Could a desperate Greece go to court over its financial dispute with Europe? The crisis is more about politics and finance than it is about law. But some reports have suggested Greece might take legal action. So let’s look at the relevant legal texts, and some ways in which – theoretically, anyway – Greece could take its case to European Court of Justice.
We should start with the bailout that’s just run out. This was governed by the Master Financial Assistance Facility Agreement, a contract between the European Financial Stability Fund (a creature of the Eurozone states), Greece itself, and the Bank of Greece. That contract was initially drafted so as to terminate at the end of 2014, but has been extended three times, most recently to extend the “availability period” until the end of June 2015.
Interestingly the agreement is subject to English law, but to the jurisdiction of the Luxembourg courts. See clause 15 of the principal agreement.
But in case you’re thinking Greece could urgently seek some sort of order from a Luxembourg court, failure to renew or an extend an agreement is of course not in itself a breach of that agreement. I don’t think anyone’s suggested there’s been any breach by the EFSF. So Greece’s legal options lie elsewhere.
First, the Greek banking system has as I understand been held up since February by “emergency liquidity assistance”, a system under which the Bank of Greece makes loans to Greek banks and draws down money from an ECB loan facility in order to do so. ELA is operated in accordance with published procedures, but ultimately governed in law by article 14.4 of the Statute of the European System of Central Banks and of the ECB.
Article 14.4 says (somewhat obscurely) –
National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on the responsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB.
The Governing Council of the ECB and ESCB (the ECB’s executive board plus the governors of the national central banks of Euro states) has already capped the level of ELA to Greece under article 14.4, a couple of days ago. But as the BBC reported,
The ECB could go further … and announce it will withdraw ELA all-together as the country’s bail-out programme officially expires.
Either of these decisions – the one already taken or any future limitation or withdrawal of ELA – could be challenged by Greece under article 35.1 of the Statute, which says:
The acts or omissions of the ECB shall be open to review or interpretation by the Court of Justice of the European Union in the cases and under the conditions laid down in the Treaty on the Functioning of the European Union.
The European Court’s jurisdiction ultimately comes from article 263 of the Treaty on the Functioning of the EU, though, which says:
The Court of Justice of the European Union shall review the legality of legislative acts, of acts of the Council, of the Commission and of the European Central Bank … It shall also review the legality of acts of bodies, offices or agencies of the Union intended to produce legal effects vis-à-vis third parties.
It shall for this purpose have jurisdiction in actions brought by a Member State …
Any decision to restrict ELA is an “act” of the ECB, and so challengeable by Greece in the European Court.
Greece’s argument would be that the ECB, by taking steps likely to push Greece out of the Euro, was in breach its duty under article 127 TFEU through the ESCB to
support the general economic policies in the Union with a view to contributing to the achievement of the objectives of the Union as laid down in Article 3 of the Treaty on European Union
an economic and monetary union whose currency is the euro.
Secondly, Greece yesterday asked for a new type of bailout: a loan under the Treaty establishing the European Stability Mechanism. The Board of Governors of the ESM is made up of Eurozone finance ministers, and has power to agree a loan to Greece under article 16 of the ESM Treaty (note the reference to a “Memorandum of Understanding”, however, which would mean conditionality; it’s discussed further in article 13.3).
Article 37 of the ESM Treaty gives Greece a second way of “appealing” to the European Court of Justice. It must first ask the Board in effect to review its refusal under article 37.2, and assuming it maintains its refusal, Greece can then take the dispute to the ECJ under article 37.3:
If an ESM Member contests the decision referred to in paragraph 2, the dispute shall be submitted to the Court of Justice of the European Union. The judgement of the Court of Justice of the European Union shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by said Court.
Greece’s argument here would be that by refusing to consider or grant a loan, the ESM is acting contrary to its article 3 purpose
to mobilise funding and provide stability support under strict conditionality … to the benefit of ESM Members which are experiencing, or are threatened by, severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole and of its Member States.
So there are two types of legal challenge open to Greece: against the EBC’s restriction or withdrawal of ELA, under the main TFEU Treaty; and an ESM Treaty challenge to the refusal of (or refusal to consider) an ESM loan.
Greece would surely want to suspend the restriction of withdrawal of ELA – something that can be ordered by the European Court, under article 278 TFEU. Or Greece might want to compel the grant or consideration of an ESM loan. It would have to argue that the ECJ had power to grant interim measures requiring this in an ESM Treaty case, under (or by analogy with) article 279 TFEU.
So there are ways in which Greece could take its argument to the European Court. But judges are not economists or financial experts; and in the real world, the chances of the ECJ ruling against the ECB and Eurozone ministers and ordering ELA support or an ESM loan – let alone that Greece can obtain such an order in time to influence financial events – must be vanishingly small.
Thirdly and less immediately, Greece could take its fellow Eurozone member states to the ECJ under article 259 TFEU, alleging breach of their duties of sincere and loyal cooperation by failing to take all steps necessary to keep Greece in the Euro. But by then, it’d all be too late.