ECJ annuls a national measure against an independent central banker

Case C‑202/18 (Ilmārs Rimšēvičs v Republic of Latvia) and Case C‑238/18 (European Central Bank v Republic of Latvia); Opinion of AG Kokott of 19 December 2018, ECLI:EU:C:2018:1030; judgment of the Court of 26 February 2019, ECLI:EU:C:2019:139.

A recent judgment of the ECJ underlined the increasing interweaving of EU law and national law in the area of central bank law, not only in substantive matters but, also procedurally. In the first cases since the provision providing for this anomaly was inserted in the Treaty1 in 1993, the ECJ confirmed that review of a national legal act affecting the independence of the monetary authority lies with the European Court of Justice. Normally, only legal acts of EU institutions, bodies, offices and agencies can be challenged before the CJEU (Article 263 TFEU); national legal acts with an EU law connotation may come before the CJEU through a reference for a preliminary ruling (Article 267 TFEU) or in infringement proceedings (Article 258 TFEU). Admittedly, this is a singular and exceptional case as it concerns review of a Member State measure by which a Governor of a National Central Bank (NCB) is “relieved from office”. Together with the Executive Board of the European Central Bank (ECB), NCB Governors in the Eurosystem2 form the ECB’s Governing Council, which has ultimate decision-making power3 for monetary policy in the Euro Area4. Since monetary policy is an exclusive Union competence5, at least for the Member States6, to be pursued in independence7, the Court found that it has jurisdiction to assess the legality of a measure that interferes with an NCB Governor performing his functions and annulled the relevant national decision in so far as it prohibits the Governor from performing his duties as NCB Governor. There is more that’s exceptional about this case: alleged corruption at a central bank, allegations of money laundering and of a misinformation campaign…..

The Court’s judgment comes against the backdrop of alleged corruption and money laundering in a Baltic state, and alleged misinformation from outside the EU8. The cases from Latvia originate in allegations of improper conduct by the Latvian central bank governor in connection with Trasta Komercbanka, a commercial bank allegedly engaged in money laundering. This bank’s licence had been withdrawn9, with its shareholders engaging in a battle before the CJEU10 to be heard in their grievances11 against the ECB12, which has been responsible since 2014 under the newly established ‘banking union’ for licensing credit institutions across the Euro Area. In February 2018, the allegations13 against the Latvian NCB Governor, Mr. Ilmārs Rimšēvičs, led the Latvian Anti-Corruption Office (Korupcijas novēršanas un apkarošanas birojs, or KNAB) to arrest14 and interrogate him15, and to issue an order temporarily prohibiting him from performing his duties as Latvia’s NCB Governor16. Both Mr. Rimšēvičs and the ECB contested the Latvian measure in court on the basis of Article 14.2 ESCB Statute.

This is not the place to go into the wider background or on the money laundering scandals. The allocation of competences for AML/CTF oversight17 is in discussion after recent outrages, possibly seeing the ECB having more powers in this field18. Nor can I go into the issue of presumption of innocence and the requirements that need to be met for relieving a Governor from his post for corruption to be justified, namely an independent court judgment or incontrovertible evidence of wrong-doing19. Mr Rimšēvičs’ guilt has not been proven in court.

What interests us here is the appeal at the CJEU against a State measure. Article 14.2 ESCB Statute contains guarantees for the independence of NCB Governors. A Governor may not be dismissed on policy grounds but “only if he no longer fulfils the conditions required for the performance of his duties or if he has been guilty of serious misconduct”. Within two months, “[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 this Treaty or of any rule of law relating to its application.” This is one of the four grounds for annulment proceedings against an EU legal act20. The AG asked if “the remedy in Article 14.2 of the [ESCB Statute] therefore [must] be analysed as an action for annulment although, in the system of remedies established in the [TFEU], an action for annulment may in principle be brought solely in order to challenge the acts of the bodies and agencies of the European Union?”. After an extensive exploration, she found that an action under Article 14.2 did not constitute a direct appeal. Rather, she approached the action as seeking “a declaration by the Court that, in adopting with regard to Mr Rimšēvičs restrictive measures that prevent him from performing his duties as Governor of the Bank of Latvia, the Republic of Latvia failed to fulfil its obligations under Article 14.2.”

The Court disagreed. Even though the ECB itself had merely requested the Court to declare that Latvia had infringed Article 14.2 by adopting the measure (paragraph 64 of the judgment)21, the Court held that “both the literal and the systematic and teleological interpretations of Article 14.2 of that statute entail the action provided for in that article being classified as an action for annulment” (para. 66). Acknowledging that “expressly entrust[ing] the Court with power to review the lawfulness of an act of national law in light of ‘[the] Treaties or of any rule of law relating to their application’, the second subparagraph of Article 14.2 of the [ESCB Statute] derogates from the general distribution of powers between the national courts and the courts of the European Union”. Such derogation “can be explained by the particular institutional context of the ESCB within which it operates”, adding: “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)

Article 14.2

“reflects the logic of this highly integrated system which the authors of the Treaties envisaged for the ESCB and, in particular, of the dual professional role of the governor of a national central bank, who is certainly a national authority but who acts within the framework of the ESCB and sits, where he is the governor of a national central bank of a Member State whose currency is the euro, on the main decision-making body of the ECB.” (para. 70)

The Court emphasises the specific, unique and exceptional nature of the remedy (para. 71), so the judgment is not opening the floodgates to similar leapfrogging of national proceedings by going directly to the CJEU22. Yet, the judgment does underline the unique character of the ECB which, in its monetary policy and other central bank tasks, as well as in its SSM-related23 novel supervisory tasks (see the L-Bank judgment)24, is the centre of a dual25 system in which traditional lines between Union and State spheres become blurred. Noteworthy in this respect is the requirement for the ECB, as prudential supervisor, to apply national law26 implementing (directives of) the Single Rulebook for banks in the EU.

The possibility of a direct appeal against a measure which, even though not outright dismissal, equally relieves the Governor from office27, was grounded by the Court on the independence of the ESCB. Referring to earlier case law on the ECB28, the Court stresses that the Treaty “is intended to shield the ESCB from all political pressure” (para. 47). It finds that also temporary prohibiting an NCB Governor from performing her or his duties “is likely a form of pressure” (para. 52). Prohibiting a Governor from performing his duties must be reviewable under Article 14.2 because, if this were not so, a series of temporary measures could be adopted evading judicial review (para. 53). In this context, the Court notes that the restrictions applied to Mr Rimšēvičs may well last until the end of his term of office (para. 54) in December 2019.

Comment

Personally, I like that the judgment confirmed my reading of Article 14.2, defended in my thesis29 in 1997, when I wrote: “A direct appeal to the European Court against a national decision (NCB Governors are appointed and ‘relieved from office’, as the [ESCB] Statute expresses it, under national procedures by State organs) is a novelty which crept into Community [now: Union] law through the backdoor of EMU provisions”.

A different outcome would have done less for the independence of the central banks: as the Court notes (para. 49): “By directly conferring jurisdiction on the Court to determine the lawfulness of the decision to relieve the governor of a national central bank from office, the Member States have demonstrated the importance which they attach to the independence of the holders of such positions”. And: unjustified measures to “relieve” an NCG Governor from office would “severely undermine” the independence of the ECB’s Governing Council, as the Court notes in para. 51. There is a direct road of redress to Luxembourg instead of an indirect route: finding merely an infringement by Latvia would have required that Member State to take the necessary steps to comply with the Court’s judgment (Article 260 TFEU) rather than providing immediate relief to the affected person (the NCB Governor) and entity (the ECB).

Also relevant in respect of the guarantee of independence is that the ESCB Statute allows both the affected Governor and the Governing Council to appeal against a national decision affecting the Governor’s position in the ultimate ECB decision-making body “so that one does not have to rely on the willingness of the Governor concerned to fight in court against the appointing (and ‘relieving’) authority”, as I wrote back in 1997. These joint cases, brought by the Latvian NCB Governor and the ECB respectively, were evidence of these paths.

The judgment30 underscores the independence of the ESCB and the members of its decision-making bodies, while it also highlights the measure in which Union and State law permeate in central banking in Europe.