How a German court has assisted an even better Brexit

Written by Daniel Hodson

THE RECENT DECISION of the German Constitutional Court (GCC or Verfassungsgericht to be precise) to overrule the European Court of Justice (ECJ) is not just a massive blow to the EU but of immense support to Britain’s successful exit from that faltering and misguided project. It clearly underscores, on sovereignty, constitutional and accountability grounds, the reasons for the UK’s decision to leave, but also provides massive assistance for a successful outcome to the present negotiations, exposing the weaknesses in the ECJ, and opening the way to a renegotiation of some of the most damaging aspects of the Withdrawal Agreement. 

In summary the GCC found that a hugely significant part of recent European Central Bank (ECB) monetary activities – some €2.2 trillion of bond purchases – had no legal authority, negating an earlier ECJ ruling. It was saying in effect that whatever the ECJ might rule, if that were against the German constitution, the latter was sovereign, and the ECJ subservient. And the German constitution, at least for Germans, is immutable. 

The problem is of course that, in strategic terms, for the development and protection of the EU’s journey towards ever closer union, the absolute and final authority of the ECJ is critical. And yet here is a massive fissure in the still developing constitutional structure of the EU, drawing further attention to its lack of accountability. How could such a massive activity have been allowed to occur without political or legal scrutiny until now, many years after the event? How can such a key institution as the ECJ command such limited respect whereby some of its rulings can be subject to rejection by mere national courts, albeit of the highest standing? 

Indeed, the half-baked nature of the EU’s constitution, with its underlying federalist aims offset by its disjointed judiciary structure is emphasised by the current proposals by Germany and France for an €500billion loan in the name of the EU itself to finance grants to individual member states to meet the demands of the pandemic crisis. This cannot be touched by the German Constitutional Court since it relates to a fiscal rather than a monetary transaction, and is already being proclaimed as a decisive move towards more wholesale integration. 

The British constitution, much of it unwritten, has been honed over most of a millennium, and has no comparator on the Continent in durability, depth and flexibility; it reflects the British view of democracy, transparency and accountability, as well as the Anglo-Saxon tradition of freedom of speech and action unless forbidden by the law, as opposed to permissible only as allowed by the law. At its heart – and the cornerstone of the Brexit movement – is the sovereignty of Parliament, which, were Britain to remain an EU member, would be slowly ceded to its institutions, including the now tarnished ECJ. The irony is that the British people would have been denied, for at least some of the ECJ’s rulings, the right of rejection now so clearly provided to Germany by its GCC. 

It is particularly galling that, at this late stage in the UK’s EU now transitionary membership, the ECJ, this now lame duck institution whose judicial primacy is asserted in no treaties except for the Withdrawal Agreement, is attacking our premier industry by upholding a proposed VAT charge on the City’s global derivative markets dating back to 1977. 

This judgement is an expensive warning and reminder of several to date under recognised but potentially highly damaging aspects of the Withdrawal Agreement: the ECJ’s continuing and open-ended role as final court of appeal for the rights of EU nationals resident in the UK and for cases relating to EU law applicable in the UK prior to Brexit, as well is its possible future oversight of British Government state aid initiatives anywhere in the UK, because of their possible impact on Northern Irish activities, under the NI Protocol. And of course there is the ongoing EU insistence in the Brexit negotiation on level playing field regulatory requirements, final arbiter the ECJ – naturally – firmly rejected to date by the UK. 

Yet the Withdrawal Agreement, although a treaty, could still be amended by negotiation. Despite manifest current difficulties there is still time before 31st December to reduce substantially or eliminate the hamstrung ECJ’s lingering presence in the treaty underlying Brexit. Failing that there is a more radical alternative. It could arguably be terminated under international law, at least in part, on account of material breach, particularly were the UK to leave the EU on WTO terms. 

The behaviour of the EU since the Agreement’s signature could well provide ample opportunity for partial treaty nullification: for instance its failure to show good faith in refusing FTA terms afforded to comparator independent nations and best efforts in negotiation, as well as its repeated efforts, contrary to international law, to undermine the UK’s fundamental right of self-determination. 

Perhaps the most egregious aspect of the EU’s attitude, providing the greatest opportunity for reshaping the Withdrawal Agreement is the former’s current totally unprincipled and selective attitude to state aid, inevitably – and fundamentally – abused across its entire membership, each country facing and dealing independently with its own CV19 induced economic and social crisis.  What bilateral treaty could be upheld in international law when a key aspect, the oversight of state aid rules by the – not always – supreme court of one signatory, is totally undermined by that signatory’s turning a blind eye to their radical abuse, regardless of the circumstances? 

The GCC judgement not only serves to remind us of the constitutional mess we are leaving behind, but also of the continuing and growing opportunities to change, to our benefit, the ultimate shape of our exit terms. Even now the Withdrawal Agreement is not in tablets of stone, particularly in respect of our ongoing judicial sovereignty, something we could be about to jettison, at least in part. Let’s salute those wise German judges and go for an even better Brexit. 

Daniel Hodson is Vice Chairman of the Foundation for Independence, Chairman of The City for Britain and a director of Vote Leave; previously he was CEO of LIFFE, Gresham Professor of Commerce and Deputy Chief Executive of Nationwide Building Society.


Share on facebook
Share on twitter
Share on linkedin