Law 2006, 1-89 (link to my blog on this paper)

For a simplified explanation of the July draft Reform Treaty see the BBC website:

• The draft EU Reform Treaty – minus the euro-legalese (link)
• Q&A – The Reform Treaty (link)

 

Malta: the 14th star of the euro area

Malta is going to adopt the euro on 1 January 2008. As final preparations get under way for the transition, the National Euro Changeover Committee and the Central Bank of Malta, in co-operation with the European Commission and the European Central Bank, organised a high-level international conference entitled “EMU Governance & Euro Changeover: Malta on the path to the euro” in Valletta on 1 October 2007.

 

And the day before this conference the ECB and the Central Bank of Malta (CBM) launched their joint communications campaign for the euro changeover in Malta.

 

The ECB website has published the speeches of its President, Jean-Claude Trichet, during these events:

• The process of European economic and financial integration
  (October 1)

• Welcome Malta! (September 30)

The welcome address by the Governor of the CBM, Michael C Bonello, at the conference may be found on the CBM website.

 

The Malta Independent Online covers the speeches of the other speakers.

 

Photo: To mark the launch of the joint communications campaign for the euro changeover in Malta, Michael C. Bonello, Governor of the Central Bank of Malta, and Jean-Claude Trichet, President of the European Central Bank, unveiled euro banners on the façade of the Central Bank of Malta’s main premises in Valletta. Mr Trichet also presented the 14th “Euro Star” to the Central Bank of Malta, a memento that is offered to each new member of the Eurosystem.

Recent Developments in the Law of the European Central Bank

Over a decade ago, in 1994 to be more precise, the European Monetary Institute (EMI) was established to strengthen central bank co-operation and monetary policy co-ordination in the European Union. Four years later, in 1998, the EMI was replaced by the European Central Bank (ECB) that is at the heart of the European System of Central Banks (ESCB). In 1999 the euro, Europe’s single currency, was officially introduced, although euro banknotes and coins were not issued until 2002.

 

Both from a political and legal perspective the last decade was a fascinating time for anyone who is interested in European integration, in particular the integration of central banking and the development of the European Economic and Monetary Union (EMU). I think many of the readers of lawofemu.info will share my appreciation for Chiara Zilioli and Martin Selmayr’s undertaking to publish a comprehensive paper on the ‘Recent Developments in the Law of the European Central Bank’ (Yearbook of European Law 2006, Oxford University Press).

 

In 89 pages they cover a lot of ground, they address the ECB’s legal status, the European Court of Justice’s landmark OLAF judgment, the consequences of the European Constitution – although politicians would not want us to refer to it by that description – for the ECB, the relationship between the ECB and the national central banks that are an integral part of the ESCB, the new decision-making process in the ECB (the so called rotation voting scheme), the Eurosystem and the ECB’s role in international relations.

 

The authors – Zilioli, Head of the Legal Advice Division in the DG Legal Services of the ECB, and Selmayr, spokesman of European Commissioner Viviane Reding and Director of the Centre for European Law at the University of Passau – make also use of this paper to debate with some of the learned writers who have disagreed with their views laid down in previous publications, which makes this paper also an important part of the academic discourse on fundamental issue concerning the EU in general and EMU in particular.

 

Moreover, if you are interested in a bibliography on EMU law or post-graduate courses on EMU law, this paper is a must read as well. And the good thing is that this new Zilioli/Selmayr paper is available online. Please visit the OUP website or the Reading Room at lawofemu.info for your free copy.

European leaders: "Cyprus and Malta can join euro area"

Yesterday European leaders decided that Cyprus and Malta can join the euro area on 1 January 2008. The final approval, though, will come from the European finance ministers, the ECOFIN Council. They are set to meet on July 10.

The European leaders’s decison follows a supporting resolution by the European Parliament.

While there was overwhelming support for the applications from Cyprus (585 in favour, 14 against) and Malta (610 in favour, 12 against), MEPs were concerned that the timetable they were being asked to follow in adopting their opinion was too short.

To avoid this happening in future, they adopted - by 552 votes in favour to 37 against - a separate resolution urging the Commission and Council to come to a formal inter-institutional agreement with Parliament with a view to ensuring MEPs have at least two months to consider proposals to enlarge the euro area.

When Cyprus and Malta adopt the euro, the number of countries using the euro will rise to 15. The number of people using the euro will only grow by 1 million. Currenlty the euro is used by 318 million Europeans.

 

Allocation of Power in the Enlarged ECB Governing Council

The enlargement of the EU has some consequences for the euro and the euro area institutions.

 

In my last log I noted that Sideek M. Seyad, Associate Professor of European Financial Law at the Stockholm University Faculty of Law, has published a two part paper on the “Legal Consequences of the EU Enlargement for the Euro”.

 

Today I want to inform you about a paper on “The Allocation of Power in the Enlarged ECB Governing Council: an Assessment of the ECB Rotation Model”, by Ansgar Belke (University of Hohenheim) and Barbara Styczynska (University of Fribourg) in the Journal of Common Market Studies (Volume 44, No. 5, pp. 865-97).

 

The Rotation Model is laid down in Article 10.2 ESCB Statutes, which was amended pursuant to Article 10.6 ESCB Statute. The latter, so called enabling clause was introduced by the Article 5 of the Nice Treaty.

 

The new voting system is a two-tier rotation model, whereby NCB governors are allocated to different groups, each group having a specific number of voting rights. In the transition phase – when the number of NCBs in the euro area is between 16 and 21 – two groups exist. As from the date on which the number of governors reaches 22, the voting rights will be allocated to three groups. As a consequence of the rotation scheme the voting frequency of the governors will vary considerably.

 

Belke/Styczynska conclude that one negative feature of the proposed voting reform is the sharp shift of the allocation of power during the early euro area accession phases. Furthermore, they conclude that especially the acceding countries lose influence on the voting result compared with the voting power under the status quo.

 

One benefit, however, so Belke/Styczynska conclude, is the higher degree of representation the reform would entail. A more important result, according to the authors, is that the voting power of the Executive Board would be considerably strengthened through the reform. Under the “quite realistic presumption that the Executive Board represents the interest of the euro area, this result tends to come as a benefit”.

Legal Consequences of the EU Enlargement for the Euro

At the beginning of this year Slovenia joined the euro area, becoming the first of the ten new Member States of the European Union (EU-10) to do so. And more countries are to follow.

 

Sideek M. Seyad, Associate Professor of European Financial Law at the Stockholm University Faculty of Law, has published a two part paper on the “Legal Consequences of the EU Enlargement for the Euro”.

 

Book Review: Legal Aspects of the European System of Central Banks

Atilla Arda, 'European Central Bank, Legal Aspects of the European System of Central Banks – Liber Amicorum Paolo Zamboni Garavelli' (2007) 44 Common Market Law Review pp. 229-230

ECB, 2005, ISBN 92-9181-701-5 (print), ISBN 92-9181-702-3 (online)

This is one of those rare books that gives an insight in the workings and thinking of groups of experts that usually operate behind closed doors; in this case the Legal Committee of the European System of Central Banks (ESCB). Or in short: LEGCO. It is written by friends and colleagues of Paolo Zamboni Garavelli, who died in 2004. In the introduction Antonio fazio, then Governor of Banca d’Italia, points to his long and distinguished career in the Bank of Italy that began in 1970 when Paolo Zamboni joined the Legal Department. Later he became the Head of the Legal Department, he joined the group of legal experts assisting the Committee of Governors to draw up the Statute of the ESCB and he was responsible for the changes in Italian legislation to adapt it to European laws on monetary policy and the ESCB.

      Clearly Paolo Zamboni played a role of great importance in the Bank of Italy’s entry into the ESCB. This book, written by present and former members of the Working Group of Legal Experts (WGLE) of the European Monetary Institute – the predecessor of the ECB – and LEGCO, honours the memory of Paolo Zamboni. Moreover, it also commemorates ten years of work of the WGLE and LEGCO and their contribution to the legal framework for the introduction of the euro, as well as to the general legal framework of the ESCB and the Eurosystem, as Lorenzo Bini Smaghi, member of the ECB’s Executive Board, points out in the epiologue.

      The book consists of five parts. It starts with contributions on the ESCB and its place in the EU, which is followed by contributions on the Eurosystem, i.e. the ECB and the national central banks (NCBs) of the Member States that have adopted the single currency of the EU; presently, the euro is introduced as legal tender in 12 out of 25 Member States. The third part concerns monetary law. Subsequently central bank independence and statutes, and financial law are addressed.

      The emphasis of the book, measured by the number of pages, is on the first part: ‘The European Union and the European System of Central Banks’. For their assessments the authors look back on the wide and increasing body of ECB Opinions – as far as this reviewer is aware of this is the first comprehensive analysis of these Opinions – and look forward to the impact of the European Constitution on Economic and Monetary Union (EMU). Furthermore, this part also deals with interesting themes as the relationship between national emergency powers and exclusive Community competences; the antechamber of EMU, i.e. the Exchange Rate Mechanism II, and central bank confidentiality.

      The Eurosystem is the theme of the second part of the book. The first three contributions in this part discuss the Eurosystem’s underlying institutional principles with an emphasis on the decentralisation principle, pursuant to which the ECB, to the extent deemed possible and appropriate, must have recourse to the NCBs to carry out operations which form part of the tasks of the ESCB. The last two authors discuss central bank responsibility for financial supervision, both from an ESCB, and the Irish perspective.

      The third part of the book deals with monetary law. First the legal status of the euro is discussed in a brief study. The following contributions analyse how euro banknotes acquire the properties of money and assess the legal protection of the euro as a means of payment. This part is followed by a number of contributions on central bank independence. This crucial principle of European central banking is discussed from different viewpoints: international standards, European law and national experiences in preparing for joining the EU and subsequently the euro area.

      The topic of the fifth and last part is financial law. The contributions of the authors of this part touch several issues of relevance for the attainment of an integrated European financial market: tax barriers, the legal protection of collateral, the law applicable to book-entry securities and the introduction of optional financial instruments.

      From the above it clearly follows that the book under review covers a wide range of topics within the realm of ESCB law. However, important issues such as the prohibition of monetary finance and privileged access, or the legal aspects of role of the ESCB in the field of European external monetary relations are not discussed. Nevertheless, the mere fact that it is written by the top legal advisors of the decision-making bodies of the ECB and the NCBs makes this book a unique and very valuable addition to any library on the law of EMU.

Tags: ECB, ESCB

Malta on Euro banknotes?

Malta has yet to adopt the euro, and it is not part of the euro area. However, Malta may make it to the second series of Euro banknotes.

 

The following quote is based on The Malta Independent Online.

 

[T]he new euro coins being used in Slovenia, the first of the accession countries to join the eurozone on 1 January this year, already include Malta.

And when the new series of euro notes is printed, it will include Malta as well.

This newspaper was given access to a letter from the European Central Bank to Central Bank of Malta Governor Michael C. Bonello, dated as far back as 29 July 2003 in which Mr Bonello was told: “When finalising the design specifications for the first series of euro banknotes in 1998, the European Monetary Institute and the EU central banks ensured that the member States that would potentially participate in EMU were depicted as accurately as possible on the banknotes.”

Exact representations were, however, limited by the constraints of the offset printing technique. Any specific area, such as islands, smaller than 400 kilometres squared could not be reliably printed under large-scale production conditions and were therefore not represented on the map or in the cartographic boxes.

“It is only natural that, when the second series of euro banknotes is issued, all EU member States should be represented and this will be taken into account when preparing the designs for these banknotes.”

“Therefore, you may rest assured that Malta will be graphically represented on the euro banknotes of the second series.”

Tags: euro, Malta

UK euro coins for sale

The United Kingdom has not adopted the euro. It has negotiated and obtained a so-called “opt-out”. Nevertheless, it is possible to order online UK euro coins.

The UK’s opt-out is laid down in the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland (the UK Protocol). This Protocol is annexed to the TEC and forms an integral part thereof.

In accordance with this Protocol the UK retains its powers in the field of monetary policy under its national law. Furthermore, the UK is not obliged to join the euro area. It is for the UK to notify the EU Council whether it intends to do so.

On 30 October 1997 the UK notified the EU Council that it did not intend to adopt the euro at the start of the third stage of EMU on 1 January 1999. Pursuant to the UK Protocol a number of Treaty provisions concerning monetary policy do not apply to the UK.

Until the UK decides to join the euro area there will be no such thing as a British euro coin. Once the UK decides otherwise, and it complies with the rules governing the entrance of the euro area, it has the power to design a national side to ‘its’ euro coins.

For the time being, and legally speaking, one can not pay with British euro coins. However, as Allard Knook (ECJblog) has e-mailed me, this is not to say that one can not obtain British euro coins. A set of these coins is for sale online: 56 euro’s at www.eurocoins.co.uk.