National Limits, European Claims: The Ultra Vires Conflict in EU Constitutional Law (part 1)

 

Dr Benedikt Riedl, Mjur (Oxford),  postdoctoral researcher and academic assistant at the Chair of Public Law and Legal Philosophy (Prof Dr Peter M. Huber, former Justice of the Federal Constitutional Court and former Minister of the Interior) at LMU Munich.

Photo credit: Luxofluxo, via Wikimedia Commons

 

Who has the final say on where the European Union’s competences end? This question lies at the core of one of the most debated issues in EU constitutional law: ultra vires review. Long seen as an instrument of national resistance to the primacy of EU law – especially in the case law of the German Federal Constitutional Court (GCC) – ultra vires review is often portrayed as an outlier. But that view misses the broader reality. Across the EU, many constitutional courts claim a residual authority to decide whether EU institutions have overstepped their conferred powers.

This blogpost – the first of two parts – re-examines the legal nature of ultra vires review. In 83 theses, it argues that ultra vires review is not just a defensive reaction, but a structural element of the European legal order. It operates within a pluralist and composite system in which both the CJEU and national constitutional courts have essential and complementary roles. Part One begins by tracing the national doctrines that support ultra vires review, showing how firmly it is anchored in the constitutional traditions of many Member States (I.). It then turns to the institutional tensions between national courts and the CJEU, focusing on the latter’s claim to exclusive authority over the scope and limits of Union law (II.).

I. Ultra Vires Review as a European Practice: Constitutional Courts and the Limits of Integration

1 Ultra vires review enables Member States’ supreme and constitutional courts to (indirectly) assess whether EU institutions have acted beyond the powers conferred upon them by the EU Treaties. These courts justify their role by emphasizing that the EU operates on the basis of limited and conferred competences (the principle of conferral) and that national constitutions impose boundaries on the application of EU law. They argue that any exercise of power not explicitly transferred to the EU by the Member States constitutes an infringement on national – and ultimately popular – sovereignty. Accordingly, ultra vires review serves as a democratic safeguard, protecting the constitutional autonomy of Member States.

2 The CJEU, by contrast, regards the EU legal order as autonomous and independent of Member States’ constitutions. It views ultra vires review as an infringement on its exclusive authority to declare EU acts invalid. The Court argues that such reviews undermine the uniformity and effectiveness of EU law, weaken the integrity of the EU judicial system, and disrupt the principle of equality among Member States. In its view, recognising ultra vires review would ultimately threaten the effectiveness of the European project as a whole.

3 Ultra vires review by national constitutional courts can potentially conflict with the CJEU’s jurisdiction under Article 19(1) EU. However, the core issue in the ultra vires debate is clear: the EU is bound by the principle of conferral, as set out in Article 5(1) and (2) TEU. What remains unresolved is the procedural question: Which court has the final authority to decide whether EU institutions, bodies, offices, or agencies have exceeded their competences? Quis iudicabit? The EU Treaties contain no explicit conflict-of-law provision to resolve judicial disputes over ultimate decision-making power in matters of competence.

4 This thesis examines ultra vires review as a legal institution within EU law and explores how a common ultra vires procedure could be structured in accordance with the EU Treaties. To this end, it compares the CJEU’s interpretation of EU law with the fundamental principles enshrined in the Treaties, and analyses the extent to which the perspectives of national constitutional courts have been integrated into EU legal doctrine. The central question is whether ultra vires review can be considered a legal concept within EU law, and to what extent constitutional courts should be involved in a collective ultra vires procedure. The study is based on a comprehensive analysis of the constitutional and EU law foundations of ultra vires review. Its aim is to determine whether the power of constitutional courts to declare EU measures ultra vires and inapplicable in their domestic legal systems constitutes a general principle of EU law.

5 In most EU Member States, constitutional reservations concerning the application of EU law exist. Courts in Germany, Denmark, France, the Czech Republic, and Poland have already declared CJEU judgments inapplicable on the grounds that they constituted ultra vires acts, i.e. acts exceeding the EU’s conferred competences. Moreover, constitutional and supreme courts in many other Member States have adopted similar reservations, serving comparable functions in safeguarding national constitutional limits within the EU legal framework.

6 The GCC’s approach to ultra vires review is based on Article 23(1) sentences 2 and 3, in conjunction with Article 20(1) and (2), and Article 79(3) of the German Basic Law.  By applying ultra vires review, the GCC ensures that EU law remains democratically legitimate in Germany, thereby adhering to the so-called “integration programme” (Integrationsprogramm) defined by the parliaments’ acts of assent. This review is triggered only in cases of manifest and structurally significant overreach of competences and is handled exclusively by the GCC, with a mandatory referral to the CJEU. The GCC respects the CJEU’s interpretation of competence limits and confines itself to reviewing the methodological soundness of that interpretation. The core rationale behind ultra vires review – the protection of popular sovereignty – is persuasive. The concept of “responsibility for integration” (Integrationsverantwortung) illustrates how the review mechanism serves to preserve democratic legitimacy. This responsibility, entrusted to German constitutional bodies, compensates for the partial loss of German citizens’ political self-determination resulting from the transfer of sovereign powers to the EU. While ultra vires review does not interfere with the substance of EU decisions, it ensures democratic openness by exposing breaches of legitimacy and blurred lines of accountability. In doing so, it partially offsets the absence of a fully developed European public sphere, enabling citizens to retain as much political self-determination as possible. As a last resort, it prevents citizens from being excluded from fundamental political decisions affecting their community.

7 In Denmark, the Højesteret bases its ultra vires review on the principle of legal certainty as articulated in § 20(1) of the Danish Constitution. This provision allows for the transfer of sovereign powers to international organisations and the EU, but only “to a specified extent.” The court’s justification is formal yet consistent, as linked directly to the principle of conferral. The scope of EU law's primacy is defined by the national act of assent; if the EU extends its competences beyond what is covered by that act, it is considered a violation of § 20, which falls under the scrutiny of the Højesteret. However, the standard of review and the limits of ultra vires control compatible with EU law remain vaguely defined in Danish case law. In the Carlsen v. Rasmussen judgment, the application of ultra vires review appeared to be confined to particularly exceptional circumstances and was closely tied to the outcome of the CJEU’s preliminary ruling. By contrast, in the Ajos case, the Højesteret upheld an ultra vires finding without elaborating on any such restrictive conditions, leaving the precise contours of the doctrine unclear.

8 In France, a flexible balancing of principles allows both the Conseil constitutionnel and the Conseil d'État to indirectly review the principle of conferral, alongside questions of constitutional identity. Although both courts formally recognise the primacy of EU law, they continue to treat the French Constitution as the supreme legal authority, in line with Article 88-1 of the French Constitution. To reconcile these positions, the courts have developed two review mechanisms: the identity test (employed by the Conseil constitutionnel) and the equivalence test (applied by the Conseil d’État). The core objective of both is to ensure that EU law maintains a level of protection equivalent to that guaranteed by the French Constitution. Within this broad, principle-based balancing approach, substantive legal issues can be linked to the preliminary question of competence, as demonstrated in the French Data Network decision by the Conseil d’État. Functionally, the equivalence test renders a separate ultra vires review redundant, thereby allowing for greater flexibility in individual judgments. However, the fact that the standard of review remains implicit – particularly where constitutionally protected interests are vaguely defined – can lead to diminished legal certainty.

9 The independent Polish Constitutional Tribunal – prior to the judicial reforms introduced by the PiS government – based its ultra vires review on Article 8(1) in conjunction with Article 90(1) of the Polish Constitution. According to Article 8(1), the Polish Constitution remains the supreme law of the Republic of Poland. Article 90(1) permits the transfer of certain competences to the EU, granting them priority of application. However, any subsequent expansion of competences must still comply with the requirements of Article 90. For the Polish Constitutional Tribunal, the procedural review mechanism was regarded as a necessary safeguard for the substantive principle of limited conferred powers. Although the procedure and standard of review were never clearly defined, the ultra vires review remained confined to exceptional cases involving a significant and manifest overreach of competences, and required a prior referral to the CJEU. In this respect, the Tribunal’s case law was largely modelled on that of the GCC. However, the more recent ultra vires ruling in case K 3/21, issued by a Constitutional Court now widely viewed as politically aligned, has been criticised as politically motivated and stands in clear contradiction to fundamental principles of EU law.

10 The Czech Constitutional Court bases its ultra vires review on Article 10a, in conjunction with Article 9(2) and Article 1(1) of the Czech Constitution. Under Article 10a, the validity of EU law in the Czech legal system depends on the national acts of assent. The ultra vires review serves to protect democratic self-determination and state sovereignty, both of which are unalterably safeguarded under Article 9(2) in conjunction with Article 1(1). The Court’s justification for ultra vires review therefore goes beyond the formal principle of conferral, encompassing broader substantive constitutional values such as sovereignty and self-determination. However, the legal standard governing Czech ultra vires review remains underdeveloped. Given that the Constitutional Court recognizes the CJEU’s exclusive jurisdiction to declare EU acts invalid, it confines its own review to “very exceptional” cases as a measure of last resort. In its ultra vires decision in Holubec, however, the Court did not clarify the criteria for such exceptional cases and declined to refer the matter to the CJEU, thereby failing to adequately observe the duty of cooperation under EU law.

11 The Hungarian Constitutional Court’s judgment No. 22/2016 (XII. 5.) on constitutional identity and ultra vires review – alongside the Polish judgment K 3/21 – clearly illustrates the instrumentalisation of these control mechanisms. Rather than serving as an independent instrument of constitutional oversight, they function primarily as political gestures by captured courts in favour of their respective governments. The Hungarian ruling lacks dogmatic coherence and is not grounded in a legal tradition compatible with EU law. Instead, it relies on a superficial and overly modular legal comparison that lacks both depth and consistency. The most serious flaw, however, is the absence of a meaningful commitment to dialogue and cooperation with the CJEU. While the judgment formally invokes a willingness to engage, it fails to substantiate this claim with any concrete standards compatible with European legal principles.

12 In an obiter dictum to its judgment No. 62/2016, the Belgian Constitutional Court addressed the constitutional limits of the EU legal order. It based its constitutional identity reservation in Article 34 of the Belgian Constitution, which permits the transfer of sovereign powers to international organisations and the EU, but only to a limited extent. Article 34 also implies that the validity of EU law within the Belgian legal order is conditional upon a constitutional review of its boundaries. The provision does not grant EU institutions a carte blanche, i.e. a general or unlimited authorisation to act. The identity review was central to the Court’s reasoning. At the same time, an ultra vires restriction is implicitly embedded in the constitutional logic of conferral through the national delegation of powers under Article 34 – even if not expressly articulated as such.  

13 The Estonian State Court defines the sovereignty of the Estonian people and state as establishing the constitutional boundaries of the EU legal order. While the primacy of EU law is acknowledged, any treaty amendments or expansions of competences must be legitimised by the Estonian parliament in order to have domestic legal effect. The Court thus assesses whether the delegation of competences results in a constitutional infringement and whether such delegation has been sufficiently legitimised through parliamentary approval. Since neither the autonomy nor the absolute primacy of EU law is recognised and the validity of EU law is grounded in the Estonian Constitution, there exists a clear constitutional basis for the potential future development of an ultra vires review.

14 In Ireland, the primacy of EU law must not override the country’s constitutional identity, which includes essential fundamental rights – such as the right to life – as well as legislative and judicial sovereignty, the principle of democracy, and, most importantly, the sovereignty of the people. This constitutional identity, as anchored in Article 5 of the Irish Constitution, imposes clear limits on integration into international organisations, including the EU. However, the Irish Constitution and the Irish Supreme Court adopt a distinct approach to safeguarding popular sovereignty: they place primary emphasis on maximising democratic legitimacy at the point of transferring sovereign powers. As a result, any such transfer to the EU requires a constitutional amendment, which in turn must be approved by referendum.

15 The Italian Constitutional Court bases its constitutional reservation (controlimiti) on the principle of Italian sovereignty, which – although it can be limited by the national legislature – cannot be fully relinquished. The Court examines whether such limitations infringe upon fundamental rights, essential constitutional principles, or the elements of constitutional identity. Since the primacy of EU law is viewed as a consequence of the domestic limitation of sovereignty under Article 11 of the Italian Constitution, the ultra vires reservation is implicitly embedded in the Constitution. This provision enables the Corte Costituzionale to review national acts of assent for their compatibility with the fundamental values of the Italian Constitution. The concept of ultra vires review is most clearly articulated in the Fragd decision, where the Court not only scrutinised the CJEU’s interpretation of EU law but also questioned whether the CJEU had acted beyond its conferred competences. However, due to the Court’s broad understanding of identity review, ultra vires review has been functionally sidelined, operating instead as a supplementary mechanism of constitutional oversight.

16 The Croatian Constitutional Court has indicated in several obiter dicta that it does not recognise an absolute or unlimited primacy of EU law. Instead, it affirms that constitutional limits apply to the primacy of EU law within the Croatian legal system.

17 The Latvian Constitution provides the doctrinal foundations for a potential future ultra vires review. Article 68 serves as the constitutional basis for the primacy of EU law within the Latvian legal system. According to the case law of the Latvian Constitutional Court, the ratification of the EU treaties is compatible with the Constitution only insofar it does not undermine fundamental constitutional values, particularly the principle of popular sovereignty. The Court has affirmed that compliance with these core values remains subject to judicial review, even in the context of European integration.

18 According to the judgment of the Lithuanian Constitutional Court, the primacy of EU law is derived from Section 2 of the Constitutional Law and is therefore rooted in domestic law. In exceptional cases, where an EU legal provision is found to conflict with the Lithuanian Constitution, that provision would have no effect within the Lithuanian legal order. However, the case law on the relationship between EU law and the Lithuanian Constitution remains underdeveloped and requires further clarification, particularly concerning its alignment with EU law principles. From a constitutional perspective, an ultra vires review would be legally permissible.

19 In Spain, the transfer of sovereign powers to the EU is governed by Article 93 of the Spanish Constitution. The Spanish Constitutional Court distinguishes between the formal supremacy (supremacía) of Spanish constitutional law and the primacy (primacía) of EU law, not conceiving them in a hierarchical relationship but rather as separate spheres of application. The transfer of competences under Article 93 imposes constitutional limits on European integration, requiring EU law to remain compatible with the fundamental principles of Spain’s social and democratic constitutional state. The Court explicitly reserves a constitutionally entrenched power of final decision, derived from Article 93, which it may invoke in exceptional cases to safeguard the sovereignty of the Spanish people and the supremacy of the Spanish Constitution. Although the Court has acknowledged the hypothetical possibility that EU primary law could exceed conferred competences – potentially infringing on Spanish sovereignty and the constitutional core – it has not explicitly established an ultra vires review as a distinct legal instrument.

20 In Greece, the primacy of EU law is grounded in Article 28(2) and (3) of the Greek Constitution. These provisions also establish limits to the primacy of EU law, particularly concerning human rights, the foundations of the democratic state, and national sovereignty.

21 In Portugal, according to Article 8(4) of the Portuguese Constitution, EU law is applicable within the national legal system only insofar as it respects the principles of the democratic constitutional state. The Portuguese Constitutional Court has ruled that in a multi-level constitutional system, where multiple legal orders coexist, legal norms that have domestic effect cannot override the Constitution. Accordingly, EU law must respect the national identity of Member States, including Portugal.

22 In Romania, the transfer of certain powers to the EU occurs through the national act of assent, in conjunction with Article 148(1) of the Romanian Constitution. The Romanian Constitutional Court derives the primacy of the national Constitution over EU law from Article 11(3) of the Constitution. Recent rulings suggest that the Court is strategically asserting the supremacy of the Romanian Constitution in relation to EU law, positioning it as a counterweight within the national legal order.

23 In Luxembourg and Slovakia, the relationship between EU law and national constitutional law remains unclear. In Malta, Article 6 of the Maltese Constitution explicitly designates the Constitution as the highest source of law within the national legal system. A similar position exists in Bulgaria, where Article 5(1) of the Bulgarian Constitution states that no other laws may contradict the Constitution. The Finnish Parliamentary Committee on Constitutional Affairs has recently begun to address both the ultra vires issue and the protection of core constitutional principles. In Slovenia, the primacy of EU law is based on the national act of assent in conjunction with Article 3a(1) of the Slovenian Constitution, making an ultra vires challenge possible in the future. In Sweden, courts generally acknowledge the primacy of EU law, though constitutional reservations are not ruled out. In Austria, the transfer of sovereign powers to the EU is carried out through the parliament’s act of assent and is subject to Article 44(3) of the Austrian Constitution, which offers special protection to the fundamental principles of the Federal Constitution. The Austrian Constitutional Court has recently implicitly recognised the principle of democracy as part of Austria’s constitutional identity. Only in the Netherlands and Cyprus, the absolute primacy of EU law is generally assumed, though even there, its validity is still grounded in national acts of assent by the Member State parliaments. Finally, in the United Kingdom, which formally left the EU on 31 January 2020, the Supreme Court continues to apply an ultra vires doctrine, drawing on the jurisprudence of the GCC.

24 In summary, ultra vires review is not a concept limited to Germany; it is explicitly recognised in the case law of six EU Member States: Denmark, Germany, the Czech Republic, France, Poland, and Hungary. Furthermore, constitutional rulings and legal foundations in Belgium, Estonia, Italy, and Latvia also acknowledge the possibility of invoking ultra vires arguments. Additionally, Croatia, Lithuania, Greece, Romania, Slovenia, and Spain accept at least the doctrinal basis for a potential ultra vires review. A significantly higher number of Member States conduct some form of identity review or apply comparable constitutional safeguards. In total, 18 Member States – a clear majority – explicitly reject the notion of absolute primacy of EU law. This number is particularly notable given that in several of the remaining Member States, the scope of EU law's primacy has yet to be addressed, often due to the absence of constitutional jurisdiction.

25 The CJEU’s justification of the primacy of EU law based on its autonomy concept is not accepted by any national constitutional court. Instead, the validity and precedence of EU law are understood to derive from the acts of assent passed by the parliaments of the Member States, which authorize the application of EU law within their respective legal systems.

26 On this basis, the clear majority of constitutional and supreme courts in the Member States do not accept the absolute primacy of EU law over their national constitutions, but instead assert constitutional reservations. In most EU countries, it is standard practice to assess EU treaties in light of national constitutional law. Many constitutional courts extend these reservations to secondary EU law, typically through one of three types of review: the Solange review (equivalent protection doctrine), identity review, and ultra vires review. These mechanisms serve to protect various dimensions of constitutional identity – whether it involves safeguarding fundamental rights, preserving core substantive constitutional principles, or defending national sovereignty and the integration programme.

 

II. The CJEU’s Constitutional Vision: Autonomy, Primacy, and the Rejection of Ultra Vires Review

Taken together, the constitutional jurisprudence of the Member States reveals a clear trend: ultra vires review is not an isolated German construction, but a widespread legal safeguard anchored in the principle of conferred powers. At least eighteen Member States explicitly reject the idea of absolute primacy and maintain constitutional reservations, particularly where Union acts threaten to undermine the democratic legitimacy or constitutional identity of the state. The CJEU, by contrast, categorically rejects the legitimacy of such review. This is not just a matter of institutional competition – it reflects a deeper constitutional conflict. The CJEU views EU law as an autonomous legal order that does not depend on national constitutions for its validity. Based on this view, it claims absolute primacy of EU law over all national norms, including constitutional provisions. However, this conception is neither codified in the Treaties nor accepted by most Member States. It rests on a dogmatic assumption: that the EU legal order is self-originating. Nevertheless, the CJEU relies on it to support a far-reaching claim to institutional supremacy. Over time, the CJEU has translated its concept of autonomy into a hierarchical constitutional structure. It does so not only through substantive doctrines like absolute primacy, but also via procedural mechanisms that establish the CJEU as the final judge of its own jurisdiction. The result is a constitutional logic in which Member States lose both the ability to define the limits of EU competences and to protect their constitutional identity.

 

1 The CJEU rejects ultra vires review based on its interpretation of the primacy of EU law as being absolute. However, this concept of primacy has never been explicitly codified in the EU treaties. The Protocol on the Application of the Principles of Subsidiarity and Proportionality, annexed to the Treaty of Amsterdam, merely alluded to the primacy of EU law. A formal codification was intended in the Treaty establishing a Constitution for Europe, yet the ratification of this treaty ultimately failed. The subsequent Treaty of Lisbon did not include a binding provision on primacy either. Instead, only a legally non-binding interpretative declaration was attached, which referred back to the CJEU’s established case law on the matter. Similarly, Article 20 of the Unified Patent Court Agreement (UPCA) does not contain any provision explicitly stipulating the primacy of EU law.

2 According to established CJEU case law, all forms of EU law take precedence over national law, including national constitutional provisions and the jurisprudence of constitutional courts. The CJEU seeks to establish an absolute hierarchy, placing EU law above national constitutional orders. This position, however, directly conflicts with the Member States’ understanding of constitutional limits, which are considered inviolable. Since ultra vires review is grounded in the constitutional identity of the Member States, this creates a central point of tension between the CJEU’s approach and the constitutional reservations upheld by national constitutional courts.

3 The CJEU’s central argument for asserting absolute primacy is the autonomy of the EU legal order – the idea that EU law does not derive from the legal systems of the Member States. This key concept of autonomy not only forms the basis for the absolute primacy of EU law but has also been invoked in recent CJEU judgements to justify a comprehensive monopoly on jurisdiction within the European constitutional court network. Its claim to institutional supremacy has evolved into a specific application of the autonomy principle and is used to reinforce and safeguard the absolute primacy of EU law.

4 In contrast to other legal systems, the CJEU has institutionally expanded its concept of autonomy, aiming to secure itself a monopoly over jurisdiction and competence vis-à-vis national constitutional and supreme courts. Through infringement proceedings and by extending state liability to cases where national supreme courts violate EU law, the CJEU has structurally integrated and subordinated national courts within the broader European judicial system. This development marks a clear shift from a cooperative relationship among courts of equal standing to a hierarchical judicial structure with the CJEU at the top. Since the Portuguese Judges ruling, the CJEU has also gained the ability to issue detailed substantive criteria regarding the organisation of national judicial systems. Looking ahead, this could even extend to national courts being required to disregard ultra vires rulings issued by their own constitutional courts – invoking the overarching principle of the rule of law as justification.

5 At the intersection with international law, the CJEU has progressively strengthened its institutional position to safeguard the uniform application of EU law, including in relation to international courts. While this analysis does not focus on the EU’s external legal relationships, it is nonetheless clear that the CJEU understands the autonomy of EU law not only as independence from Member States, but also as a means of protection from external judicial interference. In institutional terms, the concept of autonomy thus translates into a reluctance to cooperate with “competing” judicial actors within a multi-level international legal order. The CJEU positions itself as the central authority in the European legal order, thereby establishing a hierarchy in which all legal systems interacting with EU law – and all courts whose jurisdiction overlaps with that of the CJEU, including the ECHR, arbitration tribunals, and national constitutional courts – are subordinated to EU law.

6 In the procedural and institutional conflict surrounding ultra vires review, the CJEU underscores the link between the autonomy of EU law, its absolute primacy, and the question of competences. It treats the scope of EU law's validity – including its limits – as falling within the domain of its absolute primacy. Consequently, national courts are never permitted to declare EU legal acts invalid, even if the alleged invalidity stems from an overreach of competences. Relying on this understanding of primacy and autonomy, the CJEU claims exclusive authority to determine both the validity and outer boundaries of EU law – effectively asserting judicial competence over competences. Thus, the CJEU has recently rejected any form of constitutional reservation by Member States in this regard.

7 Based on this interpretation, the concept of autonomy becomes a code for the CJEU’s exclusive jurisdiction over all matters concerning EU law. Any court addressing issues that affect EU law must defer to the CJEU’s final judgment. This absolute monopoly on judicial authority effectively excludes the possibility of cooperation within the network of constitutional courts – even with regard to questions of jurisdiction. The CJEU disregards the views of the Member States, treating its notion of autonomy as overriding even standards set out in primary EU law. Institutionally, this results in the absolutisation of the Court’s role. Under the guise of autonomy, the CJEU claims the power to continuously expand the boundaries of its jurisdiction, both within the EU and in relation to external actors.

 

Taken together, the conflict over ultra vires review reveals a deeper constitutional tension within the EU legal order: while the CJEU seeks to consolidate a uniform system based on the principle of absolute primacy, most national constitutional and supreme courts insist on the conditional nature of EU law’s validity, grounded in their domestic constitutional orders. This divergence cannot be resolved by institutional assertion alone. It requires a principled legal response that reflects the composite structure of the Union. Ultra vires review offers such a response. Far from being a disruptive anomaly, it is a functional safeguard embedded in the constitutional practice of a clear majority of Member States. It reflects the principle of conferral under Article 5(1) and (2) TEU and embodies the idea that competences remain with the Member States unless expressly transferred. The absence of a conflict-resolution mechanism in the Treaties does not negate the legitimacy of this review; rather, it implies the need for constitutional safeguards that ensure the accountability of EU institutions within the limits of conferred powers. In this light, ultra vires review is not merely a national instrument of resistance, but an emerging general principle of EU law. It serves to stabilise the Union’s legal architecture where the Treaties are silent, and it institutionalises constitutional pluralism without dissolving legal unity. Properly understood, it expresses a shared constitutional responsibility for the integrity of the European legal order. The second part of this blogpost examines whether – and how – ultra vires review can be understood as structured, treaty-compatible mechanism that operates as a joint procedure between national courts and the CJEU.

 

The Own Resources Decision as an Ultra Vires Act or a Violation of Constitutional Identity? An analysis of possible procedural scenarios

Benedikt Riedl, research assistant, lecturer and PhD candidate, LMU Munich

On March 26, 2021, the German Federal Constitutional Court (GCC) held that the Own Resources Resolution Ratification Act (ERatG) must not be executed by the Federal President for the time being.

The extent to which the Own Resources Decision could be an ultra vires act or a violation of the constitutional identity of the German Basic Law has already been presented on the Verfassungsblog and the European Law Blog. Since public interest in the outcome and furthest possible course of the proceedings is high, this article will also present the possible procedural scenarios.

Two possible ultra vires acts and a possible identity violation

First, however, the three most important substantive problems should be summarised once again. The Own Resources System could be an ultra vires act in two respects. Additionally, there is a connecting factor that could be seen as a violation of constitutional identity. Those who have already read the posts from the Verfassungsblog and the European Law Blog can skip straight to the heading "Third Problem: Violation of the overall budgetary responsibility of the German Bundestag".

Background: Own Resources Decision and Next Generation EU

The subject of the summary proceedings is the Own Resources Decision Ratification Act. This is the German law approving the financing of the European Union until 2027. It is the legal basis for the entry into force of the current Own Resources Decision of the European Union of December 14, 2020. The Own Resources Decisions of the European Union are based on Article 311 (3) TFEU and, in addition to other revenue, serve to finance the EU budget. The current Own Resources Decision enables the European Commission in Article 5 (1a) to take out loans of up to 750 billion euros with a term of up to 38 years. With these funds, the European Union intends to temporarily use 750 billion euros within the framework of its NextGenerationEU economic stimulus package to repair the immediate economic and social damage caused by the Corona pandemic. The most important instrument in this stimulus package is the Recovery and Resilience Facility, which will provide 627.5 billion euros in loans and grants to support reforms and investments in the countries of the European Union. Implementation of the economic stimulus packages by the European Union is only possible once all Member States have ratified the Own Resources Decision (Article 311 (3) sentence 3 TFEU).

The German Bundestag approved the Own Resources Ratification Act on March 25, 2021. The vote was preceded by a heated debate, during which the Minister of State at the Federal Foreign Office described the Own Resources System "as a necessary and overdue step towards a fiscal union".

Ultra vires review and identity review

The central question under EU law is whether the Own Resources Decision and the authorisation to incur debt violate the Treaties. If this is the case, this could constitute an ultra vires act of the European Union. The central question under german constitutional law is whether the Own Resources System affects the limits set by the overall budgetary responsibility of the German Bundestag and be incompatible with Art. 79 (3) of the Basic Law.

First, the question arises as to why a Member State‘s constitutional court can decide on this question of EU law at all. The starting point is the primacy of application of Union law over any national law – including constitutional law – which is recognised today by both the GCC and the ECJ. However, since its Costa/E.N.E.L. ruling, the ECJ has assumed an unconditional primacy of application, which follows from the special nature of Union law as a new, independent legal order. In contrast, the GCC, like all other European constitutional and supreme courts, does not derive the primacy of application from Union law itself but assumes primacy by virtue of the constitutional authorisation of the Member States.

Ultra vires review (i.e., review of authority by a constitutional court of a Member State), refers to whether the EU institutions have exceeded their authority in a sufficiently qualified and structurally significant manner. Several European constitutional and supreme courts have already declared Union acts to be ultra vires (e.g. Cohn-Bendit ruling in France, Holubec ruling in the Czech Republic, Ajos ruling in Denmark (also discussed here), PSPP ruling in Germany). In the specific case, the question is whether the Own Resources Decision is manifestly in violation of the Treaties. As far as the question of the legal basis is concerned, it can be assumed that the constitutional complaint will not be successful. The situation is different, however, concerning the questions of earmarking and liability risk.

First Problem: Sufficient legal basis and earmarking?

It is undisputed that Article 311 (3) TFEU is the legal basis under Union law for the European Own Resources Decision of 14.12.2020. According to this, the Council, acting unanimously in accordance with the special legislative procedure and after consulting the European Parliament, adopted a decision setting forth provisions governing the Union's own resources. However, according to Article 311 (3) sentence 2 TFEU, only the Union’s own resources can be introduced. The applicants argue that borrowed funds are not the Union‘s own resources. However, according to the wording of the contracts, only the Union’s own funds (own resources) and no external funds (external resources) could be raised. This is a very restrictive literal argument based on the differentiation between debt and equity capital in business economics. The ECJ, with its strongly teleologically oriented case law guided by the idea of effet utile, will most likely not follow this line of argument. Instead, it will probably endorse a broad understanding of “own resources“. Should the GCC follow the applicant's argumentation, a referral to the ECJ would be necessary in any case. There is no acte clair that would make a referral unnecessary.

However, the earmarking of the Own Resources Decision and the regulation establishing the Corona Reconstruction Fund is also important. According to Article 122 (1) and (2) TFEU, the European Union can take action with concrete measures using binding legal acts, for example, to grant a Member State financial assistance under certain conditions in the event of serious supply bottlenecks, natural disasters, or extraordinary events. The above-mentioned instruments of Union law within the framework of the NextGenerationEU economic stimulus packages and the Recovery and Resilience Facility are explicitly based on this provision. The critical point here is whether the economic stimulus packages are only aimed at overcoming the immediate consequences of Covid-19. Only if they remain limited to this exceptional case and comply with the narrow earmarking can they be based on the exceptional provision of Article 122 TFEU, which is to be interpreted narrowly in principle.

A system of “own resources“, which in this respect not only serves as a reconstruction programme but spills over into many other subject areas, would be difficult to reconcile with Article 122 TFEU. Germany, for example, plans to use 37% of the European Union's allocations for climate protection and 20% for digitisation (BT-Drucksache 19/27838). While the use of funds for digitisation can be directly related to the Corona emergency due to the lockdown consequences and the limited possibilities of direct contacts between people, this is not the case for the use of funds for climate protection. It is not apparent why by far the largest share of Corona aid should be spent on climate protection, which has no connection to the Corona pandemic. On the contrary, if the pandemic has any "positive" effects, they have to do with the world climate. Of course, investments in climate protection can also create jobs. But it is doubtful whether this is still sufficiently directly related to combating the Corona consequences. For this reason alone, the GCC will also take a very close look at the earmarking of the European Union's Own Resources Decision. Here, the constitutional complaint has a realistic chance of success.

Second Problem: Violation of the prohibition of mutual liability?

Moreover, a violation of Article 310 and Article 125 TFEU by the Own Resources Decision and the legal acts implementing the NextGenerationEU reconstruction fund is not unlikely. From these norms follows the Union principle that the Member States act autonomously in their fiscal policy and must not mutually assume responsibility for their respective liabilities. Article 125 (1) TFEU contains the so-called "no bailout clause" in this respect. According to this, financial equalisation between the Member States is prohibited in Union law. Neither is the Union liable for the liabilities of Member States nor are Member States liable for the liabilities of other Member States.

The possible liability volume and the liability period are very critical here. Due to the long duration of the loans, future federal parliaments will be bound to the Own Resources Decision until 2058. No one will seriously assume that regular and recurring waves of crises will not occur in Europe until the last repayment instalment in 2058. New aid packages will also be put together in the next crises, as has always happened in the recent past. In this respect, the Own Resources Decision could mark the European Union's first step toward a fiscal union. The Corona emergency could be exploited to make a fiscal union inevitable through the normative power of the de facto. Instead of going down the path of amending the Treaties, the Member States and the EU seem to be attempting to form a fiscal union within the framework of budget planning.

The decisive question is whether Germany alone would be fully liable for 750 billion euros if necessary. If there are insufficient safeguards in the European Union's own resources system, a violation of Article 125 TFEU is inevitable. Finally, the lack of economic transparency in the procurement of funds is also problematic. Where and how will the European Union raise 750 billion euros in debt? Which institutions will provide the loans? Does the European Commission have a free hand in this?

A closer look at the Own Resources Decision can provide some answers, at least for the time being.

Article 9 (4) and (5) of the Own Resources Decision initially appear reassuring. It follows that if there are insufficient EU budgetary resources to repay the debt, the European Commission will first make up this financing shortfall by active treasury management and, if necessary, by recourse to short-term financing on the money market. Only if these possibilities are not sufficient can the Commission, as a last resort, require the Member States to make the shortfall provisionally available in proportion to their respective contribution to the EU budget. This proportionate interim financing seems to exclude, at least formally, liability according to the motto "one is liable for all".

The same pro rata provision of funds applies if a Member State cannot meet its share of the debt repayment. The defaulting Member State remains obliged to pay its financing share of the debt repayment. It can be concluded that this is not an assumption of liability in the true sense of the term, as funding from the remaining Member States is only temporary and not final. Legally, the defaulting Member State remains responsible and liable for its share of the financing and must pay it as soon as possible. It is a fact, however, that some Member States may not be able to make these payments.

However, Article 9 (6) of the Own Resources Decision reveals through several references (Article 6and Article 3 (1) and (2) the enormous extent of the liability risk for each member state. Currently, according to Article 3(1) of the Own Resources Decision, the total amount of “own resources“ available to the Union for annual appropriations for payments must not exceed 1.40% of the sum of the gross national income of all Member States. In the future, from 2028, according to Article 6, the annual “own resources“ ceiling will be raised by a further 0.6 percentage points until 2058. This may sound like little, but in reality, it is much more. This is confirmed by the following example calculation for Germany. According to the Federal Statistical Office (Destatis), the gross national income in Germany in 2020 was 3,427 billion euros. This would result in a liability sum for Germany of 0.6% of the gross national income with 20.5 billion euros (exemplary for the year 2020) per year. According to Art. 5, the borrowing of 750 billion euros is at 2018 prices and is subject to a fixed deflator of 2% per year. Therefore, a total debt of the European Union of up to €820 billion must be expected by 2026. With a repayment term of 31 years (from 2028 to 2058), the liability sum for a member state like Germany could amount to up to 770 billion euros in the worst case. This would effectively lead to a fiscal union.

Third Problem: Violation of the overall budgetary responsibility of the German Bundestag

However, even if the new Own Resources System of the European Union is in order under European law, the German Ratification Act must not violate the constitutional identity of the German Basic Law. Also European Union legal acts are to be reviewed against the standard of the Basic Law if this is indispensably required to monitor the preservation of Germany's constitutional identity, which is guaranteed by Article 23 (1) sentence 3 in conjunction with Article 79 (3) of the Basic Law. And here, too, the constitutional complaint likely has good prospects of success.

The GCC anchors the protection of the overall budgetary responsibility of the German Bundestag directly in Article 79 (3) of the Basic Law. The unalterable core area of the principle of democracy is violated if the German Bundestag is deprived of its parliamentary budgetary responsibility by a measure of the European Union to the extent that it or future federal parliaments can no longer exercise the budgetary right on their own responsibility. This also includes the prohibition to be jointly liable for the decisions of third parties with consequences that are difficult to calculate.

The question of the violation of the overall budgetary responsibility of the German Bundestag is strongly related to the second problem. Here, too, the question is whether Germany is exposed to incalculable liability risks. In the ESM ruling, the GCC had decided that the principle of democracy is only respected if the Bundestag remains the place where decisions on revenues and expenditures are made on its own responsibility. This decision also deals with international and European liabilities. In this ruling, the GCC had not assumed a violation of budgetary responsibility because the payment obligations assumed with the ESM Treaty did not exceed €190 billion, and liability beyond this was excluded by a joint declaration of the ESM members that was binding under international law.

Accordingly, one possible safeguard that the GCC could demand in the case of the Own Resources System ist he adoption of a protocol declaration that excludes the obligation to make additional contributions to repay the EU debt incurred under the Recovery and Resilience Facility.

An analysis of possible procedural scenarios

Starting point: Hanging decision

The decision of the GCC of March 26, 2021, is a so-called "hanging decision" (i.e., the decision only applies provisionally until the GCC has decided on the application for a temporary injunction). This is, therefore, "urgent preliminary legal protection " for particularly urgent cases where there is a threat of a fait accompli up until a decision is made on the urgent application. However, this also means that the decision of March 26, 2021, has not even been the penultimate word in this matter. The decisions on the preliminary legal protection and, in particular, on the merits of the case, are still pending. It will therefore take even longer for the court to decide on the constitutionality of the Own Resources Ratification Act.

So far, three things are still pending: (1) The statement of reasons for the hanging order. The GCC's order so far only states "The statement of reasons will be submitted later". (2) The preliminary legal decision on the urgent appeal. (3) The decision on the constitutional complaint on the merits.

First procedural problem: When will the statement of reasons be submitted?

We can only guess as to when the GCC will submit the reasons for its hanging decision. There have been no previous constitutional rulings on the matter. At the administrative court level, there have already been several hanging decisions. However, not much can be deduced from these that would apply to the constitutional summary proceedings. This is because these requirements do not apply without restriction to interim legal protection in constitutional complaint proceedings. In any case, it cannot be ruled out that the GCC will only submit its statement of reasons with the decision on the preliminary legal protection itself. 

Second procedural problem: Preliminary legal protection

In the meantime, the GCC will be able to clarify the open legal and factual questions concerning any safeguard mechanisms of the European Union's Own Resources System and how funds are raised, at least to the extent that a preliminary decision will be possible within the framework of a weighing of consequences. A preliminary injunction would be in effect for six months and could be renewed. The standard of review is different than in the main proceedings. It is about a weighing of consequences: "the consequences that would arise if the preliminary injunction were not issued but the application in the principal proceedings were successful must be balanced against the disadvantages that would arise if the preliminary injunction sought were issued but the application in the principal proceedings were unsuccessful". This also takes into account the public interest and the interests of third parties. Nonetheless, a preliminary injunction cannot be considered if principal proceedings are inadmissible or manifestly unfounded from the outset. The fact that the hanging decision was issued indicates that the emergency application has a chance of success and is not manifestly futile.

It will also be interesting to see how long it will take the court to issue a decision on preliminary legal protection. In the ESM proceedings, the GCC ruled on the interim injunction within three months after the oral hearing. Since the ESM proceedings also dealt with liability risks for the Federal Republic of Germany, it could be similar in this case. Likewise, a decision on the interim proceedings now pending could take just under three months.

Third procedural problem: Possible question for referral to the ECJ

The GCC will likely refer one or more questions to the ECJ. These would concern the substantive problems addressed above. Through the referral question, the GCC could persuade the ECJ to safeguard and contain the Own Resources Decision under European law.

In para. 118 of the PSPP judgment, the GCC stated the following: "Where an ultra vires review or an identity review raises questions regarding the validity or interpretation of a measure taken by institutions, bodies, offices and agencies of the European Union, the Federal Constitutional Court, in principle, bases its review on the understanding and the assessment of such a measure as put forward by the CJEU. However, this no longer applies where the interpretation of the Treaties is simply not comprehensible and thus objectively arbitrary (see paras. 112 and 113). "

This means that the GCC will generally accept the interpretation of the ECJ after a question of referral unless this is " simply not comprehensible ". The reason for this is the division of tasks between the courts. The ECJ is responsible for interpreting Union law, while the GCC interprets the GG (which, however, also includes Article 23 (1) sentence 2 in conjunction with Article 79 (3) in conjunction with Article 20 (1) and (2) of the Basic Law). This harsh choice of words is thus nothing other than a broad standard of review by the GCC. It serves to protect the ECJ's monopoly of interpretation of Union law.

Fourth procedural problem: Decision on the merits of the case

Two questions are then decisive for the likelihood of the decision on the merits: (1) Will the GCC refer the question to the ECJ? (2) If so, how will the ECJ answer the question?

If the GCC does not submit a question for referral to the ECJ, it is highly unlikely that there will be a further decision on the main case to the detriment of the Own Resources System. The reason for this is that since its Honeywell decision, the GCC has only interpreted the ultra vires control in a way that is friendly to European law, which includes a prior referral to the ECJ.

Should the GCC refer the matter to the ECJ, which seems likely, it will rely on its decision. The more convincing the justification of the interpretation of European law turns out to be and the sooner it limits the liability of the Member States, the less likely it is that the GCC will activate ultra vires review or identity review.

As a result, it is up to the ECJ to avoid an ultra vires decision or activation of identity control by providing a convincing answer and ensuring liability barriers. This is how interaction within the European constitutional court network functions. As long as the democratic feedback of the EU at least also happens via the Member States, an interplay between court actors of both levels (EU, Member States) is also necessary as a procedural safeguard.

 

Photo credit: Ronald Kunze, via Wikicommons Media