Dr Marios Costa,
Senior Lecturer, City, University of London
The European Union (EU) has long
been criticised for administrative inadequacies and for structural
deficiencies. There have been a number of reports and commentaries highlighting
that the EU suffers from political irregularities. Similarly, alleged
corruption, maladministration and money laundering at the national level of
governance, as shown below, is of equal concern for the citizenry and the Union
alike.
On 26 February 2019, the Court of
Justice (Grand Chamber) gave a significant judgment
on two joint cases brought by the suspended Governor of the Central Bank of
Latvia, Ilmārs Rimšēvičs, and the European Central Bank (ECB) against the
Republic of Latvia. Mr Rimšēvičs and the ECB argued that the Latvian Anti-corruption
Office has unlawfully prohibited him from carrying out his duties as the Governor
of the Central Bank which included participation in the Governing Council of
the ECB. Rather unexpectedly, the Court of Justice annulled, for the very first
time in the history of EU law, the national act from the Anti-corruption Office
which restricted Mr Rimšēvičs from exercising his duties.
This judgment raises broader
constitutional ramifications. It is therefore necessary to examine whether the
Court has now gone beyond the jurisdiction set out in the Treaty framework. With
all due respect, the ruling comes as a big surprise. This commentary examines
the appropriateness of the recent judgment and concludes that the Court of
Justice has stretched its powers of judicial review unprecedentedly. Yet, it can
be set at the outset that the Court’s ruling is exceptional and closely related
to the EU’s monetary regime. It remains to be seen whether this rather extraordinary
case will mark the beginning of a new judicial trend with extended jurisdiction
well beyond the EU legal order.
Facts of the Case
Mr Rimšēvičs, the Governor of the
National Bank of Latvia, was accused of soliciting bribery in the form of a
free leisure trip as well as accepting the amount of EUR 750 000 in
exchange of exercising influence in favour of a private Latvian Bank. The Latvian
Anti-Fraud Office initiated investigations into the serious bribery allegations
which resulted to the imprisonment of Mr Rimšēvičs. On 19 October 2018, he was released
following a prohibition on performing decision-making, control and monitoring
duties within the Central Bank of Latvia.
Mr Rimšēvičs and the ECB challenged
the legality of the decision to relieve him from the office before the
Luxembourg Court. The Court annulled the decision of the Latvian
Anti-corruption Office to the extent that it has prevented the Governor of the
Central Bank to exercise his EU (and national) duties.
EU Legal Framework on the Governors’ Accountability
EU law is not silent on the issue
of the Governors’ accountability. Article 14(2) of the Statute of the European
System of Central Banks (ESCB) and of the ECB, entitled ‘National central
banks’, provides:
A Governor may
be relieved from office only if he no longer fulfils the conditions required
for the performance of his duties or if he has been guilty of serious
misconduct. A decision to this effect may be referred to the Court of Justice
by the Governor concerned or the Governing Council on grounds of infringement
of these Treaties or of any rule of law relating to their application. Such
proceedings shall be instituted within two months of the publication of the
decision or of its notification to the plaintiff or, in the absence thereof, of
the day on which it came to the knowledge of the latter, as the case may be.
Additionally, Article 130
TFEU provides:
When
exercising the powers and carrying out the tasks and duties conferred upon them
by the Treaties and the Statute of the ESCB and of the ECB, neither the
European Central Bank, nor a national central bank, nor any member of their
decision-making bodies shall seek or take instructions from Union institutions,
bodies, offices or agencies, from any government of a Member State or from any
other body. The Union institutions, bodies, offices or agencies and the
governments of the Member States undertake to respect this principle and not to
seek to influence the members of the decision-making bodies of the European
Central Bank or of the national central banks in the performance of their
tasks.
Judicial Review of EU Law acts
The Treaty on the Functioning of
the European Union (TFEU) provides for two different methods of judicial
control designed to ensure the legal exercise of power by EU institutions,
offices, bodies and agencies. The relevant provisions are Articles 263,
concerning direct actions for annulment, and 267, concerning indirect review
via the preliminary reference procedure from the national courts. Overall, the EU
system of judicial review reflects the fundamental principles of subsidiarity
provided in Articles 4 and 5 TEU. Consequently, the annulment of a national act
falls within the exclusive competence of the Member States and the CJEU has
jurisdiction to annul a national measure only where there is an explicit power
to do so in the Treaties. Rimšēvičs is
therefore a unique case as it is relates to the annulment of a national measure
by which the Governor of the national bank of Latvia was “relieved from office”.
It becomes pressing to examine the appropriateness of the Court’s ruling and to
assess whether EU law explicitly empowers the CJEU to annul the national
measure adopted against the central banker.
The findings of the Court
The CJEU ruled that it has
jurisdiction to annul a national measure so long as it suspends the Governor of
the national bank. In doing so, the Court interpreted that “both the literal
and the systemic and teleological interpretations of Article 14(2) of the
statute entail the action provided for in that Article being classified as an
action for annulment” (para 66). The Court went even further to explain that
the statute of the ESCB derogated from the usual distribution of judicial review
powers between the national court and the EU courts. The justification,
according to the Court, was that the “ESCB represents a novel legal construct
in EU law which brings together national institutions, namely the national
central banks, and an EU institution, namely the ECB, and causes them to
cooperate closely with each other, and within which a different structure and a
less marked distinction between the EU legal order and national legal orders
prevails.” (Para 69).
Comment and Analysis
In Rimšēvičs the Court clarified the abovementioned provisions as
regards independence and accountability of the Governors of the National Banks.
Surely, any failure by an individual Governor to meet the standards described
in Article 14 (2) ESCB, as set out above, can lead to a significant damage of
the public image of the ECB and consequently cause a significant damage to financial
stability in the EU. One can understand that the concerns and commitment
to high standards exercised by the Latvian Anti-corruption Office are perfectly
legitimate.
Yet the Latvian authorities were
asked in a number of instances by the Court to support their serious allegations
with evidence. The failure to produce any evidence supporting the suspension of
Mr Rimšēvičs from office is remarkable. The lack of evidence against the serious
background of alleged bribery and money laundering is related, closely, to the
fact that individual Governors need to operate impartially and independently,
without influence and pressure from external sources, whether national
governments or private individuals. The Court protected the independence of the
ECB and its Governing Council and emphasised, rightly, that under EU law any
form of pressure cannot be accepted. Overall, the Court highlighted that
independence should be protected under any circumstances in order for the
Governor and the ECB to adopt and implement their decisions based upon technical
and up-to-date scientific expertise. They adopt critical monetary related
decisions that will have little or no use if they are subjected and influenced
to any pressure.
The Governors must meet the
highest possible standards and should perform their duties without any external
influence due to their high ranking. In particular, as already explained
above, Article 14 (2) ESCB requires Governors to be free from any external
influence. This point is vital if the ECB is to stay independent of Member
States or individuals. But let’s assume for a while that there was enough
evidence that Mr Rimšēvičs obtained pecuniary advantages from the Latvian private
bank. Assume further that the Latvian Anti-corruption Office concluded that the
Governor needs to be held accountable for infringing his duty to behave with
integrity and avoid maladministration. Is the national procedure that relieved
him from the office in accordance with EU requirements to respect the rule of
law? Or, does it represent an abusive behaviour exercised by the Latvian
executive authorities? Relieving the national Governor whose independence is
protected under EU law without evidence and without given the opportunity to
see and respond to concrete evidence that supports the serious allegations constitutes
a manifest violation of the notion of independence which is clearly safeguarded
by the ESCB statute. Surely this is not something that can be accepted or justified.
Anything that compromises the independence of the national central bankers is
illegal under EU law.
Conclusion
Pursuant to the EU Treaties,
clearly the Court of Justice has jurisdiction to decide on cases related to the
accountability and independence of the ECB. Yet, the interpretation of the
Court to extend its power to annul a national decision is surprising, at least.
Taking into account the absence of any evidence and also the factual background
of the case, one can realise that a number of irregularities by the Latvian
authorities took place. The Court has made the right decision in clarifying the
set EU law requirements that shield the ECB and the ESCB from any pressure. Additionally,
and perhaps most importantly, the judgment provides us with clear boundaries on
how to safeguard the independence of the national Governors. Independence has
been a key factor in deciding Rimšēvičs,
a factor which came with the cost to strike down a national decision by the
CJEU in order to safeguard it.
Barnard
& Peers: chapter 10, chapter 19
Photo credit: New Europe
