Dr. Marios Costa, Senior Lecturer, City, University of London
The European Union (EU) has faced criticism for administrative and structural shortcomings, with reports and discussions pointing to political irregularities within its system. Similarly, concerns about alleged corruption, maladministration, and money laundering at the national governance level raise anxieties for both citizens and the Union.
On February 26, 2019, the Court of Justice (Grand Chamber) issued a significant judgment on two combined cases. These cases were presented by Ilmārs Rimšēvičs, the suspended Governor of Latvia’s Central Bank, and the European Central Bank (ECB) against the Republic of Latvia. Both Rimšēvičs and the ECB asserted that Latvia’s Anti-corruption Office had unjustly prohibited Rimšēvičs from fulfilling his responsibilities, including his participation in the ECB’s Governing Council. In an unexpected turn, the Court of Justice, for the first time in EU legal history, overturned the national act issued by the Anti-corruption Office, which had restricted Rimšēvičs from performing his duties.
This judgment has far-reaching constitutional implications, raising questions about whether the Court has overstepped its jurisdiction as defined by the Treaty framework. The ruling has been met with surprise and warrants a closer examination of its appropriateness. This commentary analyzes the judgment and concludes that the Court of Justice has expanded its powers of judicial review to an unprecedented degree. It acknowledges the exceptional nature of the Court’s ruling, particularly its connection to the EU’s monetary system. It remains to be seen if this unusual case signals a broader judicial trend toward an extended jurisdiction that goes beyond the EU legal order.
Facts of the Case
Mr. Rimšēvičs, as Governor of Latvia’s National Bank, faced accusations of soliciting a bribe in the form of a complimentary vacation and accepting EUR 750,000 to exert influence for a private Latvian bank. The Latvian Anti-Fraud Office launched investigations into these serious bribery claims, resulting in Mr. Rimšēvičs’s detention. Although he was released on October 19, 2018, he was prohibited from performing decision-making, control, and monitoring duties within the Central Bank of Latvia.
Mr. Rimšēvičs and the ECB brought the case before the Luxembourg Court, challenging the decision to remove him from office. The Court overturned the Latvian Anti-corruption Office’s decision specifically regarding its prevention of the Governor’s execution of his EU (and national) duties.
EU Legal Framework on the Governors’ Accountability
The issue of Governors’ accountability is addressed within EU law. Article 14(2) of the Statute of the European System of Central Banks (ESCB) and of the ECB, under the heading ‘National central banks,’ states:
“A Governor may be relieved from office only if he no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct. A decision to this effect may be referred to the Court of Justice by the Governor concerned or the Governing Council on grounds of infringement of these Treaties or of any rule of law relating to their application. Such proceedings shall be instituted within two months of the publication of the decision or of its notification to the plaintiff or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.”
Furthermore, Article 130 TFEU states:
“When exercising the powers and carrying out the tasks and duties conferred upon them by the Treaties and the Statute of the ESCB and of the ECB, neither the European Central Bank, nor a national central bank, nor any member of their decision-making bodies shall seek or take instructions from Union institutions, bodies, offices or agencies, from any government of a Member State or from any other body. The Union institutions, bodies, offices or agencies and the governments of the Member States undertake to respect this principle and not to seek to influence the members of the decision-making bodies of the European Central Bank or of the national central banks in the performance of their tasks.”
Judicial Review of EU Law acts
The Treaty on the Functioning of the European Union (TFEU) outlines two methods of judicial oversight to ensure that EU institutions, offices, bodies, and agencies exercise their power within a legal framework. Article 263 pertains to direct actions for annulment, while Article 267 concerns indirect review through the preliminary reference procedure from national courts. In general, the EU’s system of judicial review reflects the core principles of subsidiarity as defined in Articles 4 and 5 TEU. As a result, the power to annul a national act typically resides solely with the Member States. The CJEU can only annul a national measure when the Treaties explicitly grant such authority. Rimšēvičs stands out as a unique case because it involves the annulment of a national measure that removed the Governor of Latvia’s national bank from office. Therefore, it is crucial to examine the legitimacy of the Court’s ruling and determine if EU law explicitly empowers the CJEU to overturn the national measure taken against the central banker.
The findings of the Court
The CJEU asserted its jurisdiction to overturn a national measure if it leads to the suspension of a national bank Governor. In its interpretation, the Court determined that “both the literal and the systemic and teleological interpretations of Article 14(2) of the statute entail the action provided for in that Article being classified as an action for annulment” (para 66). Furthermore, the Court argued that the ESCB’s statute deviated from the typical distribution of judicial review powers between national and EU courts. The Court justified this by stating that the “ESCB represents a novel legal construct in EU law which brings together national institutions, namely the national central banks, and an EU institution, namely the ECB, and causes them to cooperate closely with each other, and within which a different structure and a less marked distinction between the EU legal order and national legal orders prevails” (Para 69).
Comment and Analysis
The Rimšēvičs case provided the CJEU an opportunity to clarify the aforementioned provisions related to the independence and accountability of National Bank Governors. Without question, the failure of any individual Governor to uphold the standards outlined in Article 14(2) ESCB, as detailed above, could severely damage the ECB’s public image and threaten financial stability within the EU. Therefore, the concerns expressed and the commitment to high standards demonstrated by the Latvian Anti-corruption Office are entirely understandable.
However, it’s important to note that the Court repeatedly requested that Latvian authorities substantiate their serious accusations with evidence. The failure to present any evidence to support Mr. Rimšēvičs’s suspension from office is significant. This lack of evidence, especially considering the gravity of the alleged bribery and money laundering, is closely linked to the principle that individual Governors must operate impartially and independently, free from external influences or pressure, whether from national governments or private entities. The Court defended the independence of the ECB and its Governing Council, rightly emphasizing that any form of pressure is unacceptable under EU law. In essence, the Court underscored the importance of safeguarding independence to ensure that the Governor and the ECB make and implement their decisions based on sound technical and current scientific knowledge. If subject to or swayed by external pressure, their critical monetary decisions would hold little value.
Given their high-ranking positions, Governors must adhere to the highest possible standards and execute their duties without external influence. As previously stated, Article 14(2) ESCB mandates that Governors remain free from any outside influence. This is crucial for the ECB to maintain its independence from Member States and individuals. For the sake of argument, let’s assume there was sufficient evidence to prove that Mr. Rimšēvičs had received financial benefits from the Latvian private bank, and the Latvian Anti-corruption Office determined that he should be held accountable for violating his duty to act with integrity and avoid maladministration. Would the national procedure that removed him from office then align with EU requirements for upholding the rule of law? Or would it constitute an abuse of power by Latvian executive authorities? Removing a national Governor, whose independence is safeguarded by EU law, without providing concrete evidence or giving them the opportunity to review and respond to such evidence supporting the accusations represents a clear violation of the principle of independence enshrined within the ESCB statute. This is unequivocally unacceptable and unjustifiable. Any action that jeopardizes the independence of national central bankers is illegal under EU law.
Conclusion
The EU Treaties clearly grant the Court of Justice the authority to adjudicate cases concerning the ECB’s accountability and independence. Nevertheless, the Court’s interpretation that extends its powers to annul a national decision is unexpected, to say the least. Considering the absence of evidence and the case’s context, it becomes apparent that the Latvian authorities engaged in multiple irregularities. The Court made the correct decision in clarifying the established EU law requirements that protect the ECB and the ESCB from external pressure. Furthermore, and perhaps most importantly, this judgment provides clear guidelines on safeguarding the independence of national Governors. Independence was a decisive factor in Rimšēvičs, ultimately leading the CJEU to annul a national decision to ensure its protection.
Barnard & Peers: chapter 10, chapter 19
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