The Legal Dimension

Worth More Than the Paper They Are Written on?

One of the fundamental functions performed by the legal system is to make the risk of the unpredictability of human actions and their consequences more predictable and, thus, more manageable. The archetype of any such attempt is the legal contract: I give you something so that you do something specific in return. If you don’t do it, I won’t give you anything. And, on top of that, you have to give me something else to compensate me for your non-performance.

In the case of bilateral agreements the content of the respective obligations is often likely to be uncontroversial. If the parties cannot agree, however, the contract will remain ineffective; otherwise they have to appoint a third party – such as a court of law – to resolve the dispute. The greater the number of parties involved in a legal relationship, the more often this will be the case. The likelihood of a dispute also increases if the legal relationship is based on a statutory law. One common reason for this is the use of vague expressions that simply cry out for clarification, a case in point being the term ‘in good faith’ (‘Treu und Glauben’) as used in section 242 of the German Civil Code (BGB).

Further examples are the ‘public good’ (‘Wohl der Allgemeinheit’) mentioned in Article 14 of the German constitution (Basic Law), the ‘(European) Union’s general interest’ (Article 285 (2) and Article 300 (4) of the Treaty on the Functioning of the European Union (TFEU), as well as ‘price stability’ and the ‘general economic policies in the Union’ (Article 2 of the Statute of the European Central Bank).

It is difficult enough to draft contracts and create legal certainty in an individual system, but this task becomes even more challenging in international trade, which necessitates contracts between companies from various countries. In order to facilitate the interpretation of these contracts, the parties concerned often agree to apply the particular jurisdiction of one of the parties involved. This requires the other parties to make concessions. Alternatively, the solution may be to agree on a third jurisdiction that is alien to both parties. However, it is often difficult to make such compromises.

Standard texts are open to various interpretations

The solution to this dilemma is to use (non-binding) rules for international trade, such as those drafted by the International Institute for the Unification of Private Law (Unidroit), which the parties to the contract concerned agree are applicable. Although this produces standard texts, it does not necessarily lead to standard interpretations. Instead, it is the job of arbitration tribunals or the competent national courts to interpret these texts. It has been Unidroit’s experience that court rulings on such standard texts in individual countries have tended to follow these countries’ own jurisdictions, which means that these texts will need to be standardised again in a few decades’ time.

One potential solution here is to set up common courts of law, such as the European Court of Human Rights (ECHR) in Strasbourg and the European Court of Justice (ECJ) in Luxembourg. The latter is responsible for interpreting European Union (previously European Community) treaties. The rulings handed down by these courts are binding in all the versions that the courts produce in their official languages.

The official languages used by the ECHR are English and French, while 24 EU languages now enjoy equal status at the ECJ. This does, at least, mean that there is a common court of justice that can work in all official languages and is responsible for interpreting EU treaties. This should ensure a standard interpretation of texts across all language barriers.

Standard legal interpretation is under threat

Germany’s Federal Constitutional Court is now claiming the right to be able to review not only EU treaties, but also the ECJ’s decisions on the basis of the German constitution. If the court continues to assert this right, then – under the principle of international law that accords equal status to all member states and also governs EU law – the supreme courts of the other 27 member states that rule on constitutional matters could claim the same right. The standard interpretation of European Union law and, consequently, the EU’s legal uniformity would then be under threat. The goal of minimising the risk posed by differing interpretations of EU law would be postponed even further into the future.

It is incompatible with the principle of the European Union for national courts to review EU legislation

In my view it is incompatible with the principle of the European Union for one member state’s courts to review EU legislation and, moreover, it is incompatible with the German constitution, which envisages the integration of Germany into a united Europe. EU legislation is supposed to serve the Union’s general interest and is designed to be applied throughout the EU. No national court has the competence to judge this. It is subject to influences that largely prevail in one member state. It consists of nationals of only one member state. It is familiar with only one legal system – its own. It is not qualified to judge whether the relevant legislation serves the Union’s general interest. Its view is inevitably one-sided. It is, of course, competent to examine this legislation in a national context. However, any such examination does not serve the purpose of EU legislation.

A case in point was the legal action taken by Peter Gauweiler – a Christian Social Union (CSU) party member of the German Bundestag – against the European Central Bank (ECB). The matter at issue was Mario Draghi’s famous comment that “within our mandate the ECB is ready to do whatever it takes to save the euro.” The hearing before Germany’s Federal Constitutional Court left some people with the impression that the ECB’s subsequent actions were illegal. However, the hearing before the European Court of Justice revealed that this view was not shared by anyone else involved in the legal proceedings.

But even if there is clarity about the content of an obligation under international law, it is by no means certain that this commitment will be honoured. Although the United Nations Security Council can pass resolutions to take action, implementation of these measures lies with the UN’s member states and is governed by political rather than legal considerations. The permanent members of the Security Council are even entitled to veto any action taken against permanent members or their protégés.

A nail in the coffin for legal obedience

Organisations that see themselves as legal communities – such as the European Union – can, of course, declare their own legislation to be null and void, thereby rendering it ineffective. However, it is not possible to enforce judgements based on EU law against member states. Consequently, the enforcement of EU law is ultimately dependent on its members states’ willingness to cooperate. This is problematic when it comes to applying the Stability Pact, which Germany was especially keen to introduce in the first place. It was therefore a nail in the coffin for legal obedience by other member states when Germany of all countries did not feel obliged to comply with the Pact.

The law can only mitigate the risk of government action to a limited degree

The enforcement of the law vis-à-vis nation states is one of the greatest weaknesses of international legal systems. Consequently, the law can only mitigate the risk of government action to a limited degree. Nonetheless, the European Union’s legal system remains one of the most effective international jurisdictions: not least because – irrespective of individual member states’ consent – it is possible to establish what the law is.