Editorial of October 2016

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by Sophie Perez Fernandes, Junior Editor

Engaging EU liability within the European Stability Mechanism framework

Last September 20th, the European Court of Justice (ECJ) delivered two judgments regarding the role of the European Commission and, to a lesser extent, the European Central Bank, in the negotiation and signing of the Memorandum of Understanding concluded between the Republic of Cyprus and the European Stability Mechanism (ESM) during the 2012-2013 financial crisis, and, in particular, in the restructuring of the banking sector in Cyprus imposed as a condition for the grant of financial assistance.

In Mallis and Malli (Joined Cases C-105/15 P to C-109/15 P), actions were brought against the European Commission and the European Central Bank for the annulment of the Eurogroup’s statement of 25 March 2013 concerning, inter alia, the restructuring of the banking sector in Cyprus. In turn, in Ledra Advertising (Joined Cases C-8/15 P to C-10/15 P), depositors of two large Cypriot banks brought actions against the European Commission and the European Central Bank for the partial annulment of the Memorandum of Understanding of 26 April 2013 adopted jointly by the ESM and the Republic of Cyprus and also for compensation for damages allegedly suffered following the request for financial assistance and the ensuing restructuring of the two banks in question.

The ECJ had already been called upon to rule on judicial protection questions raised by the ESM framework. Created in order to provide, where needed, financial assistance to the Member States whose currency is the euro, the ESM was instituted through an international agreement between euro area Member States – the Treaty establishing the ESM, concluded in Brussels the 2th February 2012, in force since the 27th September 2012. Thus, the ESM Treaty is not part of the EU legal order, as confirmed by the ECJ in the famous Pringle judgment (C-370/12). As a consequence, when creating the ESM, or acting within its framework, Member States do not act within the scope of application of EU law for the purposes, in particular, of Article 51(1) CFREU. Individuals seeking to challenge Member States’ measures adopted pursuant the conditions laid down in a Memorandum of Understanding would not, therefore, find in the preliminary ruling mechanism an indirect means of access to the ECJ in order to assess their compliance with EU law and, in particular, the CFREU as the former was not in question and the latter was hence out of reach.

What the above mentioned judgments, and especially Ledra Advertising, emphasize is the link nonetheless existing between the ESM framework and the EU legal order. Quoting Alicia Hinarejos (EU Law Analysis), in order to carry out its functions, the ESM “borrows” two EU institutions, the European Commission and the European Central Bank, two thirds of the infamously known Troika. The question is whether (and, if so, when) EU institutions’ actions within the ESM framework might be reviewed and, when harmful, give rise to compensation under EU law and, in particular, in light of the CFREU.

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Summary of Simmenthal – 106/77

by José Ricardo Sousa, student of the Master's degree in EU Law of UMinho

Keywords: EU law application; national law; legal orders; uniformity; free movement of goods.

Court: CJEU | DateMarch 9th 1978 | Case: 106/77 | Applicants: Simmenthal S.p.A. vs Amministrazione Delle Finanze pello Stato

Summary: On 26th July 1973 Simmenthal imported beef for human consumption from France and they had to pay its respective fee importation for public health inspection. About this matter, it was Simmenthal’s opinion that this inspection clearly violated the fundamental principles of Common Market (in this case, free movement of goods). So, Simental brought an action to court with the intention to be repaid for the mentioned illegal (for their point of view) fee. The Court, Pretore di Suza accepted Simmenthal arguments and condemned Administrazione delle Finanze pello Stato (therefore, administrazione) to repay the company. Not satisfied with the decision, Admnistrazione appealed against the order to repay arguing with some rulings by the constitutional jurisdiction regarding the conflict between Community law and National law. The Court suspended and referred a question to CJEU:

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