Constitutions and Government Responses to Financial Crises - - PowerPoint PPT Presentation

Ragnhildur Helgadóttir

Constitutions and Government Responses to Financial Crises

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• There are limits to what governments can do,

under their own constitutions, to counteract and address financial and economic crises.

• Government action may also be problematic vis-a-

vis a state’s international obligations; under general international law; EU/EEA law and human rights

• bligations.

→ Starting point here: Constitutional litigation within the state.

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Impact of extraordinary circumstances in constitutional litigation

• The circumstances around the adoption of

legislation influence the interpretation of constitutional provisions and international conventions.

• Constitutions are often indeterminate and / or

require a proportionality test. The rationale for legislation matters for that. →

This is the normal manner in which crises affect constitutional law. However, crises may also lead to a state of emergency or the use of emergency powers.

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• Is it ever possible (and if so under what

circumstances) for financial or economic crises to justify the use of emergency powers or derogations?

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Emergency and derogation powers

• May be

– codified. Conditions and powers set out in the constitution. E.g. in France, Finland, Greece. – unwritten principle allowing derogation in emergency

• situation. E.g. in Iceland, Denmark.
• May permit

– changes in constitutional procedures – e.g. increased presidential powers or the transfer of competences from Parliament to the government. – derogations from substantive constitutional rules, such as human rights provisions.

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Use of emergency / derogation measures

Derogations from regular procedures / separation of powers Derogations from human rights War / armed conflict Iceland1940 og 1941 Denmark1940-45 France 1961 Norway 1940-45 Denmark1940 og1941 USA 1942 The Eur. Convention on Human Rights: N- Ireland, Turkey Other emergencies Norway1926 The Eur. Convention on Human Rights: Georgia (bird flu).

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Icelandic & Norwegian theory

Emergency powers are acceptable

1. in exceptional situations only. 2. if the government goes no further than necessary. A principle of proportionality is key.

In Iceland, art. 15 of the ECHR will have decisive impact on the scope of the unwritten constitutional principle of emergency powers.

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Article 15 of the ECHR

Derogation in time of emergency

• 1. In time of war or other public emergency threatening the life
• f the nation any High Contracting Party may take measures

derogating from its obligations under this Convention to the extent strictly required by the exigencies of the situation, provided that such measures are not inconsistent with its other obligations under international law.

• 2. No derogation from Article 2, except in respect of deaths

resulting from lawful acts of war, or from Articles 3, 4 (1) and 7 shall be made under this provision.

• 3. Any High Contracting Party availing itself of this right of

derogation shall keep the Secretary General of the Council of Europe fully informed of the measures which it has taken and the reasons therefore. It shall also inform the Secretary General of the Council of Europe when such measures have ceased to operate and the provisions of the Convention are again being fully executed.

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Siracusa principles on limitation and derogation provisions in ICCPR

A state party may take measures derogating from its obligations under the International Covenant on Civil and Political Rights pursuant to Article 4 (hereinafter called "derogation measures") only when faced with a situation of exceptional and actual or imminent danger which threatens the life of the nation. A threat to the life of the nation is one that: (a) affects the whole of the population and either the whole or part

• f the territory of the State, and

(b) threatens the physical integrity of the population, the political independence or the territorial integrity of the State or the existence

• r basic functioning of institutions indispensable to ensure and

project the rights recognized in the Covenant. Internal conflict and unrest that do not constitute a grave and imminent threat to the life of the nation cannot justify derogations under Article 4. Economic difficulties per se cannot justify derogation measures.“

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ESA decision Dec. 15, 2011

Premises:

• “Deviations from the fundamental principles and

freedoms of the EEA Agreement must be construed narrowly and justification can only be accepted in the case of a genuine and sufficiently serious threat affecting one of the fundamental interests of society.“

• “It is settled case law of the Court of Justice and

the EFTA Court that mere economic grounds cannot serve as justification for restrictions to the fundamental freedoms”

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ESA decision, Dec. 15, 2011.

“... the objective of the emergency measures was not merely economic but rather to safeguard the functioning

• f the domestic banking system and the real overall

economy in Iceland. The functioning of a country's banking system is of systemic significance for the proper functioning of the state's real overall economy and that of society...[In addition] payment systems of the country depend thereon. Therefore, the objective of the emergency measures is an overriding requirement in the general interest capable of justifying restrictions to the free movement of capital, provided that the measures taken can be regarded as proportionate to the attainment of the objective pursued.“

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ESA, cont. Was the reaction proportionate to the crisis?

• “This situation in which Iceland suddenly found itself was an

unprecedented calamity for a developed country”... „The three banking groups accounted for over 85% of retail banking in Iceland. Consequently, practically the entire payments systems of the country depended upon them. Almost every family and business in Iceland is said to have been a customer, holding debit and savings accounts with these banks. ...Limits in accessing such accounts would have instantly risked causing a full run on the banks with consequent serious risks for public security. Businesses could not have used funds to pay for their resources and to pay wages to employees; retail suppliers could not have imported necessities for the public, drugs and food etc; ... This would have increased the already existing risk of systemic financial collapse.“

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But justifications get you only so far...

• ESA decision June 2011, regarding ICESAVE

(Iceland’s compliance with directive 94/19/EC on deposit guarantee schemes):

– “According to the case law of the Court of Justice, a Member State cannot plead exceptional circumstances to justify non- compliance with a directive in the absence of a specific legislative provision in the directive to that effect.“ – ESA cited the ECJ on the point that “To recognize the existence

• f a general reservation covering exceptional situations, outside

the specific conditions laid down in the provisions of the Treaty and the second directive, would, moreover, be liable to impair the binding nature and uniform application of Community law” and found that “exceptional circumstances” could not release the Icelandic government from its responsibilities under the Directive.

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MBL.

Sunnudaginn 26. október, 2008 - Innlendar fréttir

Farið inn í brennandi hús

Ríkisvaldið mun sennilega bera fyrir sig stjórnskipulegan neyðarrétt í dómsmálum á hendur því vegna neyðarlaganna. Mörg riftunar- og skaðabótamál hugsanlega framundan

MBL.

Sunnudaginn 9. nóvember, 2008 - Innlent - greinar

Óvenjulegir tímar kalla á óvenjuleg ráð

Það hefur mætt mikið á Tryggva Þór Herbertssyni undanfarna mánuði, en hann er nýlega hættur sem efnahagsráðgjafi forsætisráðherra.

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Conclusions

• Constitutional emergencies can only be accepted

a) in quite exceptional situations b) if government action goes no further than strictly necessary c) when the conditions for emergencies set out art. 15 of the ECHR are met: d) if the conditions set out in the Siracusa principles are met. e) under international law, when they are proclaimed and government reaction is non-discriminatory.

• Nothing eliminates the possibility of financial crises

falling within the scope of emergency powers – but more than financial interest must be at stake.

• The requirement of proportionality is key.
• International law requires proclamation. That is a key

guarantee against abuses.

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