Conformity to the Rule of Law in the EU - the case of the Stability and Growth Pact

This paper provides a presentation of the rule of law in the EU with regard to the Stability and Growth Pact. As there are different jurisprudential conceptions as to define law, the meaning of the rule of law is inexact. The concept is however generally understood to be an antithesis to the rule of men, which implies arbitrariness. The Stability and Growth Pact is a legal instrument, adopted in accordance with the EC Treaty, aiming to assure sound public finances in the EMU Member States by providing for sanctions against countries with excessive budget deficits. In November 2003, the Council of ministers of economy and finance (hereinafter the Ecofin Council) decided not to impose sanctions against France and Germany although they had excessive budget deficits, a decision that was contrary to EC law. In a subsequent ruling by the European Court of Justice in July 2004, the Ecofin Council decisions were annulled. This paper analyses the Ecofin Council's refusal to apply EC law and the subsequent ruling from the European Court of Justice by using two perspectives on the rule of law in the EU. From a public international law perspective, which assumes that the EU consists of essentially sovereign states, the rule of law functions imperfectly in the Union. The reason is that law and state are intimately linked. The authority of law depends on the coercive means to enforce it. In this regard, the question of the authority of law depends on the body that controls the state. In classical legal theory this idea is expressed in terms of sovereignty and coercive powers. Since EU has no real sanction possibilities at its disposal, the authority of EC law is weak. The reason the Ecofin Council refused to apply EC law is because the Stability and Growth Pact is an unfortunate legal instrument. It cannot be expected to work properly between essentially sovereign states, since its application is at the mercy of the very states it purports to control. From a public international law perspective, no criticism can be pointed towards the Member States for not implementing the Pact. Instead, criticism should be pointed towards the European Court of Justice that through its case law and different conception of the rule of law has extended its powers beyond what the Member States intended. The Ecofin Council decisions not to implement the Stability and Growth Pact is in this view explainable and even justifiable. The other perspective this paper presents is a constitutional perspective, which involves a conception of law that is held by the European Court of Justice. This view holds that the EU consists of not fully sovereign Member States and that it has several constitutional features. It assumes a rights-based conception of law that can be traced back to the constitutional theory of John Locke. The law of the constitution is in this view merely an expression and a consequence of natural rights. The function of law is to safeguard and promote these natural rights that exist independently of society. To break the law is, in Lockean terminology, comparable to rebellion. The task of the Court is to interpret a constitution, whose purpose is to uphold rights and not to create them. From this perspective, the Ecofin Council decisions constituted an unacceptable encroachment on EC law. The provisions of the Stability and Growth Pact are specific and clear, and the Ecofin Council decisions concerned mere application of law, as opposed to interpretation. Nevertheless, the Ecofin Council decided contrary to EC law. This situation might be explained by the active role of the Court in developing EC law. The Court might have anticipated this situation by its creative case law through which it has developed the material scope of EC law beyond the intentions of the Member States. Despite this, the judgement of the Court that annulled the Ecofin Council decisions is likely to be followed. The alternative would lead to a constitutional crisis, which is not in the interest of the Member States. Thus in the trial of strength between the Member States and the EU, the Ecofin Council decisions were probably enough a statement of the power of the Member States