EU Court Faces ‘Declaration of War’ From German Top Judges

(Bloomberg) -- The European Union's top court faced the most stinging attack in its 68-year history -- not from Brexiteers, but from its German counterpart.

In a long-awaited ruling on the European Central Bank's quantitative easing program, Germany's constitutional court in Karlsruhe accused the EU Court of Justice of overstepping its powers when it backed the ECB's controversial policy.

The German court said the EU judges' December 2018 ruling that QE was in line with EU rules was “objectively arbitrary” and is “methodologically no longer justifiable.” It gave the ECB a three-month ultimatum to fix flaws in the measure.

“This is a declaration of war on the ECJ, and it will have consequences,” said Joachim Wieland, a law professor at the University of Administrative Sciences, who sees the real challenge in the future relationship between the EU court and national constitutional tribunals. “It's an invitation for other countries to simply ignore decisions that they don't like.”

German Judges Give ECB Three Months to Fix Flaws in QE Program

The ruling is a direct challenge to the supremacy of the EU judges, whose rulings are binding across the 27-nation bloc. The German court said this no longer applies in extreme examples when the EU tribunal fails in its duties.

The bigger issue is that the ruling has opened a Pandora's box on the EU legal order, said Guntram Wolff, director of the Brussels-based Bruegel think tank.

Calling an ECJ judgment “ultra vires,” or going beyond one's legal powers, “is a huge issue for the integrity of EU law,” Wolff said in an email. “Every national court can now challenge the EU court by saying what the German court is doing, is also applicable to us.”

It's not only the toughest criticism the Luxembourg-based EU judges have faced by one of the bloc's most senior courts, it also creates a risk that other nations will start to doubt their authority.

The EU court has long been contentious among the ranks of Brexiteers, who won the U.K.'s 2016 referendum campaign. In recent months it's also traded blows with Poland's nationalist government over reforms to the country's legal system.

Poland's Deputy Justice Minister Sebastian Kaleta said the ruling showed “yet again” that the EU doesn't have the authority to meddle in or question Polish judicial changes.

Laurent Pech, a professor of European law at Middlesex University in London, said the ruling could lead to clashes with “autocratic authorities in Hungary and Poland.”

These countries “are no doubt going to use this ruling as a pretext to further undermine the fundamental principles underlying the EU's legal system,” Pech said. They will instruct “their courts to disobey inconvenient ECJ rulings whenever convenient for the ruling party.”

The ECB's asset-purchase program has been a concern for the German court since its inception. In 2017, its judges asked the EU court for an interim decision aimed at limiting the ECB's leeway, but the EU tribunal rejected the restrictive reading of the law suggested by their German counterparts.

Aside from the battle of the judges, the German ruling has implications for a wide swathe of other EU institutions.

For some, a prime risk of the ruling is to the independence of the ECB. If the German court determines where the blurry line between monetary and fiscal policy lies, then that means the nation is essentially imposing its own national orthodoxy on a European-level institution.

“We have always been critical of the way in which the ECB has tended to blur the lines between momentary policy, which is its original task, and fiscal and economic policies,” said Ralph Brinkhaus, the parliamentary leader of Chancellor Angela Merkel's Christian Democrat bloc. “We will now use the ruling of the Constitutional Court as an occasion to question its decisions once again, in a constructive and critical dialog.”

The EU tribunal doesn't comment on rulings from national courts, Juan-Carlos Gonzalez, head of the court's press service, said by phone.

While the European Commission said it would need to study the ruling in detail first, a spokesman pointed to how the EU's top court rulings are meant to be the final word in legal conflicts.

“We reaffirm the primacy of EU law and the fact that rulings by the EU Court of Justice are binding on all national courts,” Eric Mamer, spokesman of the European Commission said at a regular press briefing on Tuesday.