1 Treaty Establishing the European Stability Mechanism Between the Kingdom of Belgium, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus, the Grand Duchy of Luxembourg, Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland, 2 Feb. 2012, Eur. Comm'n DOC/12/3 [hereinafter ESMT], http://www.european-council.europa.eu/media/582311/05-tesm2.en12.pdf.Google Scholar

2 ESMT, supra note 1, at art. 3.Google Scholar

3 ESMT, supra note 1, at art. 8.Google Scholar

4 ESMT, supra note 1, at recital 6 & art. 39.Google Scholar

5 Statement of the Eurogroup (30 Mar. 2012), http://eurozone.europa.eu/media/678952/eurogroup_statement_30_march_12.pdf. This alters the terms of Article 39 of the ESM Treaty.Google Scholar

6 Strengthening Economic Governance in the EU: Report of the Task Force to the European Council (21 Oct. 2010), http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/117236.pdf.Google Scholar

7 Conclusions of the European Council (EC), 28–29 Oct. 2010 (EUCO 25/1/10 REV 1), available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/117496.pdf.Google Scholar

8 Council Regulation 407/2010, Establishing a European Financial Stabilization Mechanism, 2010 O.J. (L 118) 1.Google Scholar

9 Registered as a Société anonyme, having a registered office 43, Avenue John F. Kennedy, L-1855 Luxembourg, R.C.S. Luxemoubrg B n° 153.414.Google Scholar

10 This interpretation was confirmed by the Court of Justice in Case C-370/12, Pringle v. Ireland, ¶ 65 (27 Nov. 2012), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62012CJ0370:EN:HTML.Google Scholar

11 Conclusions of the European Council, supra note 7. See also Decision 2011/199/EU, of the European Council of 25 March 2011 Amending Article 136 of the Treaty on the Functioning of the European Union with Regard To a Stability Mechanism for Member States Whose Currency Is the Euro, 2011 O.J. (L 91) 1, recital 2.Google Scholar

12 Conclusions of the European Council (EC), 16–17 Dec. 2010 (EUCO 30/1/10 REV 1), available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/118578.pdf.Google Scholar

13 Council Decision 2011/199/EU, supra note 11.Google Scholar

14 It is of note that it is the Decision as opposed to merely the amendment contained in the Decision that is to enter into force at the relevant date.Google Scholar

15 See Factsheet: Treaty Establishing the European Stability Mechanism (2 Feb. 2012), http://ec.europa.eu/economy_finance/economic_governance/documents/127788.pdf, published by the European Commission setting out the background and chronology to the adoption of the ESM Treaty.Google Scholar

16 Press Release, Eur. Union, European Stability Mechanism (ESM) Is Inaugurated (8 Oct. 2012), http://www.esm.europa.eu/press/releases/20121008_esm-is-inaugurated.htm. The July 2013 date is also mentioned on the website of the European Commission at: Treaty Establishing European Stability Mechanism (ESM) Signed (11 Jul. 2011), http://ec.europa.eu/economy_finance/articles/financial_operations/2011-07-11-esm-treaty_en.htm.Google Scholar

17 Factsheet, , supra note 15.Google Scholar

18 Bundesverfassungsgericht [BVerfG] [Federal Constitutional Court] Case Nos. 2 BvR 1390/12, 2 BvR 1421/12, 2 BvR 1438/12, 2 BvR 1439/12, 2 BvR 1440/12 & 2 BvE 6/12, 12 Sept. 2013 (Ger.), available at http://www.bundesverfassungsgericht.de/pressemitteilungen/bvg12-067en.html. For further details, see contributions in this special edition from Susanne K. Schmidt and Karsten Schneider.Google Scholar

19 Riigikohus [Supreme Court], Judgment No. 3–4-1-6-12, 12 July 2012 (Estonia), available at http://www.riigikohus.ee/?id=1347; Pringle v. Ireland, [2012] I.E.S.C. 47, Case No. 339/2012 (Ir.), available at http://www.supremecourt.ie/Judgments.nsf/frmSCJudgmentsByYear?OpenForm&l=en (pending before the Supreme Court of Ireland). Certain aspects of the case have already been subject to rulings by the Supreme Court.Google Scholar

20 Ireland, Pringle v., supra note 19, Ruling of the Supreme Court of Ireland, Chief Justice Denham, 31 July 2012, available at http://www.courts.ie/__80256F2B00356A6B.nsf/0/E7504392B159245080257A4C00517D6A?Open&Highlight=0,Pringle,~language_en~. The Reference is available at: http://www.courts.ie/__80256F2B00356A6B.nsf/0/E44922F2B6DBED2F80257A4C00570284?Open&Highlight=0,Pringle,~language_en~.Google Scholar

21 See e.g., Euro. Parl., EP Analytical Summary of the Debates on EMU for the ICG (11 June 1991), available at http://ec.europa.eu/economy_finance/emu_history/documentation/chapter13/19910611fr14analyticalsummary.pdf (Available only in French; these are the records of the proceedings of the Inter-Institutional Conference on Economic and Monetary Union accompanying the Intergovernmental Conferences, held on Tuesday 11 June 1991). See also the records of the Monetary Committee, working on the preparation of the Maastricht Treaty.Google Scholar

22 Observations of Pringle, at page 7, in Case C-370/12, Pringle v. Ireland, 2012 EUR-Lex CELEX LEXIS 0000 (27 Nov. 2012). The Observations of Pringle are available at http://www.extempore.ie/wp-content/uploads/2012/10/C-370.12-Observations-of-T.Pringle-as-filed-2.pdf. This position rests on arguments concerning competence of Union in economic and monetary policy set out in pages 20 to 28 of the submissions.Google Scholar

23 Observations of Pringle, supra note 22, at 7.Google Scholar

24 European Parliament Resolution of 23 March 2011 on the Draft European Council Decision Amending Article 136 of the Treaty of the Functioning of the European Union with Regard to a Stability Mechanism for Member States Whose Currency Is the Euro, Eur. Parl. Doc. P7_TA(2011)0103, available at http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P7-TA-2011-0103+0+DOC+PDF+V0//EN. At paragraph 7 the European Parliament “Warns that the intention to establish the permanent stability mechanism outside the EU institutional framework poses a risk to the integrity of the Treaty-based system. …”Google Scholar

25 Resolution of the European Parliament of 23 March 2011, supra note 24. Paragraph 9 states the European Parliament:Google Scholar

26 Opinion of the European Central Bank of 17 March 2011 on a Draft European Council Decision Amending Article 136 of the Treaty on the Functioning of the European Union with Regard to a Stability Mechanism for Member States Whose Currency Is the Euro, at para. 8, 2011 O.J. (C 140) 8, 9. Paragraph 8 observes: “A key element of the draft decision is that it provides for an intergovernmental mechanism instead of a Union mechanism. The ECB supports recourse to the Union method and would welcome that, with the benefit of the experience gained, the ESM would become a Union mechanism at an appropriate point in time.”Google Scholar

27 Observations of Cyprus, Ireland & Austria in Pringle v. Ireland, supra note 22 (on file with author). Cyprus states: “[T]he prohibition in Article 125 TFEU relates to the Union and the Member States, not to a third party such as the ESM, which has a legal personality distinct from Member States. …” The Government of Ireland submitted at paragraph 72 of its observations that “The Article 125(1) TFEU prohibition applies to “[a] Member State”, while the ESM will be an international financial institution. The ESM will have legal personality, which will be separate and distinct from the ESM Members. …” Austria submitted that “Article 122 TFEU expressly relates only to the Union. An international organisation such as the ESM is therefore not covered by that provision, especially since, furthermore, the Union is not a contracting party. …”Google Scholar

28 Observations of Pringle, supra note 22, at 37–40. Express reference was made to Case 22/70, Comm'n v. Council, 1971 E.C.R. 263.Google Scholar

29 Observations of Pringle, supra note 22, at 38, para. 3.97. Reference was made to Case C-307/97, Compagnie de Saint-Gobain v. Finanzamt Aachen-Innenstadt, 1999 E.C.R. I-6161, paras. 33 & 34; Case C-55/00, Gottardo v. Istituto nazionale della previdenza sociale, 2002 E.C.R. I-413, paras. 33 & 34; and Case C-376/03, D. v. Inspecteur van de Belastingdienst/Particulieren/Ondernemingen buitenland te Heerlen, 2005 E.C.R. I-5821, para. 52.Google Scholar

30 Observations of Pringle, supra note 22, at 34–38, paras. 3.85 & 3.91. Reference was made to Case 50/76 Amsterdam Bulb v. Produktschap voor Siergewassen, 1977 E.C.R. 137, para. 35.Google Scholar

31 Case 249/81, Comm'n v. Ireland, 1982 E.C.R. 4005; Joined Cases 67, 68 & 70/85, Van der Kooy BV v. Comm'n, 1988 E.C.R. 219; Case C-188/89, Foster v. British Gas, 1990 E.C.R. I-3313; Case C-306/97, Connemara Machine Turf Co. v. Coillte Teoranta, 1998 E.C.R. I-8761; and Case C-325/00, Comm'n v. Germany, 2002 E.C.R. I-9977. See also, by analogy, Case C-196/04, Cadbury Schweppes v. Comm'rs of Inland Revenue, 2006 E.C.R. I-7995, concerning creation of legal structures designed to avoid tax. The “decisive control” test was advocated by Advocate General Van Gerven in his Opinion in Foster v. British Gas, 1990 E.C.R. at I-3313Google Scholar

32 Observations of Pringle, supra note 22, at 20–28, 50, para. 3.146.Google Scholar

33 Observations of Pringle, supra note 22, at 52, para. 4.3. Case C-266/03, Comm'n v. Luxembourg, 2005 E.C.R. I-4805. See also Case C-433/03, Comm'n v. Germany, 2005 E.C.R. I-6985, paras. 57 & 59; and Case 22/70, Comm'n v. Council (European Agreement on Road Transport) [AETR], 1971 E.C.R. 263.Google Scholar

34 Consolidated Version of the Treaty on the Functioning of the European Union art. 3(1)(c), 5 Sept. 2008, 2008 O.J. (C 115) 47 [hereinafter TFEU].Google Scholar

35 TFEU art. 2(3). Koen Lenaerts, Piet Van Nuffel, Robert Bray & Nathan Cambien, European Union Law ¶ 7–023 (3d ed. 2011) (“Since all competences outside the areas referred to in Arts 3 and 6 are shared by the Union with the Member States (see TFEU art.4(1)) [the coordination of the economic and employment policies of the Member States] can only be classified as falling within the general category of shared competences.”).Google Scholar

36 See, e.g., Council Regulation (EC) No 1466/97 of 7 July 1997 on the Strengthening of the Surveillance of Budgetary Positions and the Surveillance and Coordination of Economic Policies, 1997 O.J. (L 209) 1, as amended by Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011, 2011 O.J. (L 306) 12; Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the Effective Enforcement of Budgetary Surveillance in the Euro Area, 2011 O.J. (L 306) 1; Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on Enforcement Measures To Correct Excessive Macroeconomic Imbalances in the Euro Area, 2011 O.J. (L 306) 8; Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the Prevention and Correction of Macroeconomic Imbalances, 2011 O.J. (L 306) 25. See also Council Regulation (EC) No 1467/97 of 7 July 1997 on Speeding up and Clarifying the Implementation of the Excessive Deficit Procedure, 1997 O.J. (L 209) 6, as amended by Council Regulation No 1177/2011 of 8 November 2011, 2011 O.J. (L 306) 33.Google Scholar

37 TFEU art. 5(1).Google Scholar

38 Expressed in Oral observations on behalf of Pringle at the hearing of 23 Oct. 2012 (on file with author).Google Scholar

39 On its own website, the ESM expressly referred to the amendment to the TFEU as its legal basis. See European Stability Mechanism, Frequently Asked Questions About the European Stability Mechanism (ESM), Eur. Stability Mechanism (8 Oct. 2012), http://www.esm.europa.eu/pdf/FAQ%20ESM%2008102012.pdf. In reply to the question “What is the legal basis of the ESM and how was it established?” it is stated that “the European Council agreed that the Treaty on the Functioning of the European Union (TFEU) should be amended in order for a permanent mechanism—the European Stability Mechanism—to be established by the Member States whose currency is the euro to safeguard the financial stability of the euro area as a whole. The amendment (in Article 136 of the Treaty) was adopted by the European Council on 25 March 2011.” Although, this assertion was subsequently withdrawn and references to the European Council Decision removed. This revised explanation of the legal basis is available at European Stability Mechanism, Frequently Asked Questions About the European Stability Mechanism (ESM), Eur. Stability Mechanism (12 Nov. 2012), http://www.esm.europa.eu/pdf/FAQ%20ESM%2012112012.pdf.Google Scholar

40 Observations of Pringle, supra note 22, at 18–19, paras. 3.6–3.10.Google Scholar

41 Observations of Pringle, supra note 22, at 54, para. 5.4.Google Scholar

42 Observations of Pringle, supra note 22, at 55, paras. 5.6, 5.7.Google Scholar

43 Observations of Ireland, para. 78, in Pringle v. Ireland, supra note 22 (on file with author). See also, Observations of Greece, para. 24, in Pringle v. Ireland, supra note 22 (on file with author); Observations of France, para. 67, in Pringle v. Ireland, supra note 22 (on file with author); Observations of Cyprus, para. 52, in Pringle v. Ireland, supra note 22 (on file with author); and Observations of the Netherlands, paras. 46–56, in Pringle v. Ireland, supra note 22 (on file with author).Google Scholar

44 See Observations of Austria, para. 24, in Pringle v. Ireland, supra note 22 (on file with author), and Observations of the European Commission, para. 78, in Pringle v. Ireland, supra note 22 (on file with author).Google Scholar

45 See Observations of Austria, supra note 44, para. 27, and Observations of the European Commission, supra note 44, paras. 69–72.Google Scholar

46 See Observations of Germany, in Pringle v. Ireland, supra note 22 (on file with author), and Observations of the Netherlands, supra note 43, paras. 60–66.Google Scholar

47 See, e.g., Observations of Germany, supra note 46, para. 77, and Observations of the European Commission, supra note 44, para. 97.Google Scholar

48 See, e.g., Observations of Germany, supra note 46, para. 77, and Observations of the European Commission, supra note 44, para. 97.Google Scholar

49 Ireland, Pringle v., supra note 22.Google Scholar

50 Id. at paras. 129–47.Google Scholar

51 Id. at para. 136.Google Scholar

52 Id. at paras. 137–38, 41, 43 & 45.Google Scholar

53 Id. at paras. 136–38.Google Scholar

54 Id. at para. 142.Google Scholar

55 Id. at paras. 53–57.Google Scholar

56 Id. at para. 56.Google Scholar

57 Id. at para. 60.Google Scholar

58 Id. at paras. 64–68.Google Scholar

59 Id. at para. 67.Google Scholar

60 Id. at paras. 183–85.Google Scholar

61 Id. at para. 123.Google Scholar

62 Id. at paras. 123–28.Google Scholar

63 See records of the Monetary Committee, working on the preparation of the Maastricht Treaty, cited by the Commission.Google Scholar

64 Ireland, Pringle v., supra note 22, paras. 144–45, referring to obligations under ESMT, supra note 1, at art. 25(2).Google Scholar

65 Ireland, Pringle v., supra note 22, paras. 138, 45.Google Scholar

66 See, e.g., Geraldine Mary Andrews & Richard Millett, Law of Guarantees (6th ed. 2012). At paragraph 1–005, the authors observe that “The essential distinguishing feature of a contract of guarantee is that the liability of the guarantor is always ancillary, or secondary, to that of the principal, who remains primarily liable to the creditor.” At paragraph 1–001, the authors define suretyship as “[T]he generic term given to contracts by which one person (the surety) agrees to answer for some existing or future liability of another (the principal) to a third person (the creditor), and by which the surety's liability is in addition to, and not in substitution for, that of the principal.” (emphasis added).Google Scholar

67 Ireland, Pringle v., supra note 22, para. 136.Google Scholar

68 Observations of Cyprus, Ireland & Austria, supra note 27.Google Scholar

69 Id. Google Scholar

70 See, for example, the approach of the Court of Justice of the European Union (ECJ) in Amsterdam Bulb v. Produktschap voor Siergewassen, supra note 30, at para. 35; Case 106/77, Amministrazione delle Finanze dello Stato v. Simmenthal, 1978 E.C.R. I-629, para. 14; and Case C-135/08, Rottman v. Freistaat Bayern, 2010 E.C.R. I-1449, para. 41.Google Scholar

71 Ireland, Pringle v., supra note 22, paras. 69, 124, 126.Google Scholar

72 It is noteworthy that this point was also identified by the ECJ at the hearing of the Pringle case on 23 October 2012. The Court inquired whether the establishment of the ESM outside the Union legal order could not reasonably be regarded as a circumvention of the requirement to amend the Treaties using an ordinary revision procedure.Google Scholar

73 Treaty on European Union, 7 Feb. 1992, 1992 O.J. (C 191) 1, art. 3(1)(c) [hereinafter TEU].Google Scholar

74 TFEU art. 120, read in combination with TEU art. 3(4).Google Scholar

75 See, e.g., Council Regulation (EC) No 1466/97, supra note 36, as amended by Regulation (EU) No 1175/2011, supra note 36; Regulation (EU) No 1173/2011, supra note 36; Regulation (EU) No 1174/2011, supra note 36; and Regulation (EU) No 1176/2011, supra note 36. See also Council Regulation (EC) No 1467/97, supra note 36, as amended by Council Regulation No 1177/2011, supra note 36.Google Scholar

76 Ireland, Pringle v., supra note 22, para. 136; ESMT, supra note 1, at art. 3.Google Scholar

77 See Resolution of the European Parliament of 23 March 2011, supra note 24.Google Scholar

78 TEU art. 3(4).Google Scholar

79 TFEU art. 3(1)(c).Google Scholar

80 TFEU art. 2(2).Google Scholar

81 Dawson, Mark & Witte, Floris de, Constitutional Balance in the EU After the Euro-crisis, 76 Mod. L. Rev. (forthcoming 2013).Google Scholar

82 Id. at 10–11.Google Scholar

83 7 Feb. 2012, Parl. Deb., H.C. (2012) 1817-i (U.K.), available at http://www.publications.parliament.uk/pa/cm201012/cmselect/cmeuleg/uc1817-i/uc181701.htm (Oral Evidence of Professor Paul Craig before the European Scrutiny Committee of the House of Commons; see Answer to Question 12).Google Scholar

84 ESMT, supra note 1, at art. 32(3).Google Scholar

85 Pringle v. Ireland, supra note 22, paras. 178–82.Google Scholar

86 For example, see cases giving rise to a preliminary reference in Case C-434/11, Corpul Naţional al Poliţiştilor v. Ministerul Administraţiei şi Internelor (MAI) (14 Dec. 2011 Order), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62011CO0434:EN:NOT, and Case C-134/12, MAI v. Corpul Naţional al Poliţiştilor-Biroul Executiv Central (14 May 2012 Order), http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62012CO0134:EN:NOT. See cases giving rise to a reference in Case C-128/12, Sindicato dos Bancários do Norte v. BPN—Banco Portuguěs de Negócios, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62012CN0128:EN:NOT (pending before the ECJ), and Case C-264/12, Sindicato Nacional dos Profissionais de Seguros e Afins v. Fidelidade Mundial—Companhia de Seguros, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62012CN0264:EN:NOT (pending before this Court).Google Scholar

87 Observations of Germany, supra note 46, and Observations of the Netherlands, supra note 43. These Member States argued that the prohibition of Article 125 TFEU should be read teleologically in the context of the ongoing financial crisis. Germany argued that the prohibition on bailouts should be read restrictively “in certain exceptional cases which were not foreseeable when the provision was adopted.” Google Scholar

88 Observations of Ireland, supra note 43, and Observations of France, supra note 43. France argued that ESM is not “a bail-out” fund precluded by Article 125 TFEU because financial assistance is subject to repayment and conditionality. It was submitted on behalf of Mr. Pringle that a conditional bailout remains a bailout.Google Scholar

89 Observations of Cyprus, Ireland & Austria, supra note 27.Google Scholar

90 Observations of the Netherlands, supra note 43. That government states: “Disputes concerning the interpretation and application of the ESM Treaty are evidently disputes which relate to the subject matter of the Treaties.”Google Scholar

91 Observations of Belgium, in Pringle v. Ireland, supra note 22 (on file with author); Observations of Germany, supra note 46; Observations of the Netherlands, supra note 43; Observations of Ireland, supra note 43; Observations of Greece, supra note 43; Observations of France, supra note 43; Observations of Cyprus, supra note 43; and Observations of Austria, supra note 44.Google Scholar

92 Observations of Germany, supra note 46; and Observations of the European Commission, supra note 44.Google Scholar

93 See Decision 2011/199/EU, supra note 11, at recital 2.Google Scholar

94 Craig, Paul, The Stability, Coordination and Governance Treaty: Principle, Politics and Pragmatism, (2012) 37 Eur. L. Rev. 231 (2012).Google Scholar

95 See for example the characterization of the Union legal order by Professor Walter Van Gerven in Walter Van Gerven, The European Union: A Polity of States and Peoples (2005).Google Scholar