GERMAN LAW JOURNAL Review of Developments in German, European and International Jurisprudence Editors–in‐Chief: Russell A. Miller; Peer C. Zumbansen Editors: Gregor Bachmann; Betsy Baker; Nina Boeger; Gralf‐Peter Calliess; Matthias Casper; Helge Dedek; Patrycja Dabrowska; Morag Goodwin; Felix Hanschmann; Hans Michael Heinig; Florian Hoffmann; Karen Kaiser; Alexandra Kemmerer; Malcolm MacLaren; Stefan Magen; Ralf Michaels; Christoph Safferling; Frank Schorkopf
www.germanlawjournal.com © Copyright 2000 ‐ 2010 by German Law Journal GbR. All rights reserved. ISSN: 2071‐8322 / ISSNL: 2071‐8322 Vol. 11 No. 12 Pages 1323‐1420 01 December 2010 Table Of Contents Articles Patrick Quirk Cover Me: The Economy Is on Fire (The German Pfandbrief) Mary Dobbs Legalising General Prohibitions on Cultivation of Genetically Modified Organisms TABLE OF CONTENTS PAGE I 1323‐1346 1347‐1372 Table Of Contents Developments Jochen Taupitz The German Stem Cell Act Stephan Ast The Gäfgen Judgment of the European Court of Human Rights: On the Consequences of the Threat of Torture for Criminal Proceedings 1373‐1392 1393‐1406 Matthias Mahlmann The Politics of Constitutional Identity and its Legal Frame—the Ultra Vires Decision of the German Federal Constitutional Court TABLE OF CONTENTS PAGE II 1407‐1420 Articles Cover Me: The Economy Is on Fire (The German Pfandbrief) By Patrick Quirk * “No German mortgage bank has defaulted since the introduction of the German Mortgage Bank Act in 1900.” 1 A. Introduction This article examines the German Pfandbrief (“covered bond”) as an example of the banking practice of “originate to hold” by which mortgage debts are retained on the balance sheet of the originator and not sold on to a third party such as an investor or hedge fund. The global financial crisis (GFC) of 2008‐2009 2 will be forever linked to the process known as “securitization” and the distribution of mortgage‐backed securities throughout willing and later remorseful financial markets. But this is not the only model. As a member of the Executive Board of the European Central Bank (ECB) noted in June of 2008, “it may be worth recalling that this [originate to distribute model] is not the way banks have historically done business. Under the traditional—perhaps, I should say secular—‘originate to hold’ business model, banks extend loans to firms and households 3
and hold them in their balance sheets until they mature or are paid off.” *
BA LLB (Queensland), LLM (Tübingen), Associate Professor and Associate Dean for Academic Affairs, Ave Maria School of Law, Naples, FL. I am grateful to Nathan Collins of the Ave Maria Law Library and Mark Pataky, David Cobb, Scott Dewey, Ann Maria Frey and Jason Jesko for their assistance in research. Mindful of the difficulties in finding high quality translations of foreign legal sources, I acknowledge a large debt to the translation of the Gesetz zur Neuordnung des Pfandbriefrecht (“Pfandbriefgesetz” PfandBG)(German Act on the Reorganization of Pfandbrief Legislation) made public by the Bundesverband Öffentlicher Banken Deutschlands and the international law firm of Allen & Overy. While offered as a “Non‐binding Convenience Translation from the German” this translation together with its introductory paragraphs is without doubt the most accurate and helpful available to lawyers at the time of writing). Mistakes and omissions are, as always, my own. Email: [email protected] 1
Orazio Mastroeni, Pfandbrief‐style products in Europe, European Central Bank, BIS Papers No.5, 63. 2
Other terms have been use in its description, including, credit squeeze, credit bubble, housing crisis, and distressed credit market crisis. 3
José Manuel González‐Páramo, Financial turmoil, securitisation and liquidity, 3, Global ABS Conference 2008, Cannes, 1 June 2008. 1324 G e r m a n L a w J o u r n a l
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The idea of holding assets in this way has a long history in the form of the German Pfandbrief and this article will outline some of its major legal characteristics and recent upgrading by the German Bundestag (Parliament) in May 2005. 4 Part B. will consider European “aversion” to securitization and Part C. will outline the history of the German Pfandbrief. Part D. will examine specific provisions of the Pfandbrief laws, including licensing, supervision, the cover register, risk management, issuing structures, and insolvency privileges. Part E. will look briefly towards the possible future of the covered bond in the United States and the UK. The Pfandbrief has received very little consideration in academic legal literature. This article invites more detailed consideration of its origins and characteristics since its regulatory structure has served as an important model for similar systems throughout 5
Europe: For example, the Obligations foncières found in France, Spain’s Cédulas hipotecarias, and Lettres de gage offered in Luxembourg. So‐called “Pfandbrief banks,” with their obligatory license from German authorities and strict quality controls, are known for their stability and permanence. According to the Association of German Pfandbrief Banks, 6 no Pfandbrief has failed in more than 100 years. 7 They are said to be attractive even in unfavorable financial times because they “provide issuers with access to liquidity at all times. . . [and] . . . can therefore finance new business with substantial margins even in a difficult market environment.” 8 A final caveat before proceeding to matters of substance concerns the dangers inherent in explaining and interpreting foreign legal terms. Direct translation may not produce 4
See Gesetz zur Neuordnung des Pfandbriefrechts, 22 May, 2005; amendments beyond this date will not be considered. 5
See Norton Rose LLP, German Pfandbriefe: a modern financing tool in demand, client publication (December 2008) available at http://www.nortonrose.com/knowledge/publications/2008/pub18574.aspx?page=all&lang=en‐gb, (last visited Feb. 5, 2009). 6
See Verband Deutscher Pfandbriefbanken (‘VDB’), Representing Germany's Pfandbrief Banks, available at http://www.pfandbrief.de/d/internet.nsf/tindex/en_about.htm, (last visited Feb. 5, 2009). This is the lobbying body for the group of approximately 36 banks that are engaged in the Pfandbrief market. 7
See Verband Deutscher Pfandbriefbanken, The Pfandbrief – a premium product, 16, presentation prepared for analysts’ conference call (26 Feb. 2008) available at http://www.pfandbrief.de/d/internet.nsf/0/346DAA456C29D09AC125741F00254245/$FILE/PfandbriefPremiumP
roduct.pdf (last visited Feb. 5, 2009). 8
Id. 4. 2010] German Pfandbrief 1325
accurate rendering of the underlying concepts. One may never assume, for example, that one of the (several) German words for mortgage (Hypothek) 9 carries along with it precisely the same meaning as the English word “mortgage.” 10 Nevertheless, ". . . to understand a foreign solution to a familiar problem is often rewarded with a clearer grasp of one's own law" 11 and this is the basis on which the following explanation and analysis is offered. B. The European “Aversion” to Securitization The United States is the birthplace of modern securitization, beginning with the mortgage‐
backed security of the 1970s. 12 European banks were much slower to adopt this technique and were arguably better placed to weather the initial stages of the 2008‐2009 crisis, 13 although they too have been directly and indirectly exposed to turmoil. One may hypothesize that their late entry to the game of securitization means that European bankers find it easier to remember what “old style” banking was all about. 14 Many banks in Europe were active in the securitization market, and (as for the rest of the world) activity for 2008 fell below those of previous years. 15 During the 2008‐9 global financial crisis, there were a number of alarming defaults, including that of Northern Rock 16 in the United Kingdom, and problems for some German banks such as IKB Deutsche 9
Hypothek is one way of presenting the idea of a real property mortgage. The word Grundshuld is also sometimes used and may be translated as “Abstract land charge”. 10
Even if it did, there are many other aspects to land transfer that would not find equivalent meaning. For example, the time periods and other procedures involved in standard land transfer or in registration or discharge of a mortgage. 11
F.H Lawson, The Field of Comparative Law, 61 JURID. REV 16 (1949). 12
See Randall Dodd, Subprime: Tentacles of a Crisis, 44 FIN. & DEV. 15 (International Monetary Fund Dec. 2007) (stating that the early roots of a secondary market for housing mortgages arguably lie in Roosevelt’s New Deal, and the founding in 1938 of the Federal National Mortgage Association (Fannie Mae)). 13
See Oz Shy & Rune Stenbacka, Rethinking the Roles of Banks: A Call for Narrow Banking, THE ECONOMISTS' VOICE: Vol. 5: 2 (2008) available at http://www.bepress.com/ev/vol5/iss2/art6 (stating that notwithstanding the UK’s Northern Rock and other bailouts, some have used this disaster as a basis to argue for drastically “narrower” (simplified, less risky, more transparent) banking services for those who want them). The average Northern Rock depositor and the UK government would perhaps both have been glad of this advice. 14
See supra José Manuel González‐Páramo, note 2. 15
See ESF Securitisation 2008 Market Outlook, European Securitisation Forum, available at www.europeansecuritisation.com. 16
The Bank of England supplied emergency financial aid to this mortgage lender on 14 September, 2007; it was subsequently nationalized on 22 February 2008. This fiasco included the first bank run in Britain in roughly 140 years. 1326 G e r m a n L a w J o u r n a l
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Industriebank, 17 WestLB, and SachsenLB. 18 Iceland also suffered severe financial, political and social unrest. 19 Ratings agency Standard and Poors issued a press release on 19 September 2007 to reassure its clients about the German banks' exposures to U.S. subprime mortgages 20 and the Verband Deutscher Pfandbriefbanken (Associateion of German Covered Bond Banks–VDP) made it clear to investors in early 2008 that its members had low exposure to US residential housing risk. 21 Despite the advent of the Euro in 1999, the European Central Bank does not directly oversee individual banks. This task is left to local authorities which in the case of Germany is divided between the Bundesbank, (Federal Reserve Bank) (overall financial strength), and the Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Institute for the Supervision of Financial Services–“BaFin”) which is responsible for levying fines and other 22
administrative and supervisory functions. There are a number of bankruptcy and commercial laws that drive the securitization process in the USA 23 and as commentators have pointed out, these are modified in various European jurisdictions. 24 17
See Peter Gumbel, Subprime on the Rhine, FORTUNE, 3 Sept. 2007, available at http://w4.stern.nyu.edu/news/news.cfm?doc_id=7571 (listing IKB Deutsche Industriebank as a Düsseldorf‐based commercial bank). 18
Recently purchased 1 January 2008 by the Stuttgart‐based Landesbank Baden‐Wurttemberg. 19
See Judy Dempsey, Iceland’s Government Collapses, NEW YORK TIMES, 26 Jan. 2009. 20
See Standard & Poors, German Banks' Subprime Mortgage And Structured Vehicle Exposure Concerns Are Overstated (19 Sept. 2007) (“... we consider that credit risk in the German banking sector from U.S. subprime mortgage exposures is limited as it is generally concentrated in the 'AAA' and 'AA' rated tranches and we consider the potential market valuation effects to be manageable.”). 21
See Verband Deutscher Pfandbriefbanken (Association of German Pfandbrief Banks), Analysts’ Conference Call, 20, 26 Feb. 2008 (noting that there was limited exposure to apartments and multi‐family dwellings but no exposure to single‐family housing). This is for to say that some German banks did not buy US sub‐prime assets and suffer the consequences. IKB Deutsche Industriebank is one example. See Subprime on the Rhine, FORTUNE, 9 March 2007. 22
See BaFin web page, www.bafin.de. “BaFin has 1,600 employees working in Bonn and Frankfurt am Main. They supervise around 2,079 banks, 718 financial services institutions, 633 insurance undertakings, 26 pension funds, 6,000 investment funds and 78 investment companies (as of January 2008). BaFin operates only in the public interest. Its primary objective is to guarantee the proper functioning, stability and integrity of the German financial system. Bank customers, insurance policyholders and investors are meant to be able to trust the financial system. Under its solvency supervision remit, BaFin ensures the ability of banks, financial services institutions and insurance undertakings to meet their payment obligations. Through its market supervision, BaFin also enforces standards of professional conduct which preserve investors' trust in the financial markets. BaFin also has an investor protection role in that it seeks to prevent unauthorised financial business being carried out.” 23
Most notably the ability to render a “true sale” of debts that have been securitized under Article 9 of the Uniform Commercial Code. 2010] German Pfandbrief 1327
German law experts have outlined the complicated legal issues surrounding a securitization in Germany. 25 Such explanations typically assume familiarity with the US markets and lie beyond the scope of this paper. C. The Pfandbrief—A History The Pfandbrief has nearly 250 years of history. Frederick the Great, King of Prussia (1712‐
1786), 26 instigated the first issue of the Pfandbrief on 29 August 1769, in the wake of the Silesian War and in response to a bankrupt nobility and a ruined Silesia where most “Buildings had been burned, cattle driven away, implements destroyed, and losses of all kinds suffered.” 27 Frederick was known as an enlightened despot, correspondent of Voltaire, and builder of the famous rococo palace of Sans Souci at Potsdam. 28 In 1767, in the midst of an ensuing credit squeeze, high interest rates, and rising commissions, a merchant named Büring had offered Frederick a written plan for the founding of a credit association that promised marvels. The plan would bring about an “abundance of money and credit for the country and for the safest manner in which to begin assisting the impoverished nobility.” 29 Initially rejected, the nobility, or a sizeable portion of the “best families,” 30 were saved by the adoption of the plan in 1770 and the launching of Die schlesiche Landschaft as the first German credit association. Many others followed. 31 24
Christopher Lewis Peterson, Over‐Indebtedness, Predatory Lending, and the International Political Economy of Residential Home Mortgage Securitization: Comparing the United States' Subprime Home Mortgage Lending Crisis to Home Finance in the United Kingdom, Germany, and Japan, SSRN Paper (11 Jan. 2008) available at http://ssrn.com/abstract=1083184. 25
Michael Kern & Werner Meier (Cleary Gottlieb Steen & Hamilton LLP), Chapter 20 ‐ German in THE INTERNATIONAL COMPARATIVE LEGAL GUIDE TO: SECURITISATION 2007, (Global Legal Group, 2007). 26
See JOHN MERRIMAN, A HISTORY OF MODERN EUROPE FROM THE RENNAISANCE TO THE PRESENT, 432‐434 (WW Norton & Co. 1996). Frederick II of Prussia, also known as “Frederick the Great”, his rule was known for its “enlightened absolutism,” judicial reforms, an examination system for entry into the state bureaucracy, bolstering the position of Prussian nobles (e.g. he maintained serfdom in the private estates while others were working for its abolition), prohibiting marriage between nobles and commoners, and preventing the sale of noble lands to commoners.. 27
D. M. Frederiksen, Mortgage Banking in Germany, 9 Q. J. OF ECON. 47, (1894) [hereafter Frederiksen]. 28
See Giles MacDonogh, FREDERICK THE GREAT: A LIFE IN DEED AND LETTERS (2001). 29
Id. at 47 (translation as published in Der Deutsche Oekonomist, 3 June 1894). 30
Frederiksen, supra note 27, at 51. 31
Kur and Neumark, 1777; Pommern, 1780; Hamburg, 1782; Westpreussen, 1787; Ostpreussen, 1788; Lüneburg, 1791; Schleswig‐Holstein, 1811; Mecklenburg, 1818 and 1840; Posen, 1822; Würtemberg, 1825; Calenberg, Grubhagen, and Hildesheim, 1825; Bremen an Verden, 1826. Frederiksen, p. 52. 1328 G e r m a n L a w J o u r n a l
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The plan began with a valuation of an estate, followed by an advance against it of one half to two‐thirds of that value in order to pay off “annoying creditors.” 32 The creditors were paid with bonds issued by the Landschaftscasse (“Casse”) 33 and guaranteed by it both as to principal and interest. The bonds 34 were payable to bearer and yielded a rate of 4% (annually) while the debtor‐noble was required to pay 4½ to 5 percent semi‐annually to the Casse—and “thus the old debts of the estate shall be settled.” 35 The interest differential provided for salaries and overheads of the Casse, as well as insurance in case of “accidents such as death of livestock, hail‐storms, fire, droughts, and war.” 36 Failure by the debtor to pay the mandated interest would lead to sale of the estate. 37 There was a prohibition on the bonds leaving the country or on foreigners making purchase of them through local agents. 38 The plan was designed to produce a large quantity of currency by which land‐owners could relieve themselves of their debt to the Casse. Gradual innovations were made, including the removal of cattle and implements from valuation, 39 and the gradual amortization of loans through sinking funds. The subsequent growth of this method of financing has been outlined in detail elsewhere, 40 but by the end of the nineteenth century it was observed that “while all attempts to base money on land have failed, this proposal, which resulted in the establishment of associations for the issue of long‐term listed bonds based on land, is the origin of all modern methods of organized mortgage banking as it is now carried on on the Continent of Europe.” 41 Several key aspects of the various credit associations are noticeable. First, the amounts loaned typically ranged “from one third to one half of the actual value of the property, and 32
Frederiksen, supra note 27, at 48. 33
Also called a Hypothekencasse. 34 Which might also be named “provincial mortgage coupons” or in more modern parlance, debentures. 35
Frederiksen, supra note 27, at 48. 36
Id. at 48. 37
As opposed to any form of receivership “for on that rests an eternal curse.” Frederiksen, supra note 27, at 48. 38
See id. at 49. 39
Land owners would apparently “borrow” cattle from neighbors of the purposes of valuation. See id. at 48. 40
See id. at 48. 41
Id. at 60. 2010] German Pfandbrief 1329
less than two thirds of the assessed valuation.” 42 Second, they were under government supervision in the sense that excessive valuations were prohibited. 43 Third, in certain cases of loans made against the value of buildings, such buildings had to have been in use for three years and have relevant fire insurance. 44 Valuations were to be related to “average net income for the last three to five years” 45 and the loan amount was a fixed proportion of the valuation. 46 On 1 January 1900 the German legislators passed the Mortgage Bank Act (Hypothekenbankgesetz, HBG) that allowed Pfandbriefe to be issued by private mortgage banks. In 1927, the passage of the Public Pfandbrief Act extended this to public sector banks. D. The Modern Pfandbrief The Pfandbrief is the German compartment of the European covered bond market and has substantial market share of the global covered bond market. In literal translation, a 47
Pfandbrief may be called a Letter of Pledge, although extreme care must be taken in translation of this legal terminology. 48 In terms more understandable in the twenty‐first century United States, a Pfandbrief is a plain vanilla bond or debenture 49 that is backed (“covered”) by an on‐balance‐sheet asset pool and regulated by special German legislation to ensure that value remains equal to or greater than the outstanding obligation. They are considered very secure since “in the event of the issuing mortgage bank becoming insolvent, the creditors would receive a preferential claim over the assets in the cover 42
Id. at 55. 43
See id. at 55. 44
See id. at 56. The amount of the loan was not to exceed the actual cost of the building. 45
Id. at 56. 46
Id. “Usually, the amount that may be loaned by the credit associations is limited, so as to be within a certain proportion of the assessed valuation of the property.” Id. 47
Graham “Harry” Cross, The German Pfandbrief and European Covered Bonds Market in THE HANDBOOK OF EUROPEAN FIXED INCOME SECURITIES, [hereinafter Cross] 201, note 1 (Frank J. Fabozzi & Moorad Choudhry eds., 2004). 48
In Anglo‐American systems a pledge is a very old form of security. As far back as 1703, Chief Justice Holt noted that the “fourth sort [of bailment] is, when goods or chattels are delivered to another as a pawn to be a security to him for money borrowed of him by the bailer; and this is call in Latin vadium, and in English a pawn or a pledge.” Coggs v. Barnard, 92 Eng. Rep. 999 (2 Ld. Raym, 909) (1703). 49
They are also sometimes translated as “bank debentures”. The distinction between “bond” and “debenture” is not strictly upheld in modern finance. 1330 G e r m a n L a w J o u r n a l
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pool, which is there solely to protect them.” 50 They also might be said to enjoy an informal backing by the German federal government due to their close supervision. 51 I. Licensing, Supervision and General Provisions Chapters 1, 2 and 7 of the Pfandbrief Act deal with important licensing and supervision questions. They also provide general provisions dealing with, inter alia, fiduciary duties. Those banks issuing Pfandbriefe may only do so under special license from the German government. In summary, the requirements for this license are: (1) Core capital (Kerncapital) of at least 25 million euros. (2) A general banking license permitting lending within the meaning of the German Banking Act (Kreditwesengesetz). (3) Appropriate risk management procedures and instruments. (4) A business plan showing regular and sustainable issue of Pfandbriefe, as well as necessary 52
organizational structure. Once issued, a licence may be revoked by the Bundesanstalt (Federal Authority) if these requirements are no longer met, or if the Pfandbrief bank has not issued Pfandbriefe for more than two years and does not expect to regularly resume doing so within the next 6 months. 53 In the event that a licence is revoked or expires, all cover pools must be settled 54 by an appointed cover pool administrator in accordance with §30‐36 (see below). Supervision of Pfandbrief banks is carried out by the Bundesanstalt. 55 This body may give “all orders as are appropriate and necessary” to ensure compliance with the Pfandbrief 50
Cross, supra note 47, at 201‐202. 51
See id. at 202. 52
Questions on German Covered Bond Legislation, Dr Otmar Stöcker, Managing Director, Association of German Pfandbrief Banks, 13.9.06 on file with author; See also §2(1) of Pfandbrief Act. 53
See Pfandbrief Act, §2(2). 54
See id. §2(3). 55
See id. §3. 2010] German Pfandbrief 1331
Act, and must conduct random checks (generally every two years) of the “cover” provided. 56 General provisions are set out in §4‐11. With respect of mortgage asset value, §4 provides the critical “matching cover” requirement: The respective total amount of Pfandbriefe outstanding of any one class must at all times be covered at their nominal value by assets at least in the same amount and with at least the same interest income. If the redemption value known at the time of the Pfandbrief issue exceeds the nominal value, the nominal value 57
shall be replaced by such redemption value. This “matching cover” principle, as it is known means in simple terms that the nominal value of the bonds must always “match” the value of those assets that are offered as collateral. In addition, §4(2) requires that cover always be the same as or greater than the net present value 58 of the cover plus 2% (“security excess cover”). This security excess cover must be in especially liquid assets such as bonds, Treasury bills, or balances with the European Central Bank. 59 Section 4(3) deals with Pfandbrief bank liabilities that are made up of derivatives used as cover and provides that, “To the extent that any liabilities of the Pfandbrief bank are constituted under derivatives used as cover, the claims of the counterparties of the Pfandbrief bank must also be covered.” Pfandbrief banks are under a duty to document their cover in a transparent manner at all times. 60 Paragraph 4(5) provides that Pfandbriefe are deemed outstanding (Im Umlauf) if they are “executed pursuant to § 8 para. 3 and handed over to the Pfandbrief bank by the 56
Id. §3 57
Id. §4(1). 58
Net Present Value is the “discounted value of an investment's cash inflows minus the discounted value of its cash outflows. To be adequately profitable, an investment should have a net present value greater than zero. Net present value is a tool for evaluating an investment proposal.” THE AMERICAN HERITAGE DICTIONARY OF BUSINESS TERMS, Houghton Mifflin Harcourt (2009). According to §4(6) of the Covered Bond legislation, the Federal Ministry of Finance (Bundesministerium der Finanzen) together with the Federal Ministry of Justice (Bundesministerium der Justiz) may promulgate rules for calculating the net present value. 59
See Pfandbrief Act, §4 (2) 1, 2, & 3 (providing a full list). 60
See id. §4(4). 1332 G e r m a n L a w J o u r n a l
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fiduciary agent; if a Pfandbrief is returned to the fiduciary agent for safekeeping, it shall for the period of such safekeeping not be deemed outstanding.” 61 Pfandbrief banks are not permitted to issue covered bonds that are not covered by assets in the register (see below). Further, banks are prohibited from disposing of assets in the register “to the detriment of Pfandbrief creditors.” 62 Pfandbriefe may not be put into circulation without certification under §8(3). 63 Chapter 7 of the Pfandbrief Act contains 13 provisions (§41‐53) that deal inter alia with transitional matters concerning licensing, insurance, lending limits, and certain preferential rights of ship Pfandbrief creditors. Section 41 governs the use of the three principal designations (Mortgage Pfandbrief, Public 64
Pfandbrief and Ship Pfandbrief) provided for in §1. These designations can only be used by those credit institutions licensed to conduct Pfandbrief business, or by those deposit‐
taking institutions (Einlagenkreditinstitute) with their “seat” in another EEA 65 or EU Member State (apart from Germany) and satisfying certain conditions, including various EU Directives. 66 II. Cover Register The cover register is provided for in §5. Each Pfandbrief class must have its own ‘cover register’ that is maintained by the issuing Pfandbrief bank. Derivatives cannot be recorded without special permission of the fiduciary agent and the counterparty of the Pfandbrief 67
bank. The final sentence of §5(1) provides that, “If an asset required for cover is repaid, the party responsible for the recording of the cover assets shall record corresponding substitute assets in the cover register without delay.” 61
Id. §4(5). 62
Id. §4(7). This provision goes on to prohibit sale to the detriment of “the creditors of claims under derivatives pursuant to para. 3 despite the remaining assets recorded in the respective register not being sufficient to cover as prescribed the respective Pfandbriefe and the claims under derivatives pursuant to para. 3.” 63
See id., §4(7). 64
See id. §1(1) sentence 2, numbers 1‐3. 65
European Economic Area. Members are signatories of the Agreement on the European Economic Area (EEA) (1991) also knows as the “Porto Treaty”. The Treaty permits countries to be part of certain economic aspects of the EU (the “four freedoms”) without being obliged under political aspects. 66
See Pfandbrief Act, §41(2). 67
Id. §5(1). 2010] German Pfandbrief 1333
The easy identification of cover assets has a number of important effects. First it allows for rapid and easy identification of assets in the event of a bankruptcy. Second, this identification in turn allows for segregation of the assets to take place and prevents them being drawn into the bankrupt estate. Third, the register makes it relatively easy for regulators to see what kind and quality of cover exists for the outstanding bonds on the register. Finally, the register allows the independent fiduciary agent to monitor the cover assets. The fiduciary agent must notify BaFin of entries each six months. The precise form of entries on the cover register itself are governed by statutory order pursuant to §5(3). Section 6 mandates that Pfandbriefe shall set out legal terms of the relationship between 68
the Pfandbrief bank and the Pfandbrief creditors. The latter are not allowed a “cancellation right” (Kündigungsrecht) and there is also prohibition on the issue of Pfandbriefe where the redemption value is unknown. 69 Section 7 provides for fiduciary agents (Treuhänder) and their deputies (Stellvertreter)—at least one of each must be appointed for each Pfandbrief bank. 70 Conflicts of interest are prohibited 71 and agents and their deputies must have requisite knowledge. This will be presumed in the case of auditors (Wirtschaftsprüfer) or chartered accountants (vereidigter Buchprüfer). 72 Fiduciary serve at the pleasure of the Federal Authority (Bundesanstalt) which both makes the appointment and may revoke it at any time for objective reasons (sachlichem Grund). 73 While the fiduciary agent must report to the Federal Authority, he or she is not bound by their instructions. 74 General duties of the fiduciary agent are set out in §8, while special duties of safekeeping are regulated under §9 and powers under §10. Section 11 regulates remuneration and dispute resolution. Each of these deserves some limited further explanation. General duties (§8) of the fiduciary agent include ensuring that prescribed cover (vorschriftsmässige Deckung) as well as derivative claims (§4(3)) are always in place. This means that the value of mortgaged properties under §16(4), and the value of ships (or ships in process of construction) under §24(5) must be correctly determined. However, the 68
See id. §6(1). 69
Id. §6(2) and §6(3). 70
Id. §7(1). 71
Id. §7(2) (prohibiting partiality). Those with employment or client relationships with the bank during the previous three years are excluded on this ground. 72
See id. §7(2). 73
See id. §7(3). 74
See id. §7(4). 1334 G e r m a n L a w J o u r n a l
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fiduciary is not obliged to go beyond these provisions in determining whether actual and determined values correspond. 75 Under §8(2) the fiduciary must ensure recording of assets in the cover register. Pfandbrief bank counterparties are entitled to notification by the fiduciary if any derivative is recorded in the cover register. Before any Pfandbrief is issued, the fiduciary must certify that prescribed cover is available and recorded in the register. 76 Once entered, assets listed in the register can only be cancelled by the fiduciary agent, in writing. Cancellation of any (unsatisfied) registered derivative shall also require consent of the relevant counterparty. 77 Failure to gain consent will deem the cancellation ineffective. 78 The duties of “safekeeping” provision (§9) sets up a system of control (safe custody) of cover assets. The fiduciary (or his designee) may hold the assets, or, in the case of deeds under dual control (Mitverschluss) they may be held jointly. Surrender can only occur under the provisions of the Act and only when the register holds sufficient assets to cover outstanding value of the Pfandbriefe. 79 Temporary surrender is allowed and in this case there is no need to ensure substitute cover. 80 Under §10, powers of the fiduciary agent extent to broad access to the relevant records held by the Pfandbrief bank that relate to the Pfandbriefe and their underlying assets. 81 All repayments of principal must be notified by the Pfandbrief bank to the fiduciary agent on a continuing basis (fortlaufende Mitteilung), along with any other changes to the assets that are of material relevance to the creditors. 82 The remuneration and dispute resolution provisions (§11) allow for reasonable fees to be paid by the Federal Authority and then reimbursed by the Pfandbrief bank. 83 Any disputes between the Pfandbrief bank and the fiduciary agent are to be resolved by the Federal Authority. 84 75
See id. §8(1), last sentence. 76
See id. §8(3). 77
See id. §8(4). 78
See id. 79
See id. §9(1) and (2). 80
See id. §9(3). 81
See id. §10(1). 82
See id. §10(2). 83
See id. §11(1). 84
See id. §11(2). 2010] German Pfandbrief 1335
III. General Provisions and Risk Management Chapter 4 of the Pfandbrief Law sets out important risk management and transparency provisions. Risk management (§27) mandates risk management systems in the Pfandbrief bank’s Pfandbrief business. In general terms, this extends to the following four risk elements: identification, evaluation, control, and monitoring. In specific terms, the bank is to take into account all counterparty, interest rate, currency, operational, liquidity and 85
“market price” risks. On top of these, the following applies: (1) Risk concentration must be restricted by way of a limit system. (2) A procedure must be in place ensuring risk reduction in case of a material increase in risk; the procedure must provide for early notification of the decision‐makers. (3) The risk management system must be adjusted to changing conditions on a short term basis and be reviewed at least once a year. (4) A risk report prepared in accordance with this provision [§27(1)] must be submitted to the management board at appropriate time intervals, at least quarterly. (5) The risk management system shall be documented 86
in a detailed and transparent manner. New products, markets and businesses also require a thorough risk assessment. 87 Transparency provisions (§28) are extremely detailed. 88 While not exhaustive, the following list is indicative of the kinds of information that must be publicly disclosed on a quarterly basis: total amounts outstanding on all types of Pfandbriefe, corresponding cover pools at differing values, maturities of outstanding Pfandbriefe, claims used as cover according to various methods (geographical, amount, residential property, commercial property, one‐family houses, retail buildings etc), claims at least 90 days in arrears (again, allocated geographically), numbers of compulsory sales, foreclosures, arrears in interest 85
See id. §27(1). 86
Id. §27(1) (Allen and Overy translation, 60). 87
See Pfandbrief Act §27(2). 88
Compared to those required for certain products in other countries, especially the USA. See generally Bobby R. Bean, Enhancing Transparency in the Structured Finance Market, 5 SUPERVISORY INSIGHTS 4 (2008). 1336 G e r m a n L a w J o u r n a l
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payments. 89 Special transparency requirements apply to public and ship Pfandbriefe. 90 From 1 January 2007 all disclosure must include the corresponding amount for the prior year. 91 IV. Offences Section 37–40 set out criminal and administrative offences designed to safeguard the Pfandbrief system. 92 Imprisonment or a fine under §38 is possible against those who put “uncovered” Pfandbriefe into circulation. 93 The same penalties apply to breach of §38(2)(disposal) and §38(3)(recording). Administrative penalties (fines up to 100,000 Euros) apply under §39 for putting Pfandbriefe into circulation without the requisite certificate of the fiduciary agent. 94 V. Issuing Structures There are three basic classes of Pfandbrief: Mortgage Pfandbrief, 95 Public Pfandbrief 96 and Ship Pfandbrief. 97 These are defined in the new Act as follows: (1) Mortgage Pfandbriefe: the issue of covered bonds on the basis of acquired mortgages designated as Pfandbriefe or mortgage Pfandbriefe (Hypothekenpfandbriefe)(hereinafter, Mortgage Pfandbriefe); (2) Public Pfandbriefe: the issue of covered bonds on the basis of acquired claims against public sector 89
See Pfandbrief Act §27(1)(2). 90
See id. §28(3) & §28(4). 91
See id. §28(5). 92
Chapter 6, Pfandbrief Act, Legal Remedies and Offences. 93
See id. §38(1). The central cover provision is §4(7) sentence 1. 94
See id. §39 (1) & §39(2). 95
Hypothekenpfandbriefe. 96
See Annex A1 to Boos, Görke, & Hoegen, infra note, at 120 (Defining the Public Pfandbrief to include “the issue of covered bonds on the basis of acquired claims against public sector bodies designated as public sector bonds (Kommunalschuldverschreibungen), public sector debentures (Kommunalobligationen) or public Pfandbriefe (Öffentiche Pfandbriefe)). 97
The Act does not cover Aircraft Pfandbriefe. 2010] German Pfandbrief 1337
bodies designated as public sector bonds (Kommunalschuldverschreibungen), public sector debentures (Kommunalobligationen) or public Pfandbriefe (Öffentliche Pfandbriefe) (hereinafter, Public Pfandbriefe); (3) Ship Pfandbriefe: the issue of covered bonds on the basis of acquired ship mortgages designated as ship Pfandbriefe (Schiffspfandbriefe) (hereafter Ship 98
Pfandbriefe). The assets allowed to support various types of Pfandbrief are carefully defined. 1. Mortgage Pfandbrief (Hypothekenpfandbrief) Mortgage Pfandbriefe (Hypothekenpfandbriefe) are governed by the particular provisions contained in §12 – §19 of the German Act on the Reorganization of Pfandbrief Legislation (Chapter 3, sub‐chapter 1). 99 These rules provide for both the type and location of the security. In terms of type, the mortgage must encumber real property or, if they are from a foreign jurisdiction, something similar (§13(1)). They must be located either in a member state of the European Union (EU) or the European Economic Area (EEA), Switzerland, the USA, Canada or Japan (§13(1)). In addition, should a bank choose to lend in states that are not EU members, a maximum 10% cap will apply unless preferential rights are secured under §30(1) (see insolvency privileges below). Mortgage lending against time‐limited rights is only allowed if planned redemption of the mortgage occurs at least ten years 100
before expiry of the time‐limited right. Under §14(1), the law provides for a 60% upper value limit on the amount that a mortgage may cover in relation to the real property value. Value is estimated under §16 (see below) and this “mortgage lending limit” is reinforced by a deeming provision that ensures mortgages are only deemed registered up to the 60% limit. Mandatory insurance of buildings erected on the mortgaged real property is required under §15. In the case that the mortgage does not provide recourse against any possible insurance claim, the Pfandbrief bank must get additional security by contract. 98
Annex A1 to Boos, Görke, & Hoegen, infra note 120, at 48. 99
Gesetz zur Neuordnung des Pfandbriefrechts Vom 22 Mai 2005, Bundesgesetzblatt Jarhgang 2005 Teil I, Nr. 29 (promulgated at Bonn on 27 May 2005). 100
The right must also not exceed “the time period required for the book depreciation of the building in line with economic principles” (Bundesverband Öffentlicher Banken Deutschlands translation. P. 54.) 1338 G e r m a n L a w J o u r n a l
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Assessment of lending value under §16 contains a number of important conditions. First, the valuer must have necessary expertise and not be involved in the loan decision (§16(1)). Second, the lending value must not go beyond a “prudent assessment” of “future marketability” of the real estate. Such assessment will take note of “long term sustainable features” of the real estate, “normal local market conditions”, and “present and potential alternative types of use.” 101 Thirdly, “speculative elements shall not be taken into account.” 102 Fourthly, the “lending value may not exceed a market value calculated in a transparent manner and in accordance with a recognized valuation method.” 103 Importantly, after setting these parameters for lending value, the law defines market value as follows: The market value is the estimated amount for which a mortgaged property on the date of valuation could be sold between a willing seller and a willing buyer in an arm's length transaction after proper marketing, in which transaction each party is acting knowledgeably, 104
prudently and without compulsion. This definition is somewhat similar to that found in US 105 and UK 106 case law. There are also special provisions for mortgages on building sites (Bauplätze) and new buildings (Neubauten)(§16(3)). Pits, quarries and mines are excluded from the law and may not be used as collateral for covered bonds and likewise properties that do not yield permanent income. 101
Pfandbrief Act 16(2). 102
Id. 103
Id. 104
Id.(Bundesverband Öffentlicher Banken Deutschlands translation, 54). 105
See BFP v. Resolution Trust Corp., 511 U.S. 531 (1994) (providing the issues inherent in calculating the market value based on the price at a forced sale). According to the US Supreme Court “The market value of a piece of property is the price which it might be expected to bring if offered for sale in a fair market; not the price which might be obtained on a sale at public auction or a sale forced by the necessities of the owner, but such a price as would be fixed by negotiation and mutual agreement, after ample time to find a purchaser, as between a vendor who is willing, but not compelled, to sell and a purchaser who desires to buy but is not compelled to take the particular piece of property. In short, "fair market value" presumes market conditions that, by definition, simply do not obtain in the context of a forced sale.” Id. 106
See R. v Islam, [2009] UKHL 30 [2009] (According to the House of Lords “A market, after all, is a place where goods are bought and sold. The market value of goods is the price that they will fetch in that market. It is the price which a willing seller will accept for them from a willing buyer.”), available at http://www.bailii.org/uk/cases/UKHL/2009/30.html. 2010] German Pfandbrief 1339
The German Federal Ministry of Finance, together with the Ministry of Justice, may set out rules for and the method and form of assessing mortgage lending value, and may also authorize an easing of valuation requirements for “properties that are predominantly used for residential purposes” (§16(4)). Commencement of Redemption (Tilgungsbeginn) is regulated under §17. Amortization of the share of the mortgage used as cover may be deferred for no more than 10 years. After that time, the amount used as cover must be reduced “by at least the share of the redemption that would be attributable to the share used as cover in case of separate loan 107
agreements and corresponding individual mortgages.” Paragraph 17(2) allows the Federal Authority some discretion to extend beyond 10 years in certain cases. 108 Paragraph 18 renders land charges and foreign security interests equal to mortgages for the purposes of the law. Paragraph 19 provides for additional cover assets. 2. Public Pfandbrief (Öffentiche Pfandbriefe) Cover assets for Public Pfandbriefe are regulated under §20. The list of public sector institutions includes (a) domestic political entities that are subject to an unlimited maintenance obligation (Anstaltslast), or a guarantee obligation (Gewährträgerhaftung); (b) other member states of the EU, EAA, USA, Switzerland, Canada or Japan, and (c) any of their regional government (with conditions); (d) other European States that are members 109
of the OECD; (e) non‐profit administrative institutions of the State listed in (b); (f) banks listed in §4 para. 2 sentence 2 no. 1 of the Pfandbrief Law. The governments listed in (b) may also give full guarantees. 3. Ship Pfandbrief (Schiffpfandbriefe) Ship Pfandbriefe are regulated under §§21–26 of the Pfandbrief Law. Lending is limited to ships (and those under construction) that are on a public register (§22(1)), including foreign registers if certain conditions are met. 110 Lending must be made via installment 107
Annex A1 to Boos, Görke, Hoegen, infra note 120, at PfandBG §17(1). 108
See Annex A1 to Boos, Görke, Hoegen, infra note 120, at 55, (stating that under §17(2) this will be permitted if “this appears justified due to other liabilities of the debtor related to the granting of the loan, taking into account the condition and the permanent features of the mortgaged property.”). 109
Again, with compliance with certain EU Directives. 110
These conditions are: “1. a right in rem (dingliches Recht) can be created in respect of ships and ships under construction, which is recorded in a public register; 2. the right in rem grants the creditor security which is similar to a ship mortgage under German law and, in particular, the right to seek satisfaction under the secured loan claim from the ship or the ship under construction; 3. it is not significantly more difficult to bring an action for creditors of other nationalities as compared to their fellow nationals.” Boos, Görke, Hoegen, infra note 120, at 58. 1340 G e r m a n L a w J o u r n a l
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loans 111 of note more than 15 years duration, 112 and must not exceed more than 60% of the ship’s value as determined by the process under §24. This paragraph contains a number of interesting provisions. First, similar to the requirements of §16, the valuer must not have been involved in the transaction. 113 Second, the valuation must result from a “conservative valuation of the future marketability of the ship” by taking into account the ship’s “long term sustainable features,” market conditions, as well as current and potential types of use. 114 Third, “speculative elements” are to be ruled out. 115 Fourth, valuation must be carried out in a “transparent manner” and under a “recognized valuation method.” 116 The mortgages used to support Mortgage Pfandbriefe “must encumber real property, rights equivalent to real property or such rights under a foreign jurisdiction that are similar to rights equivalent to real property under German law.” 117 Those assets which may support Public Pfandbriefe include, broadly‐speaking, German “domestic political subdivisions,” other states of the European Union (EU) or the European Economic Area (EEA), Switzerland, the USA, Canada or Japan, and certain banks. 118 VI. Insolvency Privileges “Bankruptcy remoteness” is a key attraction of the entire Pfandbrief supervisory regime. Pfandbrief holders are said to enjoy an insolvency privilege by which the “assets recorded in the cover registers do not form part of the insolvency’s estate [sic].” 119 Relevant provisions are found in §29–§36 of the Pfandbrief Act. §30 provides: (1) If insolvency proceedings (Insolvenzverfahren) have been commenced against the assets of the Pfandbrief bank, the assets recorded in the cover registers shall not be part of the insolvency estate (Insolvenzmasse). 111
See Pfandbrief Act §22(2). 112
See id. §22(4). 113
See id. §24(1). 114
Id. §24(2). 115
See id. §24(2). 116
Id. §24(2). 117
Annex A1 to Boos, Görke & Hoegen, infra note 120, at 53. 118
Pfandbrief Act§20; see Annex A1 to Boos, Görke & Hoegen, infra note 120, at 56. Other entities also capable of supporting Public Pfandbriefe include full members of the OECD, certain banks. 119
Annex A1 to Boos, Görke & Hoegen, infra note 120, at 56 2010] German Pfandbrief 1341
The claims of the Pfandbrief creditors shall be satisfied in full using the assets recorded in the respective cover register; they shall not be affected by the commencement of insolvency proceedings against the assets of the Pfandbrief bank. Pfandbrief creditors will participate in the insolvency proceedings only in the scope of para. 6 sentence 4. 120 Many other insolvency privileges also accrue. First, Pfandbriefe do not automatically accelerate when the issuer becomes insolvent. 121 This prevents them becoming due immediately and allows payment in the normal course. Second, judicial intervention in the insolvency estate (e.g. in the form of a stay) will not affect the cover pool, or “special legal estate” of the Pfandbrief. 122 Third, Pfandbrief bank insolvency will result in the appointment of “cover pool administrators” who oversee the cover pool of Pfandbrief assets for the benefit of the Pfandbrief holders. These administrators then receive the right to “administer and dispose of the registered assets.” 123 Fourth, if cover assets are not sufficient to satisfy the claims of Pfandbrief holders, they may have recourse against other assets of the bank. Fifth, the sale of cover assets to other issuers are facilitated by specific provisions in the Pfandbrief Act.124 Cover pool administrators are appointed under §30(2) and thereby receive the authority to “administer and dispose” of the registered assets. This halts the right of the Pfandbrief bank to dispose of the assets and renders any such disposal ineffective. 125 Even if assets do not qualify as “cover assets” for the purposes of §14(2), the mortgages will still be subject to the administration and disposal powers of the cover pool administrators. 126 This does not translate into a windfall for the Pfandbrief holders since sentence 3 provides that “the cover pool administrator shall, after deducting reasonable administrative costs, release such share to the insolvency estate as would be attributable to the insolvency estate had 120
Karl‐Heinz Boos, Oliver Görke & Peter Hoegen, Das neue Pfandbriefgesetz‐Starkung des Finanzplatzes Deutchland [The New German Pfandbrief Act: Strengthening Germany as a Financial Centre], Allen & Overy, at 62 (May 2005). 121
See Questions on German Covered Bond Legislation Dr Otmar Stöcker, Managing Director, Association of German Pfandbrief Banks, 13 Sept. 2006. 122
Id. 123
Pfandbrief Act §30 (2), sentence 2. If the Pfandbrief bank has disposed of an asset recorded in the cover register after the appointment of the cover pool administrator, such disposal shall be invalid (sentence 3). 124
See id. §32 (I). 125
See id. §30(2). 126
Id. §30(3). 1342 G e r m a n L a w J o u r n a l
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there been separate loan agreements and corresponding individual mortgages.” 127 It is open to the insolvency administrator to demand that the cover pool administrator release cover assets to the insolvency estate provided they are “obviously” not required to meet obligations to the Pfandbrief holders. 128 All assets remaining after Pfandbrief holders are satisfied (and administrative costs are met) will be returned to the insolvent estate. 129 Cover pool administrators may be appointed by the relevant court even before the insolvency commences, provided certain conditions are met. 130 Creditors with claims under §4(3) are to be treated equally with Pfandbrief creditors. 131 The cover pool administrator assumes the Pfandbrief bank’s responsibilities under the Act, 132 subject to the supervision of the relevant court. 133 The court may require production of information or reports at any time, and may also dismiss the administrator for cause. 134 Appointment is made by certificate of the court, publicized in the Bundesanzeiger (Federal Bulletin) and ex officio (unpublished) in the Handelsregister (Commercial register). 135 The appointment is also registered in the relevant land register (Grundbuch) if there is concern that Pfandbrief creditors may be at a disadvantage because of non‐registration there. 136 Similar provisions apply to the register of ships and ships under construction. 137 The cover pool administrator has rights to cover pool assets for remuneration of services rendered and for reimbursement of incurred costs. 138 127
Id. §30(3). 128
Id. §30(4). 129
See id. §30(4), sentence 2. 130
See Principally §46a of the Banking Act (Kreditwesengesetzes); Pfandbrief Act §30(5), sentence 1. 131
See Pfandbrief Act §30(8). 132
See id. §31(1), sentence 4. 133
See id. §31(1), sentence 1 (giving authority to the court “having jurisdiction at the seat of the Pfandbrief bank.”). The “seat” refers to the place of management under German Sitztheorie (“seat theory”). This may be compared to the place of incorporation theory (Gründungstheorie) more commonly found in common law systems. 134
See id. §31(1) sentence 3This must occur at the request of the Federal Authority;. 135
See id. §31(2), sentence 3. In cases under §33(5) the Genossenregister (register of co‐operatives) is appropriate. 136
See Pfandbrief Act §31(3) sentence 1. This will depend on the circumstances the nature of the right. 137
See id. §31(3) sentence 4. 138
See id. §31(4). 2010] German Pfandbrief 1343
At the commencement of duty, the cover pool administrator must produce an opening balance sheet and explanatory report. 139 The cover pool administrator must undertake their duties will due care and diligence. 140 Failure to do so can lead to damages owed to the Pfandbrief bank. 141 Section 32 allows for the transfer of assets in the cover register to a different Pfandbrief bank. 142 Any such transfer must be notarized 143 and recorded in the commercial register in accordance with §33. Something less than full transfer is contemplated under §35. This provision permits administration “in a fiduciary capacity by the cover pool administrator of the insolvent Pfandbrief bank on behalf of the other (“transferee”) Pfandbrief bank, provided that the other Pfandbrief bank assumes liability for the covered liabilities of the insolvent Pfandbrief bank.” 144 Assets administered in this way shall be treated as if they were assets of the solvent Pfandbrief bank even if not formally transferred 145 and shall be so recorded in the relevant assets register. 146 Partial transfer if possible under §36. VII. Special Changes in the 2005 Act The German Pfandbrief system underwent a major overhaul in 2005 with the passing of new federal laws governing this financial product and the financial institutions that provide it. 147 The new Act consolidates a number of older laws, 148 and provides a comprehensive licensing scheme for financial institutions wishing to participate in the market. As stated 139
See id. §31(5). Annual financial statements and an annual administration report are also required. The financial statement must be audited (§31(5) sentence 2. 140
See id. §31(6) sentence 1. 141
See id. §31(6). 142
See id. §31(1). 143
Id. §31(4). 144
Pfandbrief Act §35(1) sentence 1 (Allen & Overy translation, 66) . 145
See Pfandbrief Act §35(2). 146
See id. §35(3). 147
Gesetz zur Neuordnung des Pfandbriefrechts “PfandBG” [Pfandbrief Act], Bundesgesetzblatt [Federal Law Gazette], Part I, 1373, 27 May 2005. 148
Specifically, the Act on Pfandbriefe and Related Bonds of Public Sector Credit Institutions (Gesetz über die Pfandbriefe und verwandten Schuldverschreibungen öffentlicher‐rechtlicher Kreditanstalten; ÖPG); the Mortgage Bank Act (Hypothekenbankgesetz; HBG); the Act on Ship Pfandbrief Banks (Gesetz über Schiffspfandbriefbanken; SchBkG). 1344 G e r m a n L a w J o u r n a l
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above, qualified financial institutions must possess a core capital of 25 million euros, 149 must supervise risks in accord with the Act, 150 and must have “a business plan demonstrating that it will engage in the Pfandbrief business regularly and on a sustained basis and that the required organizational structure is in place.” 151 Comparative tables of old regulations and the New German Covered Bond Law (July 2005) are readily available. 152 VIII. Pfandbriefe and the “True Sale” Doctrine German Pfandbriefe do not result in a ‘true sale’ of the relevant mortgages to the Special Purpose Entity (SPE), upon which the magic of securitization depended. 153 In fact, there is no ‘sale’ at all. They must remain on the balance sheet of the originating bank and cannot be ‘securitized’. Paradoxically, this makes them more ‘bankruptcy proximate’ than the more complicated ‘bankruptcy remote’ SPE. At the same time, as outlined above, the special provisions of the Pfandbrief Act render them specially immune from the bankruptcy of the originating bank and secured from the claws of its general creditors. E. The Future of the Covered Bond in the US and UK From early 2008, press reports began to sing the praises of the European covered bond as 154
an alternative to the deteriorating securitization market. Emphasis was placed on their “on‐balance‐sheet” nature and ability to minimize maturity mismatching. 155 Their success in Europe was viewed as a plus, 156 and the Bush Administration was seen to be “pushing” 149
See Pfandbrief Act §2 (§2 PfandBG). 150
See Pfandbrief Act §27 (providing for Risk Management ). 151
Karl‐Heinz Boos, Oliver Görke & Peter Hoegen, Das neue Pfandbriefgesetz‐Starkung des Finanzplatzes Deutchland [The New German Pfandbrief Act: Strengthening Germany as a Financial Centre], 10 Allen & Overy (May 2005). 152
See Renzo G. Avesani, Antonio García Pascual & Elina Ribakova, Appendix II: Regulatory Framework for Pfandbriefe and Cédulas Hipotecarias Mortgage Pfandbriefe: A New Regulatory Framework in The Use of Mortgage Covered Bonds, 20, IMF Working Paper, WP/07/20, (2007). This Working Paper does not represent the views of the IMF. 153 See Kettering, Kenneth C., Securitization and Its Discontents: The Dynamics of Financial Product Development, 29 CARDOZO L. REV. 1553; NYLS Legal Studies Research Paper No. 07/08‐7 (2008) (explaining the criticism by leading authors criticizing of this magic), available at SSRN: http://ssrn.com/abstract=1012937 154
Greg Ip, FDIC Might Set a Policy View on New Mortgage Funding, THE WALL STREET JOURNAL, A12, 7 March 2008. 155
Bert Ely, Let’s Try Market‐Oriented Reform, THE WALL STREET JOURNAL, A11, 31 May 2008. 156
See Deborah Solomon, U.S. Pushes a European Method To Help Banks Make Home Loans 'Covered Bonds' May Lure Investors Wary of Defaults, WALL STREET JOURNAL, A3, 17 June 2008. Solomon notes that “Some analysts have predicted that a covered‐bond market in the U.S. could grow to $1 trillion over the next few years. Currently, the market is minuscule compared with the $11 trillion in home mortgages outstanding in the U.S. ...Covered bonds 2010] German Pfandbrief 1345
them as a solution. 157 They were said to offer the "double protection of on‐balance‐sheet status" and a "cover pool of high quality mortgages." 158 The credit ratings of such bonds would be higher, and interest payments accordingly lower. 159 Focus was also brought to bear on the bondholder’s prime ranking against bank assets in the event that underlying mortgage assets did not cover a claim. 160 In July 2008, the FDIC issued a statement 161 supporting the expansion of a covered bond market in the United States. 162 The UK Treasury has been working for some time to implement legislation to allow for covered bonds in accordance with the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive. 163 Some regulators remain wary of cover bonds and related products since pledging balance‐
sheet assets to investors (bond purchasers) may “undermine the first preference [that]. . . should be given to depositors in the event of a bank failure.” 164 This debate continues. F. Conclusion The authors of an IMF Working paper released in 2007 have summarized the benefits of covered bonds as follows: First, covered bonds help credit institutions gain access to an alternative stable and relatively cheap funding are considered safer investments because they stay on a bank's balance sheet and the buyer of the bonds gets double protection. The bonds are backed first by a "cover pool" of high‐quality mortgages that must meet certain criteria, such as being in good standing. If the mortgages go bad, the bank must step in to ensure bond holders get their interest.” Id. 157
Id. 158
See id. 159
See id. 160
See id. 161
Press Release, Federal Deposit Insurance Corporation, Federal Deposit Insurance Corporation on Covered Bond Policy Statement (15 July 2008), available at http://www.fdic.gov/news/news/press/2008/pr08060a.html (last visited Feb. 3, 2009). 162
Heidi N. Moore, Deal Journal – Path to Cash: Covered Bonds ‐ FDIC Urges Banks to Issue Securities; Huge Market in Europe, THE WALL STREET JOURNAL, 17 July 2008, C3. 163
HM Treasury Press Release, 120/07, 8 November 2007, Government to implement covered bonds regime in March 2008. For the relevant Directive see 85/611/EEC. 164
David Uren, Mortgage bundling supported, THE AUSTRALIAN, 24 June 2008, p.23, discussing the approach of the Australian Prudential Regulation Authority (APRA). 1346 G e r m a n L a w J o u r n a l
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source in an environment of increasing reliance on wholesale funding as opposed to a core deposit base. Second, small regional credit institutions have the possibility of “club” funding. Through joint‐issuance of a covered bond, small institutions can access international capital markets, typically only available to medium or large financial institutions. The mortgage pool may enjoy further credit enhancement as a result of the regional diversification of the underlying mortgage portfolios. Third, similar to other instruments, such as credit and interest rate derivatives, covered bonds allow for better long‐term liquidity management and the matching of the increasing duration of assets with long‐
165
term bonds. It is submitted that German Pfandbrief offers a ready model for foreign regulators looking to shore up capital markets and re‐launch a culture of responsible lending.
165
Renzo G. Avesani, Antonio García Pascual & Elina Ribakova, Appendix II: Regulatory Framework for Pfandbriefe and Cédulas Hipotecarias Mortgage Pfandbriefe: A New Regulatory Framework in The Use of Mortgage Covered Bonds, 20, IMF Working Paper, WP/07/20 (2007). This Working Paper does not represent the views of the IMF. Articles Legalising General Prohibitions on Cultivation of Genetically Modified Organisms By Mary Dobbs ∗ A. Introduction In a pluralistic society, agreement over complex issues is frequently difficult to achieve. This is amply demonstrated by the question of cultivation of Genetically Modified Organisms (GMOs), where scientific uncertainty relating to potential threats to the environment 1 or human health 2 runs parallel with concerns over ethics, 3 freedom of choice, 4 and competing agricultural and economic interests. 5 Conflict centres over the objective of free trade of GMOs and the circumstances in which restrictions may legitimately be imposed to deal with the abovementioned concerns, in particular regarding cultivation. In contrast with the USA, which follows a product approach by regulating according to the nature and characteristics of the individual product, the European Union (EU) upholds a 6
process approach, which regulates according to the process by which a product is created rather than its individual attributes. Consequently, the EU has regulated GMOs due to ∗
Ph.d Candidate and Ad Astra Scholar, Law School, UCD, Ireland. I would like to thank Professor Colin Scott, Professor Joseph McMahon, James Lawless and Niamh Mulholland of the Law School, UCD and Dr. Oana Stefan, HEC, Paris, for their comments and suggestions. I would also like to thank Professor Peer Zumbansen, Professor Russell Miller and the reviewers of the German Law Journal. Any errors and omissions are my own. Contact details: Law School, University College Dublin, Belfield, Dublin 4, Ireland. EmaiL: [email protected]. 1
E.g., outcrossing and “superweeds” due to pesticide resistance. 2
E.g., antibiotic resistance, allergens, and general potential long‐term effects. 3
E.g., through interfering with nature or taking/imposing unnecessary risks versus the possibility of developing crops suitable for climates where conventional crops are incapable of being grown in famine ridden countries. 4
Of both producers and consumers, e.g., whether there is a veritable possibility to have a choice between GM and truly non‐GM crops/products, considering issues of admixture. 5
Of producers and States, where for instance there is a valuable market for organic products. 6
Coordinated Framework for the Regulation of Biotechnology, 51 Fed Reg 23,302 (June 26, 1986); Adam Sheingate, Promotion versus Precaution: The Evolution of Biotechnology Policy in the United States, 36 Brit. J. Pol. Sci. 243 (2006); Rebecca Bratspies, Some thoughts on the American Approach to Regulating Genetically Modified Organisms, 16 Kan. J.L. & Pub. Pol'y 393 (2007). 1348 G e r m a n L a w J o u r n a l
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their genetic modification, with specific purpose‐built legislation developed since Directive 90/220 on GMOs 7 with a requirement for prior authorisation for deliberate release into the environment. However, the Directive omitted aspects relating to the nature of the risks, potential threats, monitoring, traceability, etc. As well as risks to the environment, concern grew over the risk to human health and the lack of specific legislation for GM food or feed. 8 Linked to this, there was little protection as regards freedom of choice for consumers or indeed farmers if admixture occurred (i.e., if there were mingling or cross‐
contamination between GM and non‐GM crops, in particular if non‐GM crops were found to contain a percentage of GMOs). Member States’ governments were also not happy with the extent of the Commission’s control over the release of GMOs, 9 and used the “safeguard clause” in Article 16 of the 1990 GMO Directive to impose nine national bans 10 and the de facto moratorium. 11 This led to the World Trade Organisation (WTO) Biotech dispute, 12 where the USA, Canada, and Argentina challenged the legality of the EU permitting the delays, bans, and moratorium, due to restricting trade and not being based on thorough scientific risk assessments. This challenge, which was later upheld by the Dispute Panel, 13 spurred on 7 Council Directive 90/220/EEC on the deliberate release into the environment of genetically modified organisms, 1990 OJ (L 117) 15. 8
This issue fell within the scope of Regulation 258/97/EC concerning novel foods and novel food ingredients, 1997 OJ (L 43) 1 where the concept of “substantial equivalence” applied. 9
Highlighted by the Novartis Affair; Yves Tiberghien, Competitive Governance and Legitimacy: Regulation of GMOs since the mid 1990’s, 31 J. EUR. INTEGRATION 389, 400 (2009); European Parliament’s Resolution on Genetically Modified Maize, 1997 OJ (C 432) 2. 10
European Commission, GMOs in a Nutshell, available http://ec.europa.eu/food/food/biotechnology/qanda/d1_en.htm#d (accessed Dec. 8, 2010). at 11 Denmark, France, Greece, Italy and Luxembourg declared at the Council meeting of 24/25 June 1999 that they would ‘take steps to have any new authorisations for growing and placing on the market suspended’, until their concerns over risk assessments, traceability and labelling were resolved through new legislation. Europa Press th
Release: 2194 Council Meeting‐Environment‐Luxembourg, 24/25 June 1999, 9409/99, No. 203, available at http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/envir/ACF5B.htm (accessed Dec. 8, 2010). At the same meeting, Austria, Belgium, Finland, Germany, the Netherlands, Spain and Sweden all declared their concerns, and a quasi temporary moratorium pending assurances of safety. Both groups noted public concerns, transparency and the precautionary principle as motivations for their Declarations. Ian Sheldon, Europe’s Regulation of Agricultural Biotechnology: Precaution or Trade Distortion? 2 J. AGRIC. & FOOD INDUS. ORG. 1 (2004); and Elsa Tsioumani, Genetically Modified Organisms in the EU: Public attitudes and Regulatory Developments, 13 RECIEL 279 (2004). 12 Thomas Bernauer and Erica Meins, Technological revolution meets policy and the market: Explaining cross‐
national differences in agricultural biotechnology regulation, 42 EUR. J. POL. RES. 643 (2003); and Dispute Settlement, European Communities — Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R, WT/DS292/R and WT/DS293/R, DSR 2006:III, 847. 13 The Panel found that the de facto moratorium, the substantial delays in authorization and the national bans were all in breach of certain provisions: Section VIII Conclusions and Recommendations of the Panel’s Report ibid. 2010] Genetically Modified Organisms
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the EU to deal with the criticisms encapsulated therein, while compromising with the Member States in order to allay concerns and hopefully deal with national prohibitions and hesitancy. 14 The current regime centres on the Deliberate Release Directive 2001/18, 15 Regulation 1829/2003 on GM food and feed, 16 and Regulation 1830/2003 on the labelling and traceability of GMOs. 17 The risk assessments and information to be considered therein were substantially enhanced; this is demonstrated by the inclusion of indirect and long‐
term effects, and even potential threats, as for instance the environmental risk assessments were to take into account scientific uncertainty, in light of the precautionary principle. 18 Monitoring, tracing and labelling were provided for, coexistence measures authorised and improvements occurred in relation to decision‐making to increase democracy as well as the use of independent, scientific expertise. These changes were introduced in order to improve the effective protection of the environment and human health, democracy and transparency, and freedom of choice of producers and consumers. 19 However, this was according to the EU’s chosen levels of protection rather than those of the Member States; the States have continued to display, via in particular national prohibitions, 20 a desire to retain a greater degree of control over 14
Gregory C. Shaffer & Mark .A. Pollack, The EU regulatory system for GMOs, in UNCERTAIN RISKS REGULATED: FACING THE UNKNOWN IN NATIONAL, EU AND INTERNATIONAL LAW 269 (M. Everson & E. Vos eds., 2008). 15
Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC, 2001 OJ (L 106) 1. 16 Regulation 1829/2003/EC of the European Parliament and of the Council of 22 September 2003 on genetically modified food and feed, 2003 OJ (L 268) 1. 17
Regulation (EC) No 1830/2003 of the European Parliament and of the Council of 22 September 2003 concerning the traceability and labelling of genetically modified organisms and the traceability of food and feed products produced from genetically modified organisms and amending Directive 2001/18/EC, 2003 OJ (L 268) 24. 18
Commission Decision 2002/623/EC establishing guidance notes supplementing Annex II to Directive 2001/18/EC of the European Parliament and of the Council on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC, 2002 OJ (L 200) 22. 19
The last two were to be protected through the combined means of labelling and coexistence: Justo Corti‐Varela, Coexistence of Genetically Modified, Conventional and Organic Products in the European Market: State of the Art Report, 1 Eur. J. Risk Reg. 63, 65 (2010). 20
EU’s Press Release, Questions and Answers on the EU's new approach to the cultivation of GMOs, Brussels, 13th July 2010, MEMO/10/325, available at http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/10/325&format=HTML&aged=0&language=E
N&guiLanguage=en (accessed Dec. 8, 2010. See also GMO Free Europe 2010, GE Cultivation Bans in Europe, available at http://www.gmo‐free‐regions.org/gmo‐free‐regions/bans.html (accessed Dec. 8, 2010). The usual list of safeguard measures is currently unavailable on the Commission’s website due to restructuring. 1350 G e r m a n L a w J o u r n a l
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the release of GMOs to protect these values, and probably also for political and economic reasons. Despite the Commission’s objections regarding lack of appropriate scientific evidence, some States profess their intention to maintain these prohibitions. 21 In an attempt to reconcile the Member States, while complying with external obligations, the Commission proposed a seemingly revolutionary package in July 2010, which would provide for de‐harmonisation of a central element of the GMO regime. 22 The Commission recommended providing the States not merely with greater flexibility in creating coexistence measures, 23 but also with the potential to legally prohibit cultivation of GMOs nationally, via the proposed Article 26b 24 to be inserted into the Deliberate Release Directive 2001/18. 25 This would provide a post‐authorisation national veto for Member States, and potentially lessen their controversial use of safeguard clauses. This article assesses the potential scope of the proposed Article 26b to permit Member States to exclude cultivation legally within the EU and WTO in order to protect legitimate concerns at the level chosen nationally; it does so without making a judgment on the safety or otherwise of authorised GMOs but on the basis that Member States may have reason to believe that GM crops interfere with various national objectives, which they desire to protect. In order to examine the Proposal in context, it is necessary to briefly introduce in Section B the current use of the safeguard clauses by Member States, as the main means of excluding cultivation. It will become apparent that the potential of the safeguard clauses is undermined, both through the overly restrictive interpretations by the European Food Safety Authority, the Commission and the EU Courts where relevant and also through the legally questionable refusals by the individual Member States or Council to force the lifting of the prohibitions. The continuing conflict further highlights the desire by some Member States for a greater discretion or competence to control, or even exclude, the cultivation of 21
A number of Member States have already banned the cultivation of Amflora Potato since its EU authorization in March 2010. Commission Communication on the freedom for Member States to decide on the cultivation of genetically modified crops, COM (2010) 380 final (Jul. 13, 2010). 22
EU move to break GM deadlock could sow discord, EURACTIV WITH REUTERS (June 30, 2010), http://www.euractiv.com/en/eu‐move‐break‐gm‐deadlock‐could‐sow‐discord‐news‐495753. 23 Commission Recommendation on guidelines for the development of national co‐existence measures to avoid the unintended presence of GMOs in conventional and organic crops, 2010] OJ (C 200) 1. 24
Proposal for a Regulation amending Directive 2001/18/EC as regards the possibility for the Member States to restrict or prohibit the cultivation of GMOs in their territory, COM (2010) 375 final (July 13, 2010). 25
Directive 2001/18/EC of the European Parliament and of the Council of 12 March 2001 on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC, 2001 OJ (L 106) 1. 2010] Genetically Modified Organisms
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GMOs within their territories to protect a broader range of objectives, which the safeguard procedures do not formally provide. Section C examines the Commission’s response, in particular in the form of the proposed Article 26b, which could potentially in effect substantially de‐harmonise this aspect of the GMO regime, providing the MS with a renewed competence to exclude GMO cultivation within their territories. It centres on the interaction of the proposed Article 26b with the provisions of the Treaty on the Functioning of the EU (TFEU) on the quantitative restrictions and context of the EU GMO regime, focusing on how the choice of a legitimate objective and establishing proportionality limit the apparent carte blanche to veto cultivation nationally. Finally, if to be of long‐term value, it is essential to understand the possibilities within the WTO for the application of Article 26b. In Section D, it is argued that, in contrast with the safeguard clauses, the SPS Agreement is of no relevance to Article 26b. It is argued that the public morality exemption within Article XX of GATT is applicable, thereby providing a broad basis to exempt the quantitative restrictions on the condition that necessity is established. If adopted into Directive 2001/18, Article 26b may provide the necessary bypass of the safeguard clauses and the SPS Agreement for EU Member States, which may have further implications for the general GMO cultivation regime within the EU. However, this new derogation would not be unfettered and will involve a heavy evidentiary burden if States are challenged legally. B. Existing possibilities for Member States to exclude GM cultivation? Due to the nature of the EU and internal market whereby barriers to the free movement of goods within the EU are to be removed, where a regime has been harmonised or even partially harmonised the competence and discretion of the State are reduced and any apparent disparities must be provided for within EU law, via derogations or exceptions. Article 288 TFEU provides for those secondary legislative instruments which are of binding force and may be used to harmonise regimes, including Regulations and Directives. States 26
must comply with the EU legislation even where in conflict with their own laws. Where a Member State is suspected to have acted beyond its competence or in breach of EU law, then its actions may be challenged before its national courts or the EU Courts, by a private party, another Member State, or the Commission. The Courts may order the State to 26
Due to the principle of supremacy (e.g. Costa v ENEL, 1964 E.C.R. 585) and duty of loyal or sincere cooperation (to be found in ex Article 10 EC Treaty and in Article 4 Treaty on the EU). 1352 G e r m a n L a w J o u r n a l
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comply with the relevant EU law and impose a fine 27 or damages to be paid to the injured party (under Francovich liability 28 ). In the context of GMOs, the 2001 Directive and 2003 Regulations complemented by further documents such as the guidance notes on Environmental Risk Assessments, 29 provide for a high level of harmonisation, thereby limiting the discretion of MS severely. Their main powers lie in relation to the original national assessments and coexistence measures under Article 26a of Directive 2001/18 to prevent admixture, although even this discretion is somewhat limited by the Commission’s development of Recommendations, 30 a Co‐existence Network, 31 a Co‐existence Bureau, etc. 32 Once a GMO receives EU authorisation it is automatically authorised within each and every Member State, 33 provided that seeds to be cultivated are published on a register 34 and licensing conditions are complied with. Member States who wish to exclude cultivation may only do so within the framework provided for by EU law, whether under the GMO legislation, other relevant secondary legislation such as conservation Directives or under the TFEU itself, or else risk being held in breach of EU law. The EU regime provides for the possibility of States excluding GM cultivation where specific conditions are fulfilled. Although exclusion may be achieved via coexistence measures 35
depending on the agri‐type preferred, as well as through other EU legislation such as the 27
Under Article 260 TFEU. In Case C‐121/07, Commission of the European Communities v. France 2008 E.C.R. I‐
9159, the Court imposed a fine upon France for failure to implement Directive 2001/18 (n15). 28
Joined Cases C‐6/90 and C‐9/90 Francovich v Italy, 1991 E.C.R. I‐5357. 29
Commission Decision 2002/623/EC establishing guidance notes supplementing Annex II to Directive 2001/18/EC of the European Parliament and of the Council on the deliberate release into the environment of genetically modified organisms and repealing Council Directive 90/220/EEC 2002 OJ (L 200) 22. 30
Commission Recommendation 2003/556/EC on guidelines for the development of national strategies and best practices to ensure the coexistence of genetically modified crops with conventional and organic farming, 2003 OJ (L 189) 36, and the 2010 Recommendation (n23). 31
Decision 2005/463/EC, 2005 OJ (L 164) 50. 32
Maria Lee, Multi‐Level Governance of GMOs in the EU: ambiguity and hierarchy, in THE REGULATION OF GMOS: COMPARATIVE APPROACHES (L. Bodiguel & M. Cardwell, eds. 2010). 33
Directive 2001/18, supra note 15, art. 22. 34
Corti‐Varela, supra note 19, at 64. 35
“Appropriate measures” may be taken by Member States via Article 26a of Directive 2001/18 as inserted by Regulation 1829/2003. On preferences to competing agri‐types, see Les Levidow & Karin Boschert, Coexistence or contradiction? GM crops versus alternative agricultures in Europe?, 39 GEOFORUM 174, 174, 181, 187 (2008). 2010] Genetically Modified Organisms
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Habitats Directive, 36 these mechanisms are intended to target local and individual situations rather than providing for a national prohibition. The central mechanisms for Member States to prohibit GM cultivation throughout their territories are via the safeguard clauses, although these are limited in legal scope. The use of these clauses is supervised in particular by the Commission, with the assistance of the European Food Safety Authority. Established by Regulation 178/2002 on the 37
General Principles of food Law, the European Food Safety Authority assesses the scientific evidence provided in notifications for authorisation and also by States attempting to derogate via the safeguard clauses on health or environmental reasons. It is to provide independent scientific assessments/opinions at an EU level, which are heavily relied upon by the Commission in coming to its risk management decision and by the EU Courts in assessing the Commission’s decisions. 38 Both of these bodies play crucial roles in the application of the safeguard clauses. I. Safeguard Clauses Safeguard clauses provide a failsafe, to facilitate swift and effective protection where evidence indicates that, despite authorisation or harmonisation, the product or process in question poses a real risk. Along with specific safeguard clauses or emergency provisions 39
within the GM legislation, there is also the possibility of availing of the provisions within Article 114 (4) and (5) TFEU (ex 95(4) and (5) EC) to maintain or introduce national measures respectively, as well as Article 18 of Directive 2002/53/EC. 40 Of greatest relevance for cultivation are Article 23 of Directive 2001/18 and Article 114 (5) TFEU. Although availed of by Member States, they are of limited scope compared to the wide breadth of concerns in question and further the Commission, the European Food Safety Authority and the Courts have attempted to control their use stringently. 36
Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora 1992 OJ (L 206) 7. On the relevance of conservation Directives to managing authorized GM crops see: Commission Staff Working Document, PARL. EUR. DOC. (SEC 313) (2006), annexed to the Commission Report on the implementation of national measures on the coexistence of genetically modified crops with conventional and organic farming, (COM 104) (2006). 37
Regulation 178/2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety [2002] OJ L 31/1. 38
Paul Craig, EU ADMINISTRATIVE LAW 156 (2010). 39 For example, Article 16 in the 1990 GMO Directive, supra note 7, Article 23 in the Deliberate Release Directive 2001/18, supra note 25, and Article 34 in Regulation 1829/2003, supra note 16. 40 Council Directive 2002/53/EC of 13 June 2002 on the common catalogue of varieties of agricultural plant species, 2002 OJ (L 193) 1. E.g. Commission Decision 2006/10/EC of 10 January 2006 concerning the provisional prohibition in Greece of the marketing of seeds of maize hybrids with the genetic modification MON 810 inscribed in the common catalogue of varieties of agricultural plant species, pursuant to Directive 2002/53/EC, 2006 OJ (L 7) 27. 1354 G e r m a n L a w J o u r n a l
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Use of the Article 23 safeguard clause is only permitted where a State, “as a result of new or additional information . . . affecting the environmental risk assessment . . . on the basis of new or additional scientific knowledge, has detailed grounds for considering that a GMO . . . constitutes a risk to human health or the environment”. 41 Article 23 has been used on multiple occasions by various Member States. 42 However, the Commission 43 and the European Food Safety Authority 44 have yet to hold any of these restrictions or prohibitions as justified, due to a lack of new or additional scientific information indicating risks. This requirement of “newness” is understandable in so much as the risk assessment was to be based on all available evidence and ensure that any actual or potential threats be dealt with within the risk management measures, such as licensing conditions. However, this is in an area of scientific uncertainty and it is possible to have varying interpretations of the existing data. The Courts have also specifically declared that safeguard clauses embody 45
the precautionary principle, which has not merely been incorporated into Article 191 TFEU46 (ex Article 174 EC), but also declared as a general principle of EU law. 47 Reading the clause in the light of the precautionary principle in conjunction with the principle of 41
Directive 2001/18, supra note 15, art. 23. 42 See note 20, supra. 43
Commission Proposals to compel Member States to remove safeguard measures as unjustified: (COM 161) (2005), (COM 162) (2005), (COM 164) (2005), (COM 165) (2005), (COM 166) 2005, (COM 167) (2005), (COM 168) (2005), (COM 169) (2005), (COM 509) (2006), (COM 510) (2006), (COM 713)(2006), (COM 586) (2007), (COM 589) (2007), (COM 12) (2009), (COM 51) (2009), and (COM 56) (2009). 44 E.g., Scientific Opinion of the Panel on Genetically Modified Organisms on a request from the European Commission related to the safeguard clause invoked by Austria on oilseed rape MS8, RF3 and MS8xRF3 according to Article 23 of Directive 2001/18/EC, 2009 EFSA J. 1153. In addition, see the list of questions referenced by Corti‐
Varela, supra note 19, at n. 8. 45 Case C‐6/99, Association Greenpeace France and Others v Ministère de l'Agriculture et de la Pêche and Others, 2000 E.C.R. I‐1651, para. 44, where the Court ruled that Directive 90/220 dealt with environmental and human health risks in compliance with the precautionary principle via inter alia the safeguard clause in its Article 16 and the risk assessment procedure. 46
It has been present within the Environmental Title since the Maastricht Treaty, 1992. A high level of environmental protection is to be achieved in accordance with a number of principles including the precautionary principle. 47
E.g., Joined Cases T‐74/00, T‐76/00, T‐83/00, T‐84/00, T‐85/00, T‐132/00, T‐137/00, & T‐141/00, Artegodan GmbH v. Commission, 2002 E.C.R. 11‐4945, para. 184; Case C‐132/03, Ministero della Salute v Coordinamento delle Associazioni per la Difesa dell’Ambiente e dei Diritti degli Utenti e dei Consumatori (Codacons), 2005 E.C.R. I‐
4167, para. 35 (“That interpretation of Community law is compelling not only because it reflects the logic of the system but also on account of the precautionary principle, a general principle of Community law, which demands the best possible information.”). On general principles of law, in the context of the EU, see TAKIS TRIDIMAS, THE GENERAL PRINCIPLES OF EU LAW (2d ed. 2007). 2010] Genetically Modified Organisms
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precedence, 48 it would seem appropriate to interpret the provision broadly and consequently for “new or additional knowledge” to include new understandings of the original data. Although the Court of Justice of the EU (CJEU) has not dealt with a Member State relying on Article 23 directly, 49 it has had opportunity to examine it in Case C‐121/07 Commission v France. 50 In his Opinion of 5 June 2008, Advocate General Mazák argued that the relevant French decree 51 failed to implement Article 23 satisfactorily as it allowed for new interpretations to justify measures, rather than requiring new evidence. 52 The Court’s Judgment does not analyse the issue, as it decided to award a lump sum against France for failure to meet the deadline, rather than a continuing fine for failure to implement. 53 The CJEU were willing to take into consideration the efforts by France reflected in the March 2007 Decrees, which made substantial inroads into correct implementation, noting that according to the Commission, only three provisions remained unimplemented (including Article 23). 54 Although inconclusive, it is probable that the Courts would follow the Advocate General’s Opinion, and uphold the requirement similarly to their approach to that of Article 114 (5) TFEU, which currently excludes new interpretations of old evidence. Despite the Commission and European Food Safety Authority’s opinions that they do not meet the requirements of Article 23, 55 the decision‐making structure in relation to Article 23 has permitted States to maintain their prohibitions; if the Council vote by qualified majority against the Commission’s proposal to take action against the States in question, the Commission must either drop the issue or suggest a different proposal that the Council will agree to. 56 The Council have rejected every proposal by the Commission in relation to 48 E.g., Artegodan, supra note 47, at para. 184, 186. 49 As the Council block actions by the Commission to lift these prohibitions‐outlined in following paragraph. 50
Comm’n v. France, supra note 27. 51
In particular Article 16 of Decree 2007‐359 and its relationship with L535‐2 and L533‐6 of the Code de l’Environnement (since repealed by Article 14 of Loi nº 2008‐595 du juin 2008 relative aux organismes génétiquement modifies JORF 26/6/08, p.10218, http://www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT000019066077&dateTexte= (accessed 8 December 2010). 52
Comm’n v. France, supra note 27, Advocate General’s Opinion, at para. 44. 53
By the time of the CJEU’s Judgment, France had made major steps in implementation and were also near to promulgating Loi nº 2008‐595 du juin 2008 (n49) which would implement Directive 2001/18 fully. 54
Comm’n v. France, supra note 27, at para. 85. 55 56
GMOs in a Nutshell, supra note 10. Article 5 of Council Decision 1999/468/EC laying down the procedures for the exercise of implementing powers conferred on the Commission, 1999 OJ (L 184) 23, as amended by Council Decision 2006/512/EC amending 1356 G e r m a n L a w J o u r n a l
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the use of safeguard measures relating to cultivation, leading the Commission to split a proposal regarding lifting bans within Austria on cultivation and marketing in order to hopefully lift the ban on marketing. The Council were unable to achieve a qualified majority in the latter decision 57 and, consequently, the Commission were able to make the final decision in that regard. 58 However, this measure may still only be used in relation to individual GMOs, and it is unsatisfactory that the measures may be of some practical success only through the political stubbornness of the Council or the recognition of the futility of action by the Commission, despite the belief by the Commission and the European Food Safety Authority amongst others that they are illegitimate. Legal certainty is undermined as the possibility and consequences of a safeguard measure are unknown. The main alternative for Member States is that of Article 114 (5) TFEU whereby a State 59
may attempt to justify the introduction of measures that conflict with harmonising measures. In order to achieve this, the State must show that there is “new scientific evidence relating to the protection of the environment or working environment 60 on grounds of a problem specific to that Member State arising after the adoption of the harmonisation measure,” which are cumulative conditions, 61 and may be very difficult to fulfil. 62 As with Article 23, the State must again demonstrate “newness,” which has been Decision 1999/468/EC laying down the procedures for the exercise of implementing powers conferred on the Commission, 2006 OJ (L 200) 11. 57 Commission Decision 2008/495/EC concerning the provisional prohibition of the use and sale in Austria of genetically modified maize (Zea mays L. line MON810) pursuant to Directive 2001/18/EC of the European Parliament and of the Council, 2008 OJ (L 172) 25. It details the Council’s previous refusal to take action, as well as the Commission’s decision to propose action only on food and feed. 58
Id. 59
Member States may also maintain measures via Article 114 (4) TFEU, where necessary to protect the environment, working environment or those objectives within Article 36 TFEU. The restrictions of ‘specificity’ and new scientific evidence’ on Article 114 (5) TFEU are not imposed here, however limitations still apply and the provision is less relevant to the issue of GMOs. 60
Consequently health protection is excluded, as are the other concerns of Member States. 61
Therefore, as highlighted by the Advocate General Sharpston in her opinion of 15 May 2007 in C‐439/05, Land Oberösterreich and Austria v Commission, 2007 E.C.R. I‐07141, para. 139, the Member State must fulfil 5 conditions cumulatively: ‘i) new evidence must be presented, (ii) the evidence must be scientific, (iii) it must relate to protection of the environment or the working environment, (iv) there must be a problem specific to the Member State, and (v) the problem must have arisen after the adoption of the harmonising measure.’ 62
See Ludwig Krämer, EC ENVIRONMENTAL LAW (6th ed. 2007); N. de Sadeleer, Procedures for Derogations from the Principle of Approximation of Laws under Article 95 EC, 40 COMMON MKT. L. REV. 889 (2003); F.M. Fleurke, What Use for Article 95 (5)? An Analysis of Land Oberösterreich and Republic of Austria v Commission, 20 J. ENVNTL. L. 267 (2008). 2010] Genetically Modified Organisms
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interpreted by the Commission, 63 European Food Safety Authority 64 and EU Courts 65 alike to indicate new scientific data and not merely a new interpretation of the old facts. 66 In particular, there must be a new element to the risk assessment, rather than merely the risk management element. A further severe limitation is imposed through the requirement of “specificity.” This does not entail that the problem be unique 67 ; however, it must not be one generally present throughout the EU. In partial defence of this, where the Commission approves of the Member State’s measures but believe that there are no specific circumstances within the nation, it may and must take appropriate EU wide measures instead. Nonetheless, if a measure meets the other criteria of the provision, including the usual requirement to comply with the principle of proportionality, it seems counterproductive to require fulfilment of specificity. II. Conclusion on the Use of Safeguard Clauses The clauses risk being used as a political tool to delay or prevent releases, and simultaneously being too difficult to legally be used successfully in cases where potential threats do exist but where the required “newness” or “specificity” is lacking. However, any change in the approach to the safeguard clauses would more than likely require a legislative proposal at this stage, as it would be a substantive alteration in EU jurisprudence 63
E.g., Commission Decision 2003/653/EC relating to national provisions on banning the use of genetically modified organisms in the region of Upper Austria notified by the Republic of Austria pursuant to Article 95(5) of the EC Treaty, 2003 OJ (L 230) 34. Article 95(5) EC was renumbered as Article 114 (5) TFEU following the Lisbon Treaty. 64
Reviews/reassessments were insufficient in Opinion of the Scientific Panel on Genetically Modified Organisms on a question from the Commission related to the Austrian notification of national legislation governing GMOs under Article 95(5) of the Treaty, 2003 EFSA J. 1. 65
The General Court upheld the European Food Safety Authority’s interpretation in Joined Cases T‐366/03 and T‐
235/04, Land Oberösterreich and Republic of Austria v Commission, 2005 E.C.R. II‐4005. 66
Decision 2003/653/EC, supra note 63; Sheldon, supra note 11; Fleurke, supra note 62. However it should be highlighted that Advocate General Sharpston in Land Oberösterreich, supra note 61, at para. 142, indicated that a new analysis of original data could lead to new conclusions which could constitute new evidence. Further the Advocate General stated that if the problem was latent and the Member State only became aware of the problem since the harmonising measure, this could fulfil the requirement that the problem arise only since the harmonising measure. However Austria failed to establish that these two requirements were fulfilled on the facts. The CJEU did not comment on this issue as for the purposes of the appeal it was only necessary to establish if the Commission and GCEU had correctly assessed the requirement of a ‘specific problem’, as if this requirement was not fulfilled by a Member State, then they would not be able to justify the national measures under Article 114(5) TFEU. 67
The General Court in Land Oberösterreich, supra note 65, at para. 65‐67, referred to the necessity of the unique or unusual character of the State’s problem. However the CJEU, supra note 61 at para. 65‐67, clarified that specificity was broader than uniqueness, although what it entails exactly is still unclear. 1358 G e r m a n L a w J o u r n a l
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for the Courts to commence a more lenient approach to the Member States’ safeguards. 68 Even the Commission’s decision not to take action against Portugal earlier in 2010 when it ignored the passing of the deadline in relation to the use of Article 114 (5) regarding Madeira, despite the European Food Safety Authority’s opinion that no new scientific evidence had been presented,69 appears only to have been a temporary concession.70 It should not be presumed that this tolerance will necessarily continue following the new proposals discussed below. A further inherent limitation of the safeguard clauses is their restriction to the areas of environmental or human health protection. Consequently, concerns over ethics, freedom of choice, democracy etc are not permitted as the main objectives in taking safeguard measures, although nonetheless affected. As the area is harmonised, and these issues are supposedly dealt with via the authorisation procedures, labelling, coexistence measures, etc., Member States lack the legal competence to prohibit cultivation for these reasons. Yet Member States have regularly indicated their desire and intention to prohibit cultivation nationally for scientific and non‐scientific reasons, despite the Commission’s protestations. Currently the States can achieve this via Article 23 with the support of the Council, yet the legality of such an approach is questionable. Further, it is unsatisfactory that protection of legitimate values should resort to such subterfuge. Despite the efforts of the EU, many of the concerns of the Member States leading to the de facto moratorium and Biotech Dispute remain regarding cultivation. Likewise, national bans continue, while until March 2010 there had only been one authorisation of cultivation under Directive 2001/18. The Commission has attempted to resolve these issues in July 2010. C. Legalising Exclusion? The July 2010 Package Over the past two years there have been indications of potential change. In June 2009 Austria, with the support of 10 other Member States, submitted a note to the Environmental Council suggesting the inclusion of an opt‐out clause for States within the 71
GM regime. Commission President Barroso in 2009 also indicated the possibility of 68
The CJEU recently side‐stepped an opportunity to expand the concept; see supra note 66. 69
Scientific Opinion on a question from the European Commission related to the notification by Portugal, pursuant to Article 95 (5) of the EC Treaty, for the prohibition of cultivation of Genetically Modified Plants in the Autonomous Region of Madeira, 2010 EFSA J. 1500. 70
James Kanter, E.U. Signals Big Shift on Genetically Modified Crops, N.Y. TIMES, May 9, 2010, available at http://www.nytimes.com/2010/05/10/business/energy‐environment/10green.html. The author refers to a memorandum by the Commission stating that the Commission did not want to add to the confusion at the time. 71
Note Submitted by Austrian Delegation, Genetically Modified Organisms – A Way Forward (June 25, 2009), http://register.consilium.europa.eu/pdf/en/09/st11/st11226‐re01.en09.pdf (accessed Dec. 8, 2010). 2010] Genetically Modified Organisms
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Member States deciding upon national cultivation. 72 Following this, the Commission first extended the deadline regarding a safeguard measure by Portugal, 73 and then appeared to ignore the extended deadline in May 2010 thereby implicitly permitting its actions. Nonetheless, the actions of the Commission in July 2010 are radical in the context of the development of the EU GMO regime. Following two decades of harmonising legislation, combined with a detailed soft law 74 coexistence Recommendation 75 despite legally being within the Member States’ competence, 76 the Commission has decided to relieve the situation outlined above by making the post authorisation regime more flexible 77 through increasing the power or discretion of the States relating to coexistence and prohibitions on cultivation. It therefore theoretically should increase the formal legitimacy and legal certainty simultaneously as the States would have an appropriate legal basis for actions which had hereto been lacking. 78 Within the 2010 Coexistence Recommendation, 79 the Commission expressly states that Member States may unilaterally declare certain areas as GM‐free if less restrictive measures would not suffice in contrast with the 2003 Recommendation. 80 It also acknowledges explicitly that Member States may legitimately use measures that seek to prevent admixture below the labelling threshold, especially where organic crops are at stake 81 . Unlike in 2003, the Commission acknowledges that there are special attributes to 72
President Barroso, Political Guidelines for the next Commission, at 39 (Sept. 3, 2009), http://ec.europa.eu/commission_2010‐2014/president/pdf/press_20090903_en.pdf (accessed Dec. 8, 2010). 73 Commission Decision 2009/828/EC relating to the draft Regional Legislative Decree declaring the Autonomous Region of Madeira to be an Area Free of Genetically Modified Organisms, notified by the Republic of Portugal pursuant to Article 95(5) of the EC Treaty, 2009 OJ (L 294) 16. 74
L. SENDEN, SOFT LAW IN EUROPEAN COMMUNITY LAW (2004). For a common definition see Francis Snyder, The Effectiveness of European Community Law: Institutions, Processes, Tools and Technique, 56 MODERN L. REV. 19, 32 (1993) (“rules of conduct which, in principle, have no legally binding force but which nevertheless have practical effects”). Oana Stefan, European Competition Soft Law in European Courts: A Matter of Hard Principles?, 14 Eur. L.J. 753 (2008), provides for an extension to Snyder’s definition to include legal effects also. 75
2003 Coexistence Recommendation, supra note 30. 76
See supra note 35. 77 (COM 380 final) (2010), supra note 21; and Recital 7 of the 2010 Coexistence Recommendation, supra note 23. 78
E.g., Citizen’s Summary‐ GMO cultivation – The Commission's flexible new approach, available at http://ec.europa.eu/food/food/biotechnology/docs/gmo_cultivation_citizen_sum_en.pdf (accessed Dec. 8, 2010). 79
2010 Coexistence Recommendation, supra note 23, Guidelines, Section 2.4. 80
See supra note 30. 81
2010 Coexistence Recommendation, supra note 23, Guidelines, Section 1.1. 1360 G e r m a n L a w J o u r n a l
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organic farming and produce 82 for farmers and consumers; it further acknowledges that some farmers and operators may wish to “ensure that their crops have the lowest possible presence” of GMOs, 83 which may involve striving to avoid admixture entirely and the exclusion of GM crops. However, the Commission continues to see coexistence as an economic issue, 84 and consequently any measures are intended to relate to the economic impact on farmers or others down the production/consumption line. Further, the measures must be established by the Member State as proportional, and are intended to facilitate the management of cultivation locally rather than providing for national prohibitions. Although the 2010 Recommendation is of significance within the regime as an example of soft law 85 and indicating a more flexible approach by the Commission, to a great extent it merely reflects the practices of some Member States already 86 and the obvious implications of the use of buffer zones, isolation distances, etc. The potentially revolutionary element of the package is that of the Proposal to insert Article 26b into Directive 2001/18. I. Article 26b: Legalising General National Prohibitions on GM Cultivation? In conjunction with the more flexible Coexistence Recommendation, the Commission 87
proposed the insertion of Article 26b into Directive 2001/18 : 82
This was also seen in the Communication on the European Action Plan for Organic Food and Farming (COM 415) (2004) at Section 1.4 where organic farming was stated to be beneficial to public health, social and rural development, animal welfare and the environment. 83
2010 Coexistence Recommendation, supra note 23, Guidelines, Section 1.1. This more closely reflects Regulation 834/2007/EC on organic production and labelling of organic products and repealing Regulation (EEC) No 2092/91, 2007OJ (L 189) 1, which states that should aim at the lowest possible level of presence in the Recitals, and Article 9 which states that no GMOs should be used in organic agriculture. 84
It should be pointed out that there have been important statements in contradiction with this within the Commission. In his speech at the Conference, the Commissioner for the Environment, Stavros Dimas, stated that co‐existence measures could protect the environment as well as economics. Stavros Dimas, Commissioner for the Environment, “Coexistence of genetically modified, conventional and organic crops: Freedom of choice,” April 5, 2006, available at http://www.europa‐eu‐un.org/articles/en/article_5884_en.htm (accessed 8 December 2010). 85
See supra note 74. As an example of soft law, it is capable of binding the Commission to their content due to the general principles of EU law including the principle of legitimate expectations, legal certainty and equal treatment. Generally it is also of interpretative value. See Case C‐322/88, Grimaldi, 1989 E.C.R. 4407. 86
Commission Staff Working Document, supra note 36; J. Corti‐Varela, The End of Zero‐Risk Regulation of GM Crops in Europe: The Battle of Co‐existence Rules, presented at ‘The End of Zero Risk Regulation: Risk Toleration in nd
Regulatory Practice Conference’, 2 Annual Cambridge Conference on Regulation, Inspection and Improvement, Cambridge, UK, 11‐12 September 2007, at 6‐9, Annex II available at http://www.cbr.cam.ac.uk/pdf/Corti_Varela_Paper.pdf. 87
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Member States may adopt measures restricting or prohibiting the cultivation of all or particular GMOs authorised in accordance with Part C of this Directive or Regulation (EC) No 1829/2003, and consisting of genetically modified varieties placed on the market in accordance with relevant EU legislation on the marketing of seed and plant propagating material, in all or part of their territory, provided that: (a) those measures are based on grounds other than those related to the assessment of the adverse effect on health and environment which might arise from the deliberate release or the placing on the market of GMOs; and, (b) that they are in conformity with the Treaties. By way of derogation to Directive 98/34/EC, Member States that intend to adopt reasoned measures under this Article shall communicate them to the other Member States and to the Commission, one month prior to their adoption for information purposes. This provision at first glance appears to be a spectacular turn about on EU GMO policy and to give States a general veto on national cultivation. The provision provides for Member States to create restrictions or prohibitions on cultivation, on a national level. However, two limitations apply: firstly, the measures may not be based on human health or environmental reasons, linked again to the presumption that the authorisation procedure and safeguard clause suffice; and secondly, the measures must comply with the EU Treaties. As the measures would amount to a quantitative restriction or measure of equivalent of effect in an area which would be in effect no longer harmonised, these would be prohibited generally under Articles 34 and 35 TFEU (ex Articles 28 and 29 EC). However, these prohibitions may then be justified under Article 36 TFEU (ex Articles 30 EC) objective justifications and mandatory requirements, although without the benefit of using the most obvious one of protection of the environment, human health, or animal or plant life. So, if the measures are challenged, on what bases may they be justified? II. Potential Objective Justifications? 88
Article 36 TFEU contains an exhaustive list of objective justifications for quantitative restrictions. Alongside these is the non‐exhaustive list of mandatory requirements 89 for 88
C‐113/80, Commission v Ireland, 1981 E.C.R. 1625. 89
P. CRAIG & G. DE BÚRCA, EU LAW: TEXT, CASES AND MATERIALS (4th ed. 2007). 1362 G e r m a n L a w J o u r n a l
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those measures of equivalent effect, developed following Cassis de Dijon, 90 which include inter alia consumer protection 91 . It is probable that the restrictions would be measures of equivalent effect, involving a general prohibition on cultivation of GMOs rather than a direct prohibition on import. Therefore there is more flexibility in identifying a legitimate objective. Excluding the objectives of environmental and health protection, the most likely potential bases would be protecting public morality/ethics, 92 public policy including that of “quality” farming, 93 industrial and commercial property, 94 or consumer interests. 95 These objectives would cover most of the substantial concerns of Member States and appear to be permitted by Article 26b via mandatory restrictions. There should be little difficulty in establishing that the above objective justifications or mandatory requirements could apply to a restriction on GMO cultivation, especially considering the flexibility of the notions of public policy 96 and morality. 97 Whichever objective is presented as the basis for the national restrictions, it must be clear that it is a substantial reason behind the restriction, and not concealing other objectives such as environmental or health concerns, 98 political expediency or a disguised trade restriction. 90
C‐120/78, Rewe‐Zentrale AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon), 1979 E.C.R. 649. 91
Id. 92
For example, Interfering with nature, “playing god,” taking unnecessary risks, etc. Nuffield Council on Bioethics, Genetically Modified Crops: the Ethical and Social Issues (1999), available at http://www.nuffieldbioethics.org/gm‐crops J.S. Applegate, The Prometheus Principle: Using the Precautionary Principle to Harmonize the Regulation of Genetically Modified Organisms, 9 IND. J. GLOBAL LEGAL STUD. 207 (2001). 93
The EU provides protection for what are described as “quality products” and includes protected designation of origin, protected geographical indication and traditional specialties guarantees. See European Commission, Geographical Indications and Traditional Specialties, available at www.ec.europa.eu/agriculture/quality/schemes/index_en.htm. As well as the economic aspects acceptable to the Commission, there are further societal, cultural and potentially health benefits to these. In Case 196/85, Commission v France, 1987 E.C.R. 1597, protection of traditional and customary methods was upheld as a legitimate objective. 94
Joined Cases C‐465/02 and C‐466/02, Germany and Denmark v Commission, 2005 E.C.R. I‐9115, para. 69, state that this concept includes designations of origin and geographical indications. The specific marks mentioned ibid would also be covered. 95
E.g. through facilitating genuinely GM‐free produce. 96
However the issue must involve a genuine and serious threat to fundamental interests of the Member State. Case 30/77, Bouchereau 1977 E.C.R. 1999 para. 34‐35. 97
Case C‐244/06, Dynamic Medien Vertriebs GmbH v Avides Media AG, 2008 E.C.R. I‐505, para. 44. 98 In Case C‐165/08, Commission v Poland, Jul. 16, 2009, paras. 54‐59, Poland attempted to argue ethics; however these were held to be too closely linked to environmental and health concerns. Further, the views of certain sections of the public were held not to suffice as indicative of ethics or public moral. 2010] Genetically Modified Organisms
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This will prove even more difficult to establish where national approaches are inconsistent. France has proven a good example of this, varying between being a strong proponent of GMOs and a strong opponent. France has been one of the foremost Member States in cultivating GM crops and with a very wide range of field trials 99 over the past two decades, 100 although it has had difficulties at times with destructions of crops and protests. However, in 2008 with a new President at the helm, France declared that they would be imposing a suspension on the cultivation of MON810. 101 France also requested that the current process be amended and a wider range of environmental and safety factors be included, widening the basis of expertise. 102 Yet, concurrently, France were finalising legislation to implement Directive 2001/18. 103 It would be difficult to establish that the reasoning attaches to a public interest/mandatory requirement and demonstrate the necessity or proportionality of measures at one moment, which would not have been considered as such nationally the previous year. Although public morality in particular is not a static notion, the Court would be unlikely to accept that it changes with the executive. However, choice of a suitable objective justification is only the first step in the process of justifying a national measure. Some potentially suitable objectives may in effect be undermined due to the cumulative requirements that the measures must be applied in a manner that is not arbitrarily discriminatory, a disguised restriction on trade, or 104
disproportionate. III. Proportionality of the Measures? Proportionality is a general principle of law within the EU 105 , and applies equally to Article 36 TFEU justifications. It includes three cumulative elements 106 : the measures in question 99 Available at www.ogm.gouv.fr (accessed Dec. 8, 2010). 100
Co‐Extra, Genetically modified plants http://www.coextra.eu/country_reports/gmo_planting_FR_EN.html. in France, available at 101
This was upheld by the Conseil d’Etat in March 2008: Ordonnance du juge des référés du 19 mars 2008, http://www.conseil‐etat.fr/cde/node.php?articleid=739 (accessed Dec. 8, 2010). 102
France proposes tough E.U. standards related to genetically modified crops, MARKETWATCH, Mar. 4, 2008, http://www.marketwatch.com/news/story/france‐proposes‐tougher‐eu‐standards/story.aspx?guid={AA76A432‐
AE89‐49C7‐A44F‐D986092F1718} (accessed Dec. 8, 2010). 103
Loi nº 2008‐595 du juin 2008, supra note 51. 104
The first two requirements are found within the chapeau of Article 36 TFEU, while the third of proportionality has been imposed by the Courts from an early stage, e.g., Case 4/75, Rewe‐Zentralfinanz eGmbH v Landwirtschaftskammer, 1975 E.C.R. 843. 105
TRIDIMAS, supra note 47, at 137. 1364 G e r m a n L a w J o u r n a l
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must be suitable to achieving a legitimate aim or objective (effective); they must be the least restrictive alternative available to achieve this aim (necessary); and they must be proportional stricto sensu. 107 As these legitimate objectives apply where there is a lack of complete harmonisation, the Member States have a margin of appreciation in deciding upon the level of protection they wish to achieve, even where other Member States have less strict measures in place 108 , and also regarding the content of public policy and morality. 109 Obviously, the higher the level, the more “costly” the measure may be while still being proportionate. Nonetheless, if some evidence is adduced which suggests that either the objective is already protected, or that other less restrictive measures would fulfil the need as effectively, the Member States will have to bring weighty evidence to bear to contradict this. This will be the case in particular where the relevant EU legislation is intended to deal with these objectives already, as although not fully harmonised the EU legislation will be 110
presumed to be proportionate, and any more severe measures will be difficult to justify. This is amply demonstrated by the Commission’s arguments in Commission v. Poland, 111 where ethics and public morality were raised as a justification for national restrictions. 112 Although the CJEU did not decide on this particular issue, 113 the Commission dismissed this as a legitimate basis for the restrictions, as Directive 2001/18 provided for ethical issues to be taken into account in the authorisation process. 114 It is likely that the Court would have agreed with the Commission on this point, if it had been necessary to do so, or at least placed a further burden on Poland to indicate that the authorisation procedure failed to deal with the issue of ethics and religion adequately and hence why the prohibition was 106
However the second and third aspects are similar in content and are frequently dealt with together. 107
TRIDIMAS, supra note 47, at 139; Case 11/70, Internationale Handelsgesellschaft, 1970 E.C.R. 1125. 108
Case C‐110/05, Commission v. Italy, 2009 E.C.R. I‐519, para. 65. 109
See supra note 96 and note 97. 110
Unless legally challenged, the EU measure will be presumed to be in conformity with the Treaties. Further if challenged, any EU measures must comply with the principle of proportionality in achieving their objectives (e.g., Case 137/85, Maizena 1987 E.C.R. 4587, para. 15) and the institution will be granted a wide margin of discretion in deciding upon these measures; the usual test being whether the measures were “manifestly inappropriate” (e.g., Case C‐84/94, United Kingdom v Council, 1996 E.C.R. I‐5755, para. 58). Therefore the burden will be substantial for a Member State if the EU measure claims to have already dealt with the objective in question. 111
Case C‐165/08, supra note 98. 112
Id. at paras. 19 and 21. 113
Id. at para 51. 114
Id. at para. 34 (referring to Article 29 of Directive 2001/18). 2010] Genetically Modified Organisms
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necessary. This assessment is supported by analogy with the Greenpeace case 115 where the CJEU decided that as the safeguard clause embodied the precautionary principle, the legislation as a whole was compliant with the precautionary principle. Likewise, it could be argued that the risk authorisation procedures, the option of coexistence measures within Directive 2001/18, and labelling in Regulation 1830/2003 amongst other provisions already take into consideration such issues as consumer protection and agrarian interests in a proportional manner. Consequently, Member States will have to provide strong evidence to support their arguments that more general prohibitions are required and proportional within their country. This is particularly the case considering that the Commission has indicated in the 2010 Recommendation that regional prohibitions and targeting below 0.9% admixture may be permissible due to these considerations. While prohibition might be proportional in relation to protecting “quality” produce and farming, this would seem more difficult to establish for conventional farming. In this respect, through indicating acceptance of more stringent coexistence measures, the Commission may in effect have limited the options for Member States under the new proposed Article 26b. However, it could be argued that if, as the Commission continuously states, the coexistence measures are merely intended to focus on the economic aspects of those issues, then that only these aspects should be discounted in considering whether the objectives are adequately protected. While coexistence measures acceptable to the Commission might protect the economic interests of various farmers, the social, cultural or ethical aspects of their agricultural type may not be protected sufficiently. Taking into account that zone‐by–zone segregation, whilst an effective option in the short‐term, is 116
unfeasible for the long‐term and other coexistence measures may not suffice depending on the weight given to the values at stake, it may be possible to establish proportionality. This is strengthened by the Commission specifically recognising that States may wish to exclude cultivation locally via coexistence measures, or nationally via the proposed Article 26b. Overall, the proposed Article 26b provides for a strong possibility for Member States to legally prohibit the cultivation of GMOs within their territory on the basis of suitable mandatory requirements, with the exception of environmental or health protection. Further, the discussion above relates to the legal consequences if the Member States’ prohibitions are challenged. Taking into consideration the Commission’s response to Portugal’s prohibitions within Madeira this year, along with the loosening of control in July and the desire to see Member States willing to authorise further GMOs, it would seem 115
Case C‐6/99, supra note 45. 116
M. Demont & Y. Devos, Regulating coexistence of GM and non GM crops without jeopardizing economic incentives, 26 TRENDS IN BIOTECHNOLOGY 353 (2008); and Levidow & Boschert, supra note 35. 1366 G e r m a n L a w J o u r n a l
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likely that the Commission would be willing to accept the Member States’ justifications even where the legitimate objectives or proportionality might be questionable, at least initially, thereby avoiding legal confrontations before the Court of Justice of the EU (CJEU). However, considering the impact of the Biotech Dispute, the Commission’s approach to national measures may well alter depending on whether Article 26b and national measures are found to be in compliance or breach of the WTO legal instruments. 117
D. Permissible under the WTO? Much like Member States under the TFEU, the EU has contractual obligations under the WTO not to negatively discriminate or impose trade restrictions on imports, except under certain circumstances. Within the Biotech Dispute, the Dispute Panel condemned the de facto moratorium, extensive delays and national bans, refusing the EU’s defence on the precautionary principle as they deemed a satisfactory risk assessment could be carried out and the measures were not justified even under Article 5.7 of the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). In the context of Article 26b, with the exclusion of environmental and human health protection, it appears that the SPS Agreement would be excluded. It could be argued that the Technical Barriers to Trade (TBT) Agreement applies, however this relates to technical regulations relating to labelling, packaging, product requirements, etc. Further, due to the non‐exhaustive justifications possible under Article 2 TBT, it would seem probable that complainants would bring an action under alternative relevant agreements. The core basis for action would appear to be under the General Agreement on Tariffs and 118
Trade (GATT), which prohibits quantitative restrictions in Article XI and discriminatory measures under Article III. For the latter, the complainant State must first establish that there exists a “like product” which is receiving more favourable treatment than the one being discriminated against (i.e., that a non‐GM product is “like” the GM equivalent). This is a complex issue, especially where GMOs are no longer detectable in the product, as proponents see little difference while opponents consider them as substantially different to goods created in a “conventional” manner. Although raised within the Biotech Dispute, the Panel did not find it necessary to decide upon the issue 119 . Consequently there is no ruling on this question yet. The jurisprudence 117
An exhaustive analysis is beyond the scope of this article, and this section only provides a brief overview of some of the issues that might arise if the proposed Article26b were challenged before the WTO. 118
The Trade‐Related Aspects of Intellectual Property Rights Agreement is a further option. 119
Panel Report , supra note 13, para. 7.2418. 2010] Genetically Modified Organisms
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of the WTO provides several general criteria in establishing whether a good is a “like product.” 120 These include, inter alia, consumers’ tastes and habits which would seem to raise the likelihood that the WTO would reject GMOs as “like products,” thereby removing restrictions on them from the scope of GATT III:4. However, consumer tastes are merely one of a number of criteria, and difficult to establish as any positive or restrictive legislation will have an impact on the consumer tastes. There is the risk that the current regime may “crystallise” consumer tastes 121 and thereby justify itself by circuitous logic. Other criteria include the properties and end‐uses of the products. Consequently, it is possible that GMOs would be considered a “like product” for the purposes of GATT. 122 Either way, a complainant State could still raise the issue of a quantitative restriction. Although a number of justifications exist in Article XI, and elsewhere within GATT, 123 most are of little relevance for the purpose of justifying Article 26b and Member States’ measures. The provision of greatest relevance is the General Exceptions Clause, Article XX of GATT. To avail of the exceptions therein, the EU must establish that the measures relate to and are necessary to protect a listed public interest, 124 and are not arbitrarily or unjustifiably discriminatory or a disguised restriction on trade or services. 125 As the public interests within Article XX are exhaustive, and Article 26b would exclude the possibility of environmental and health protection, the most relevant interest remaining would be that of public morality in Article XX (a). Public morality however is an ethereal concept and begs the question of whose morality, both within the relevant State and of how many States internationally. There is minimal jurisprudence on the exception of 126
public morality in GATT XX (a), and consequently what it covers will be difficult to assess. 120
European Communities ‐ Measures Affecting Asbestos and Asbestos‐Containing Products, WT/DS135/AB/R, 2001:VII, 3243. The criteria listed are: “(i) the properties, nature and quality of the products; (ii) the end‐uses of the products; (iii) consumers' tastes and habits ‐ more comprehensively termed consumers' perceptions and behaviour ‐ in respect of the products; and (iv) the tariff classification of the products,” at para. 101. 121
Condemned within the EU in Case 178/84, Commission v Germany, 1987 E.C.R. 1227, para. 32. 122
For more in‐depth discussion, see J. Wong, Are Biotech Crops and Conventional Crops Like Products? An Analysis under GATT, 2003 DUKE L. & TECH. REV. 0027; and D. Morgan & G. Goh, Genetically Modified Food Labelling and the WTO Agreements, 13 RECIEL 306, 315‐317 (2004). 123
For example in Articles XII, XVIII, XIX, and XXI. 124
United States ‐ Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R DSR 1996:I. 125
In accordance with the good faith requirement of the chapeau of Article XX. 126
The first instance of the AB addressing the exception of ‘public morality’ under the scope of any WTO Agreements was within United States – Measures affecting the cross‐border supply of gambling and betting services, WT/DS285/AB/R, DSR 2005:XII, 5663; fn 351 of the Report of the Appellate Body of the WTO. M. Wu, Free Trade and the Protection of Public Morals: An Analysis of the Newly Emerging Public Morals Clause Doctrine, 33 YALE J. INT’L. L. 215 (2008). 1368 G e r m a n L a w J o u r n a l
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In US‐Gambling, the WTO examined public morality in conjunction with public order in the context of the General Agreement on Trade in Services (GATS) Article XIV(a), 127 albeit without detailing what it involved. The Panel resorted to a dictionary definition and stated that the term “public morals” “denotes standards of right and wrong conduct maintained by or on behalf of a community or nation.” 128 It is apparent from the case that the morals to be protected need not be held by all States (i.e., universal), but nor should they generally be just held one State (i.e., unilateral). 129 It appears that, although not absolutely required, where a number of States are of the same viewpoint, this will be of aid in establishing that the issue is one of public morality 130 and also in examining the issue of necessity. Since US‐Gambling, the WTO has had occasion to examine Article XX(a) public morality in China‐Audiovisual Services, 131 where the WTO approved a similar approach. In both cases the WTO provided the States with some leeway in deciding what issues fell within public morality, similarly to within the EU, as the content of the concepts for States “can vary in time and space, depending upon a range of factors, including prevailing social, cultural, ethical and religious values.” 132 Taking the leeway provided in these two disputes and the focus of the parties’ arguments upon the issues of necessity and discrimination instead, 133 it appears that the content of public morality will prove sufficiently flexible to encapsulate a wide range of issues, including that of GMOs. Instead the control and limitation is seen through ensuring compliance with the chapeau and, in particular, necessity. 127
See the AB’s Report, id. at para 327 (restrictive measures taken by the USA were necessary for the protection of public morality and the maintenance of public order). 128
United States ‐ Measures Affecting the Cross‐Border Supply of Gambling and Betting Services ‐ Report of the Panel, WT/DS285/R at para. 6.465. 129
J.C. Marwell, Trade and Morality: The WTO Public Morals Exception After Gambling, 81 NYU Law Review 802 (2006); and Wu, supra note 126, at 231‐233. 130
For further discussion on the impact of US‐Gambling on the development of the public morality exception, see N.F. Diebold, The Morals and Order Exceptions in WTO Law: Balancing the Toothless Tiger and the Undermining Mole, 11 J. INT’L ECON. L. 43 (2008). 131
China — Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products‐ WT/DS363/AB/R. 132
Panel Report in US‐Gambling, supra note 128, at para. 6.461, where they refer to the discretion traditionally granted by the AB to States in deciding upon the level of protection, and then apply it to the content of what may be protected, similarly to the approach within the EU; the Panel continued this approach in China‐Audiovisual Services‐see WT/DS363/R at para. 7.759. 133
Panel Report in China‐Audiovisual Services, id. at paras. 7.762‐3 (the relevance to morality was not specifically contested). 2010] Genetically Modified Organisms
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Necessity 134 is very similar to the notion of proportionality within the EU, involving a process of “weighing and balancing a series of factors”. These factors include: the importance of the public interest, the contribution of the measure to this interest, and the degree of restrictiveness on trade. The defendant State must demonstrate that the measures are somewhere between “indispensable to” and “contributing to” the legitimate objective being protected. Where a prima facie case of necessity has been established, the complainant State may challenge this through providing evidence of less trade restrictive alternatives; however, these alternatives should be reasonable and available rather than 135
hypothetical. The Panel and Appellate Body (AB) have closely scrutinised the national measures in assessing whether truly necessary. In US‐Gambling, the AB reversed the findings by the Panel that the measures were not necessary due to failure to participate in meetings with Antigua, as this was not a reasonable alternative. 136 Similarly, in China‐Audiovisual Services, the Panel and the AB examined China’s measures minutely 137 ; however, in this case, they both found the measures unnecessary, as either China failed to establish sufficient evidence of prima facie necessity 138 or else to displace the burden once the USA demonstrated reasonably available alternatives. 139 Although it is likely that the WTO would accept that GMOs could raise the issue of public morality, the EU and the Member States must then establish that GMOs raise the issue of public morality within the relevant Member State(s), that they were necessary to protect this public interest and that this was the reason for the restrictions. Similar difficulties to those discussed in the context of the EU regime above would arise. However, this does not necessitate that the responses by the EU Commission or CJEU would parallel those of the WTO; within the EU, the Commission’s Communication accompanying the Proposal and the Preamble of the Proposal itself explicitly provide for the possibility of Member States unilaterally imposing prohibitions on cultivation for legitimate objectives beyond health or environmental risks, thereby implying that such measures could be considered proportional. No such provisions exist within the WTO relating to GMOs, and the 134
Id. at paras. 7.782‐7.793. 135
AB’s Report in US‐Gambling, supra note 126, at paras. 103‐109. 136
Id. at paras 126‐7. The AB did however find against the USA on the basis that they had not demonstrated that the measures did not discriminate against foreign gambling service providers. 137
Panel Report, supra note 132, at paras. 7.794‐7.909, and AB Report, supra note 131, paras. 234‐335. 138
Panel Report, supra note 132, at paras 7.848, 7.863 and 7.868; The AB upheld the Panel’s conclusions generally, however believed that China had failed to establish even necessity conditional on no reasonable alternatives being available, AB Report, supra note 131, at para. 336. 139
Panel Report., supra note 132, at paras 7.869‐7.909, and AB Report, supra note 131, at paras 336‐7. 1370 G e r m a n L a w J o u r n a l
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complainant State could discharge its burden by proposing reasonable and available alternatives such as accurate labelling, or reasonably stringent coexistence measures, which the EU and its Member States would then have to demonstrate were insufficient. In particular, where a Member State has raised an alternative objective acceptable under EU law, it will be exceedingly difficult to then claim necessity to protect public morality as the basis similarly to in Commission v Poland 140 before the CJEU. If the WTO should reject the necessity/proportionality of these measures or as protecting an objective not provided for by WTO law, the Commission would once again be in the position where it would be obliged to take measures to lift national restrictions. Nonetheless, politically if the Coexistence Recommendation and the incorporation of Article 26b do achieve the Commission’s goal of increasing authorisations, and reducing delays and what the Commission considers are insupportable applications of safeguard clauses, then other nations such as the USA may not challenge individual Member States’ restrictions. E. Conclusion The proposed Article 26b is both intriguing and innovative within the EU, as it attempts to encourage harmonisation of the overall EU GM cultivation regime via post‐authorisation de‐harmonisation. It provides the potential for Member States to exclude GM cultivation nationally where desired in order to resolve national concerns, without resorting to the safeguard clauses, in a manner legally compliant with EU and WTO law. However, stakeholders on each side are remaining suspicious of the proposals, approving of some 141
aspects, disapproving of others, and generally unsure as to their impact, as the legal and practical consequences are unclear. These consequences will depend on approaches by the Commission, the CJEU, non‐EU States and the WTO, as well as on the nature of the actual concerns of the Member States imposing the ban rather than merely the declared concerns. Regarding legitimate objectives, Article 26b is unlikely to prove as legally substantive as it might first appear, in particular omitting environmental and health protection; the current demanding conditions posed by the safeguard clauses would continue to exist, as would the exclusion of new interpretations of existing data. The scope is narrower within WTO law, where likely restricted to public morality. Consequently, Member State bans under 140
Supra note 98. 141 E.g., EU makes decision on approval, countries on cultivation, GMO‐Safety News, June 8, 2010, available at http://www.gmo‐safety.eu/news/1182.makes‐decision‐approval‐countries‐cultivation.html (accessed Dec. 8, 2010); J. Riss, M. Stoczkiewicz, & R. Gouveia, Barroso’s empty GM deal, EUROPEAN VOICE, July 8, 2010, available at http://www.europeanvoice.com/article/imported/barroso‐s‐empty‐gm‐deal/68451.aspx. The authors of this letter respectively are Director of the European Unit of Greenpeace, Director of Friends of the Earth Europe, and Secretary General of Euro Coop Brussels. 2010] Genetically Modified Organisms
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Article 26b may be legally compliant with EU law, while in breach of GATT as not related to the acceptable objectives therein. The legal status of a ban will depend on whether its objectives are regarding the environment/human health (excluded by Article 26b), other mandatory restrictions excluding morality (irrelevant to GATT) or morality (potentially compliant with both Article 26b and GATT). Although the status quo encourages Member States to disguise actions based on ulterior concerns within the ambits of safeguard clauses, it would instead become possible that Member States would attempt to disguise concerns over the environmental/human health risks behind other objectives such as consumer choice/protection or ethics in order to comply with Article 26b. Likewise, morality may be raised as the ultimate “get out of jail free” card, subsuming all other relevant concerns in order to appear legally compliant with EU and WTO law. Member States which believe that the crops pose a threat may restrain themselves from raising the issue in the first place, as seeing it as simpler to utilise an alternative legitimate objective under Article 26b to justify their prohibition instead. Although the Proposal would resolve many of the Member States’ concerns, while not posing the same difficult legal questions regarding risks and precaution as raised in the Biotech Dispute, the desirability of encouraging Member States to raise alternative issues rather than risks as legitimate objectives should be considered. In particular, whether Member States should be limited in their choice of level of protection regarding the environment and health, compared to other values, and whether the EU should interpret newness and specificity so narrowly or instead should follow Advocate General Sharpston’s more recent flexible suggestions. If the Commission follows a lenient approach to national restrictions, then it may achieve a more positive approach to authorisations and consequently satisfy non‐EU States. However, if non‐EU States challenge the prohibitions before the WTO, it is likely that some Member States would fail to establish the necessity of their measures to protect public morality; although potentially still legal within the EU as protecting other objectives, the Commission may treat applications more restrictively and even attempt to exclude other objectives on the basis that they are already protected by GM legislation. Although the CJEU would presumably uphold a broader approach regarding the range of legitimate objectives, they may accept a more restrictive interpretation of the proportionality of the measures. In such a case, Member States may once again turn to Article 23 safeguard clauses and the help of the Council in upholding national prohibitions, if unable to justify Article 26b bans before the CJEU. For the moment, Article 26b is merely at the Proposal stage; however it would seem likely that it will be adopted in a substantively similar form in the next few years, as the Parliament and Council are unlikely to object to Member States having a national veto on GM cultivation. It is also a somewhat inevitable step to take considering the current safeguard clause stalemate. It would be interesting to see whether other Member States, who have not availed of the safeguard clauses but who have not shown a strong positive 1372 G e r m a n L a w J o u r n a l
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stance towards national GM cultivation, would also avail of Article 26b as a method approved by the Commission for general, national prohibitions. It remains to be seen whether these proposals will clear a passage through the mountainous GMO regime for the infamous Sherpa, or alternatively lead to one more dead end. Developments The German Stem Cell Act By Jochen Taupitz * Abstract The article describes the original Stem Cell Act, the reform discussion following its enactment and the reform of the Act adopted by the German Bundestag on 11 April 2008. A. The Legal Position under the Act of 28 June 2002 I. Introduction In 2000, the German Researcher Oliver Brüstle officially applied for support from the Deutsche Forschungsgemeinschaft (DFG) (German Research Foundation, GRF) for a research program that needed the importation of human embryonic stem cells from 1
abroad. This led to a strong debate about the ethical and legal acceptability of the importation of human embryonic stem cells because their production requires the “consumption” of the embryos. While the Embryo Protection Act (EPA) of 13 December 1990, in force since 1 January 1991, 2 prohibits such a use of embryos in Germany, it does not include a provision regarding the importation of stem cells created by such means. The lack of a prohibition of importation was considered by some as an implicit permission to import and by others as an unintentional loophole within the Embryo Protection Act. The German Research Foundation was asked by political circles to delay its decision concerning the request of Brüstle, so that the Parliament could have the possibility to make up ist mind. The GRF delayed its decision on the Brüstle request. Following this the *
Professor of Civil Law, Law of Civil Procedure, Private International Law and Comparative Law at the University of Mannheim; Managing Director of the Institute for German, European and International Medical Law, Public Health Law and Bioethics of the Universities of Heidelberg and Mannheim. Email: [email protected]‐
mannheim.de. 1
Brüstle had already given notice of his application some months earlier; therefore the discussion about the importation of embryonic stem cells started before 2000. 2
See BGBL. I:2746 (1990). 1374 G e r m a n L a w J o u r n a l
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GRF 3 , as along with two newly founded political advisory boards gave their opinions on the matter. While the committee of enquiry “Recht und Ethik der modernen Medizin” (“law and ethics of modern medicine”), deployed by the German Bundestag on 24 March 2001, spoke out against the importation of embryonic stem cells, 4 the majority of members of the “Nationaler Ethikrat” (“National Ethics Council”), deployed on 2 May 2001 through the German Government, demanded a time‐limited and strict ruling allowing the importation of embryonic stem cells. 5 On 30 January 2002 the German Bundestag discussed three proposals with which a formal legislation procedure was to be set up: The Proposal by the Members of Parliament Wodarg a.o. held, “in light of the protection of the dignity of embryos and the Embryo Protection Act,” that there should be a prohibition 6
of the importation of embryonic stem cells without exception. The Proposal by the Members of Parliament Flach, Reiche, Hintze a.o. pleaded for the possibility of importation, as long as the imported embryonic stem cells came from leftover (supernumerary) embryos that were donated for high‐ranking scientific research. A commission would perform a scientific and ethical investigation in order to approve the importation. 7 The Proposal by the Members of Parliament Böhmer, von Renesse, Fischer a.o., intended for legislation against the consumption of further embryos in order to gain embryonic stem cells. The importation of stem cells was to be only allowed under strict measures for scientific research. 8 The last Proposal received the majority of votes and was the foundation of the Stem Cell Act, which was decided on 28 June 2002. The Act, which ensures the protection of embryos in connection with the importation and use of human embryonic stem cells (Stem Cell Act, SCA) (Gesetz zur Sicherstellung des 3
See Deutsche Forschungsgemeinschaft [German Research Foundation], Humane embryonale Stammzellen: Stellungnahme vom 19. März 1999, in HUMANGENOMFORSCHUNG – PERSPEKTIVEN UND KONSEQUENZEN 3 (2000). 4
See DEUTSCHER BUNDESTAG: DRUCKSACHEN UND PROTOKOLLE [BT] 14/7546. 5
See NATIONALER ETHIKRAT, ZUM IMPORT MENSCHLICHER EMBRYONALER STAMMZELLEN (2002); MANUELA BREWE, EMBRYONENSCHUTZ UND STAMMZELLGESETZ 54 (2006). 6
BT 14/8101. 7
See BT 14/8103. 8
See BT 14/8102. 2010] German Stem Cell Act
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Embryonenschutzes im Zusammenhang mit Einfuhr und Verwendung menschlicher embryonaler Stammzellen – Stammzellgesetz, StZG), 9 entered into force on 1 July 2002. It governs the importation and the use of human embryonic stem cells (hES cells). The importation and the use of embryonic stem cells are in principle prohibited (§4 (1) in conjunction with §1 no. 2 SCA). Under particular circumstances, however, importation and use are exceptionally permissible (§4 (2) in conjunction with §1 no. 3 SCA). According to §1 SCA, it is the purpose of the Stem Cell Act in consideration of the State’s obligation to respect and protect human dignity and the right to life and to guarantee the freedom of research . . . 1. to prohibit, in principle, the importation and use of embryonic stem cells, 2. to prevent German demand from causing the derivation of embryonic stem cells or the production of embryos with the aim of deriving embryonic stem cells, and 3. to determine the requirements to exceptionally permit the importation and use of embryonic stem cells for research purposes only. Stem cells, under §3 no. 1 SCA, are “all human cells which have the potential to multiply by cell division if in a suitable environment and which by themselves or through their daughter cells are capable, under favourable conditions, of developing into specialised cells, but not into a human being (pluripotent stem cells).” Embryonic stem cells, under §3 no. 2 SCA, are “all pluripotent stem cells derived from embryos which have been extracorporeally produced and have not been used to bring about pregnancy or which have been taken from a woman before the completion of nidation.” In this context, an embryo is “any human totipotent cell which has the potential to divide and to develop into a human being if the necessary conditions prevail” (§3 no. 4 SCA). It is irrelevant whether the totipotent cell was itself taken from an embryo (unlike in §8 of the Embryo Protection Act). II. Protection of Living Embryos Abroad: Cutoff Date Provision (Key Date Provision) The central concern of the Act is the provision which proceeds from the derivation (= procurement) of stem cells from embryos and is aimed at the protection of living embryos abroad. Under §4 (2) no. 1 (a) SCA, embryonic stem cells may be imported and utilised, if at all, if “the competent agency has satisfied itself that . . . the embryonic stem cells were 9
See BGBL. I:2277‐2280 (2002). 1376 G e r m a n L a w J o u r n a l
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derived before 1 January 2002 10 in the country of origin in accordance with relevant national legislation there and are kept in culture or are subsequently stored using cryopreservation methods (embryonic stem cell line).” This “cutoff date provision” or “key date provision” intends to prevent embryos available abroad from being utilised for the purposes of German research. In other words, the prohibition of an “instrumental use” of embryos according to §2 EPA is also applied to the derivation of embryonic stem cells abroad. 11 III. Disapproval or Prevention of Particularly Reprehensible Acts in Connection with the Derivation of Stem Cells §4 (2) SCA contains further provisions relating to the derivation of the hES cells. They are discernibly based on the consideration that the derivation of stem cells may not be 12
preceded by any act regarded as particularly reprehensible by the legislator. They are 13
therefore based on the ethical but constitutionally questionable prohibition of harvesting the fruit of a poisonous tree. 14 The restrictions would only provide independent future‐
oriented protection for embryos (located abroad) if the cutoff date provision were repealed. Under §4 (2) no. 1 (b) SCA, it must be confirmed to the satisfaction of the authorising agency that the embryos from which the stem cells were derived were created by way of medically assisted extracorporeal fertilisation for the purpose of effecting a pregnancy. This excludes, inter alia, the importation and use of hES cells which come from embryos created by way of cell nuclear transfer (“therapeutic cloning”, “Dolly” method). For this method does not consist in a “fertilisation.” The requirement of extracorporeal fertilisation prevents the importation of stem cells that come from embryos that were created by way of an intracorporeal fertilisation process (insemination or gamete intrafallopian transfer) and were removed from the mother again before nidation by way of uterine lavage, at the mother’s wish. In addition, the allowed stem cells must come 10
On the reform of the statute, see Section C. infra. 11
Legislative rationale of the draft Stem Cell Act of 27 February 2002, BT 14/8394 at 8; see also Christian Starck, Embryonic Stem Cell Research according to German and European Law, 7 GERMAN LAW JOURNAL 625, 641 (2006). 12
See Taupitz, Erfahrungen mit dem Stammzellgesetz, 62 JURISTENZEITUNG 113 (2007). 13
On the unconstitutionality of the restrictions of the Stem Cell Act going beyond the cutoff date provision, see, in addition to those named infra note 25: Wolfrum, Schriftliche Stellungnahme of 7 March 2002, des Ausschusses für Bildung, Forschung und Technikfolgenabschätzung des Deutschen Bundestages, BT 14/574; Löwer, Schriftliche Stellungnahme of 8 March 2002, des Ausschusses für Bildung, Forschung und Technikfolgendabschätzung des Deutschen Bundestages BT 14/574; Jochen Taupitz, Alternativlosigkeit als Voraussetzung der Forschung mit embryonalen Stammzellen, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 335, 341 (2003) (with further references); see also infra II 5. 14
See Taupitz, supra note 12. 2010] German Stem Cell Act
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from embryos created for the purpose of bringing about a pregnancy, without ultimately being used for this purpose (known as supernumerary embryos). In any case, these embryos had no chance of survival. In contrast, the importation and use of stem cells from embryos created for the purpose of deriving stem cells or for the purpose of research are not permissible. Further on, the decision to reject the embryos is not to have been made for reasons based on the embryos themselves. As a consequence, the importation and use of stem cells from embryos that were rejected on the basis of pre‐implantation diagnosis (PID) are not permissible. And finally, no payment or other non‐cash benefit is allowed to be granted or promised for the permission to use the embryos to derive stem cells (§4 (2) no. 1 c) SCA). Thus, on the one hand commercialisation is avoided, and on the other hand it is also ensured that the decision of the genetic parents to permit the embryo to be used for research was not made in a situation of financial distress. IV. Protection of Other Provisions of German Law §4 (2) SCA contains a third group of requirements, which protect other prohibitions within German law: The competent agency must have satisfied itself that other legal provisions, in particular those of the German Embryo Protection Act, do not conflict with the importation 15
or utilization of embryonic stem cells. In addition, approval must be refused if the derivation of the stem cells manifestly occurred in contradiction to fundamental principles of the German legal system (§4 (3) sentence 1 SCA). 16 The refusal of approval may, however, expressly not be justified with the argument that the stem cells were derived from human embryos (§4 (3) sentence 2 SCA). Since hES cells are by definition derived from human embryos, this provision serves to harmonise the Stem Cell Act with §2 EPA (prohibition of the use of embryos other than to effect a pregnancy). This shows that the legislator does not regard the (past) use of embryos other than to effect a pregnancy as one of the particularly reprehensible acts mentioned under A.III., that is, it does not regard 17
the use of embryos to derive stem cells in itself as a violation of human dignity. V. Restriction of Work Using Embryonic Stem Cells in Germany The importation and the use of embryonic stem cells may be approved only for research purposes (§4 (2) SCA), and only if “the requirements of §5 SCA have been complied with and the research project is ethically justifiable in this sense” (§6 (4) no. 2 SCA). 18 §5 SCA has two partial requirements: Firstly, under §5 no. 1 SCA research work on embryonic stem 15
See BREWE, supra note 5, at 194‐195 (providing a more detailed treatment). 16
See id. (providing a more detailed treatment). 17
See Dederer, Verfassungskonkretisierung im Verfassungsneuland–das Stammzellgesetz, 58 JURISTENZEITUNG 986, 993 (2003) 18
Christian Honecker, Was heißt “ethisch vertretbar”?, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 361 (2003). 1378 G e r m a n L a w J o u r n a l
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cells may only be conducted “if it has been shown by giving scientific reasons that such research serves eminent research aims to gain scientific knowledge in basic research or to extend diagnostic, preventive or therapeutic methods to be applied to humans.” This criterion of eminence primarily relates to the aims of the intended research. 19 Secondly, under §5 no. 2 SCA it must have been shown by giving scientific reasons that according to the state of the art in science and technology a) the questions to be studied in the research project concerned have been clarified as far as possible in in vitro models using animal cells or in animal experiments and b) the scientific knowledge to be gained from the research project concerned can only be expected to be achieved by using embryonic stem cells. This second criterion is directed towards the means employed for this purpose. On the one hand, there must be sufficient prior clarification concerning the question one wishes to answer in experiments on animals or animal cells (so that it is “now” necessary to continue research with human cells). On the other hand, it must be shown that the knowledge to be gained cannot be achieved in any other way than by research using human embryonic stem cells (for example by research using adult cells or cells from umbilical cord blood). Both partial requirements may be reduced to the (linked) aspects of necessity and 20
subsidiarity, possible to summarise briefly under the term “lack of alternatives.” The provisions described above do not, therefore, refer in a past‐oriented manner to the circumstances of the creation, which took place abroad. Instead, in a future‐oriented manner, they provide the additional requirements which are to be complied with in Germany. These provisions, which also restrict research, apply – as does the whole Stem Cell Act – (only) to stem cells, that is, to cells that as such are not totipotent and therefore 19
See BREWE, supra note 5, at 199 (providing a more detailed treatment); Hans‐Georg Dederer, Hochrangigkeit von Zielen der Stammzellforschung im Lichte des Grundgesetzes, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 305 (2003). 20
See BREWE, supra note 5, at 199 (providing a more detailed treatment); Jochen Taupitz, Alternativlosigkeit als Voraussetzung der Forschung mit embryonalen Stammzellen, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 335 (2003); Jochen Taupitz, Der Schutz embryonaler Stammzellen durch das Stammzellgesetz, GENTECHNIK & RECHT 11, 12 (2003). 2010] German Stem Cell Act
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are generally held not to enjoy any protection of human dignity and life. 21 In the opinion of the legislator, the research restrictions which are laid down in the Act are justified by the fact, that embryonic stem cells may not “from the ethical point of view” be regarded in the same way as every other form of human material, since in order to derive them it was necessary to destroy embryos. 22 The “fruit of the poisonous tree” is therefore not to be used at will; its use is even to be “reduced to a minimum.” 23 But ethical misgivings as such cannot justify a restriction of the freedom of research guaranteed by the constitution. 24 Nor does the doctrine of the fruit of the poisonous tree, which is of great importance in the ethics debate, as such have a place in a constitutional discussion about possible restrictions of the freedom of research. In the opinion of other writers, 25 however, the restrictions of the Stem Cell Act create a “post‐mortem protection of the human dignity of prenatal life.” 26 But this view is not convincing either. Admittedly, the Federal Constitutional Court has in fact recognised postmortem protection of human dignity as such in several decisions, 27 but this protection is linked to the fact that the person in question lived and worked in the human community (“among us”). In essence, therefore, this protection concerns the memory of someone who was part of a social community. This idea, however, cannot be transferred to embryos in vitro. In addition, a state’s legal system is not responsible for the protection of legal interests situated abroad in the same way as it is for those within the country. 28 This shows a 21
See Dederer, supra note 19, at 305, 307; Johanna Raasch, Das Stammzellgesetz–ein beladenes Gesetzesvorhaben, 35 KRITISCHE JUSTIZ 285, 294 (2002); Jochen Taupitz, Import embryonaler Stammzellen. Konsequenzen des Bundestagsbeschlusses vom 31‐1‐2001, 35 ZEITSCHRIFT FÜR RECHTSPOLITIK 111, 113 (2002). 22
BT 14/8394 at 7. 23
BT 14/8394 at 9. 24
See BT 16/7983 at 2 (coming to a different result); see infra Part A.VI. 25
See BREWE, supra note 5, at 109 (providing further references). Contra Dederer, supra note 19, at 305, 308–
309; Karsten Klopfer, VERFASSUNGSRECHTLICHE PROBLEME DER FORSCHUNG AN HUMANEN PLURIPOTENTEN EMBRYONALEN STAMMZELLEN UND IHRE WÜRDIGUNG IM STAMMZELLGESETZ 83 (2006); Taupitz, supra note 20, at 11, 13. 26
The expression comes from Löwer, Written Opinion of 8 March 2002, BT 14/574 (Committee on Education, Research and Technology Assessment of the German Bundestag); he himself speaks of “constitutionally absolutely unsecured terrain.” 27
See BVerfGE 30, 173 (194); BVerfG, 47 NEUE JURISTISCHE WOCHENSCHRIFT 783, 784 (1994); BVerfG, 54 NEUE JURISTISCHE WOCHENSCHRIFT 594 (2001); BVerfG, 54 NEUE JURISTISCHE WOCHENSCHRIFT 2957, 2958–2959 (2001). 28
See NATIONALER ETHIKRAT, ZUR FRAGE EINER ÄNDERUNG DES STAMMZELLGESETZES 40 (2007); Michael Kloepfer, Humangentechnik als Verfassungsfrage, 57 JURISTENZEITUNG 417, 426 (2002); Klopfer, supra note 25, at 81; Ralf Müller‐Terpitz, Die neuen Empfehlungen der DFG zur Forschung mit menschlichen Stammzellen, 34 WISSENSCHAFTRECHT: WISSENSCHAFTSVERWALTUNG, WISSENSCHAFTSFÖRDERUNG 271, 279–280 (2001); Jochen Taupitz, Der “ethische Export” als Rechtsproblem biomedizinischer Forschung, dargestellt aus dem Blickwinkel des deutschen Rechts, in STAMMZELLFORSCHUNG: ETHISCHE UND RECHTLICHE ASPEKTE ‐ FESTSCHRIFT FÜR HEINZ HAUSHEER 733, 740 (Geiser, Koller, Reusser, Walter & Wiegand eds., 2002). For a more restrictive view, see BREWE, supra note 5 at 98. 1380 G e r m a n L a w J o u r n a l
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fundamental difference between law and morality: whereas morality and ethics are universally oriented, law (apart from international law) is based on the idea of state sovereignty. This does not exclude protection of universal legal interests. In addition, the states are required to pursue the violation of legal interests which are recognised in all civilised states, irrespective of the territory and the nationality of the perpetrator (universality principle). International law too, is based on the principle of worldwide application. But the global legal community (Weltrechtsgemeinschaft) has no common understanding of the appropriate protection of embryos in vitro, as the varying provisions 29
show. For this reason, if embryos are destroyed abroad without any relation to Germany, this does not make it mandatory that the use of the stem cells derived from the embryos should subsequently be subject to restrictive conditions in Germany. Against the background of these arguments, a considerable number of authors regard the restrictions of the Stem Cell Act which exceed the cutoff date provision as unconstitutional. 30 VI. No Legalisation of the Past Destruction of Embryos In all the above provisions, the Stem Cell Act does not pronounce that the derivation of embryonic stem cells abroad is legal. Nor does the Stem Cell Act place eminent research above the protection of the life of embryos. Instead, the Act merely permits the importation and use of stem cells which were derived in the past, which means that the utilisation of embryos entailed in this occurred in the past and cannot be reversed. As long as the importation and use of those stem cells are permitted which were derived in compliance with the legal position in the country of origin (§4 (2) no. 1 a) SCA), it is to be particularly emphasised that the question as to whether and subject to what requirements destructive embryo research is permitted or prohibited abroad is to not be judged by 31
German law, but by the relevant foreign law. The attitude of the legislator in, on the one hand, rejecting the derivation of stem cells, but on the other hand authorising the importation and use of embryonic stem cells (albeit subject to very strict requirements) is unobjectionable from a constitutional point of view (A.V. above). However, this is criticised as “morally lazy” or as an expression of “double moral standards.” 32 It is claimed that it is “absolutely unacceptable” to leave foreign 29
See NATIONALER ETHIKRAT, supra note 28, at 40. 30
See the references supra note 13 (providing evidence). See also the references supra note 25 (providing opposing views). 31
See BT. 14/8846 at 13. For constitutional objections to this provision, see BREWE, surpa note 5, at 167. 32
See MERKEL, FORSCHUNGSOBJEKT EMBRYO, VERFASSUNGSRECHTLICHE UND ETHISCHE GRUNDLAGEN DER FORSCHUNG AN MENSCHLICHEN EMBRYONALEN STAMMZELLEN 217 (2002); BIOETHIK‐KOMMISSION DES LANDES RHEINLAND‐PFALZ, BERICHT “MEDIZINISCHE, ETHISCHE UND JURISTISCHE BEWERTUNG DER FORSCHUNG AN HUMANEN EMBRYONALEN STAMMZELLEN UNTER EINBEZIEHUNG DES STAMMZELLGESETZES VOM 28. JUNI 2002,” 52 (Aug. 23, 2002); Raasch, supra note 21, at 285, 294–295 2010] German Stem Cell Act
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researchers to carry out the derivation of embryonic stem cells which is rejected in Germany, while at the same time making use of the results. In this context, it is not uncommon (but questionable) 33 for a parallel to be drawn to receiving stolen goods. Others point out that it is arbitrary to lay down a fixed date from which henceforth the doctrine of the fruit of the poisonous tree applies; one should either always take the standpoint that its wrong to eat the fruit of the poisonous tree, or one should reject this principle. 34 However, moral objections to the use of the fruit of past wrong do not per se exclude every weighing of interests whatsoever. They may be subordinated if the use serves eminent interests and goals, for example the treatment of serious illnesses. 35 Thus assisted reproduction, which is now firmly established in Germany, was and is based on knowledge arising from destructive embryo research undertaken in other countries. 36 Quite generally, it is certainly necessary to distinguish between an act that produces something and an act that merely uses the product. 37 In addition, there is the following problem: even the strict German Embryo Protection Act does not prohibit destroying embryos as such. Where embryos – for whatever reason – cannot be transferred to a woman for the purpose of reproduction, there is no requirement to preserve them. It is therefore undisputed that there is no obligation to keep them alive; they may be disposed of 38 . It is to be doubted whether the disposal constitutes a violation of human dignity, solely because the embryos are not merely “disposed of”, but additionally used to derive stem cells. This can scarcely be regarded as a “scornful disparagement” according to the judicature of the Federal Constitutional Court. This applies independently of the controversial question as to whether embryos in vitro should be seen as deserving protection of human dignity at all (and if so, in what intensity). The Stem Cell Act, in turn, permits at most the importation and use of stem cells from such embryos which – because they could not be transferred to a woman – anyhow had no real (2002); Ulrich Schroth, Forschung mit embryonalen Stammzellen und Präimplantationsdiagnostik im Lichte des Rechts, 57 JURISTENZEITUNG 170, 178 (2002). 33
See NATIONALER ETHIKRAT, supra note 28, at 18‐19. The need to sanction receiving stolen goods usually follows from the mere fact that it has a causal effect on the perpetuation of robbery and theft, which cannot normally be assumed of the use of stem cells produced abroad; apart from this, receiving stolen goods requires prior criminal acts which are without doubt ethically and legally condemned everywhere; but this is decidedly not the case with regard to the production of embryonic stem cells, since this is permitted in many countries. 34
Ulrich Schroth, Forschung mit embryonalen Stammzellen und Präimplantationsdiagnostik im Lichte des Rechts, in STAMMZELLENFORSCHUNG UND THERAPEUTISCHES KLONEN 249, 280 (Oduncu, Schroth & Vossenkuhl eds., 2002). 35
See NATIONALER ETHIKRAT, supra note 28, at 19. 36
See id. 37
Taupitz, supra note 12, at 113, 118. 38
HANS‐LUDWIG GÜNTHER, JOCHEN TAUPITZ & PETER KAISER, EMBRYONENSCHUTZGESETZ, § 1 Abs. 1 Nr. 3 margin note 7 (2008). 1382 G e r m a n L a w J o u r n a l
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chance of life. Since, therefore, even the original act of using the embryo does not constitute an obviously serious injustice, it must all the more be doubted whether the act of exploitation, that is, the use of embryonic stem cells, can be disapproved of in itself. It may, however, be established that the Act, against the background of the starkly diverging views, has at least made an important contribution to social pacification, which has existed for quite a time. 39 VII. Procedural Protection Two institutions are competent to review the above material requirements: every importation and every use of embryonic stem cells must be approved by the Robert Koch‐
Institute. 40 Its approval depends not only on the above‐named requirements of s. 4 (2) SCA; in addition, there must also be an opinion given by the Central Ethics Commission for Stem Cell Research (Zentrale Ethikkommission für Stammzellforschung), whose members are representatives of biology, medicine, ethics and theology. The Central Ethics Commission for Stem Cell Research for its part must (only) review whether the requirements of s. 5 SCA (eminent research with no alternatives) are satisfied and the research project is ethically justifiable in this sense. 41 B. Reform discussion and suggested legislation prior to the Bundestag decision of 11 April 2008 I. Cutoff Date Provision The much‐discussed original cutoff date (1 January 2002) was fixed to be earlier than the date when the Act came into force (1 July 2002). The intention was to prevent destruction 42
of embryos “on order” proceeding from Germany. But by laying down a fixed cutoff date lying in the past (as in the case of the new cutoff date–on this, see C. below), the legislator went too far. This is because it also excludes acts which are only distantly or not at all responsible for causing the destruction of embryos. There is no concrete legal attribution of a particular causal element. Consequently, a researcher has no possibility of proving 39
Stephan Roesler, Das deutsche Stammzellgesetz–Spezifische Fragen der Auslegung des Gesetzes, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 283 (2003). 40
This follows from §6 SCA in conjunction with the delegated legislation supplementing the Stem Cell Act. 41
On the scope of the Commission’s powers of review, see BREWE, supra note 5, at 224; Jochen Taupitz, Die Aufgaben der Zentralen Ethikkommission für Stammzellforschung, in FESTSCHRIFT FÜR HANS‐LUDWIG SCHREIBER, 903 (Amelung, Beulke, Lilie, Rosenau, Rüping & Wolfslast eds. 2003). 42
Zentrale Ethikkommission bei der Bundesärztekammer, Stellungnahme zur Stammzellforschung vom 19.6.2002 (Opinion on stem cell research of 19 June 2002 of the Central Ethics Commission at the German Medical Association), printed in Jochen TAUPITZ, RECHTLICHE REGELUNG DER EMBRYONENFORSCHUNG IM INTERNATIONALEN VERGLEICH 233, 269 (2003); See also the legislative rationale on the draft Stem Cell Act of 27 February 2002, BT 14/8394 at 9. 2010] German Stem Cell Act
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that no embryo was destroyed specifically as a result of him ordering the stem cells. Instead, the Act is based on the general suspicion that every destruction of an embryo in order to derive embryonic stem cells after the cutoff date has been ordered from Germany if these stem cells are then used for German research. The constitutionality of the cutoff date provision is and was the subject of intensive discussion. The opinion is expressed that the cutoff date provision is necessary in the 43
interest of the greatest possible protection of life. In addition, it is said that there are no objections to it with regard to the prerogative of assessment and drafting which the Federal Constitutional Court grants the legislature. According to this opinion, adapting the cutoff date to a later date (“flexible cutoff date”) would not achieve the legislator’s aim in an equally suitable manner. However, this opinion is not convincing. The cutoff date provision, within the system of the legislation (prohibition subject to approval), is an exception to the prohibition of importation and use, but at the same time de facto prohibits the importation and use of all embryonic stem cells produced after the cutoff date. As set out above, this is intended to prevent (indirectly, that is, by preventing sale to Germany) a (further) destruction of embryos being brought about from Germany. But precisely this is already directly guaranteed by the Embryo Protection Act in conjunction with the provisions of international criminal law (§§3 to 7, 9 of the German Criminal Code (Strafgesetzbuch ‐ StGB)). This provides that every participation of German researchers from Germany in stem cell derivation abroad is prohibited and a criminal offence, even if 44
the act is not a criminal offence in its location. All that the cutoff date provision in the Stem Cell Act and the associated prohibition of importation and use do is to additionally catch cases in which foreign researchers or enterprises produce hES cells on their own initiative, but are motivated by the expectation of later demand from Germany, and with the intention of then exporting them to Germany. However, this case is somewhat far from reality. There is a global demand for embryonic stem cells. In addition, the existing cell lines can be kept in culture for a very long time and can be propagated at will. Thus, it cannot be assumed that additional embryos are destroyed or have to be destroyed 45
specifically to satisfy the need for stem cells in Germany. Altogether, therefore, a 43
Kurt Faßbender, Der Schutz des Embryos und die Humangenetik: Zur Verfassungsmäßigkeit des neuen Stammzellgesetzes und des Embryonenschutzgesetzes im Lichte des einschlägigen Arzthaftungsrechts, 21 Medizinrecht 279, 283 (2003). 44
§5 no. 12 StGB contains even stricter provisions for German public officials. This also applies in particular to members of universities, but also to members of quasi‐governmental non‐university institutions. See Albin Eser & Hans‐Georg Koch, Forschung mit humanen embryonalen Stammzellen im In‐ und Ausland; Eser & Koch, Forschung mit humanen embryonalen Stammzellen: Strafrechtliche Grundlagen und Grenzen, in DEUTSCHE FORSCHUNGSGEMEINSCHAFT 37, 151 (2003). 45
See NATIONALER ETHIKRAT, supra note 28, at 16, 41‐42; Zentrale Ethikkommission, supra note 42, at 233, 269; DEUTSCHE FORSCHUNGSGEMEINSCHAFT, STAMMZELLFORSCHUNG– MÖGLICHKEITEN UND PERSPEKTIVEN IN DEUTSCHLAND 60 (2006) available at http://www.dfg.de/aktuelles_presse/themen_dokumentationen/stammzellen/dfg_publikationen_stammzelforsc
hung.html; see also Klopfer, supra note 25 at 85‐86. 1384 G e r m a n L a w J o u r n a l
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connection between the number of embryonic stem cells used in Germany and the number of embryos destroyed abroad is extremely questionable. 46 In other words, the Stem Cell Act causes great detriment to research in Germany, without in turn creating protection of foreign embryos extending beyond the Embryo Protection Act. 47 In constitutional terms, this means that the prohibition of importation and use of the Stem Cell Act in conjunction with the cutoff date provision entails a disproportionate encroachment upon the freedom of research. 48 The situation worsened due to the fact that the factual effects of the cutoff date provision were increasingly reaching towards a complete prohibition of research before the revision of the Stem Cell Act in 2008: (1) This results from the fact that the “old” hES cells, which were derived before the original cutoff date (1 January 2002), are of a considerably inferior quality. Unlike the “new” hES cells, they were cultivated on layers of animal cells and thus cannot be used therapeutically due to a serious risk of infection should they be used on human beings. Because of this, the research work that has been approved may have to be repeated with other stem cells, either later or at another location, because the characteristics of the cells which comply with the old cutoff date provision may differ from those of the cells later 49
used in the clinic. The interest of German enterprises in investing in stem cell research was therefore very limited. (2) The stem cell lines produced before 1 January 2002 were not isolated and cultivated under standardised conditions pursuant to the rules of good laboratory practice or good manufacturing practice. Further, suboptimal culturing conditions have in part resulted in genetic and epigenetic changes. The expression patterns and development stages of the stem cell lines produced before 1 January 2002 are therefore very heterogeneous. This too has a detrimental effect on their suitability for basic research, and all the more for later clinical and therapeutical use on humans. 46
E.g., Claus Dieter Classen, Die Forschung mit embryonalen Stammzellen im Spiegel der Grundrechte, 117 DEUTSCHES VERWALTUNGSBLATT, 141, 147 (2002). 47
See id. at 147 (“[The German legislator, in prohibiting the importation of embryonic stem cells] does not in principle ... make a genuine contribution to the protection of embryos.”). 48
See Schroth, supra note 34, at 249, 280; Klopfer, supra note 25, at 85; see also Friedhelm Hufen, Erosion der Menschenwürde?, 59 JZ 313, 318 (2004). 49
See the fears of this of the Zentrale Ethikkommission für Stammzellforschung (Central Ethics Commission for Stem Cell Research), Dritter Bericht vom 14.12.2005, 6, available at http://www.rki.de/cln_011/nn_228928/DE/Content/Gesund/Stammzellen/ZES/Taetigkeitsberichte/taetigkeitberi
cht‐inhalt.html 2010] German Stem Cell Act
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(3) The importation of hES cells produced abroad before 1 January 2002 makes researchers in Germany dependent on foreign patents and licences. Detailed material transfer agreements usually make sure that the research results obtained with the imported cell lines are (co‐)owned by the producers. In addition, there is an obligation to disclose unpublished data to the producing enterprise too. There are, however, now a number of new cell lines which have been made freely available to science, so can be used without accepting these restrictions. However, German researchers could not use these freely available cell lines, because they were not produced before 1 January 2002. So the cutoff date provision very substantially fortified foreign monopolies. Another result of this is that the authoritative standards were laid down abroad. But above all, German enterprises were discouraged from investing in stem cell research. This is because later commercial applications were normally covered by the foreign patent, and there could therefore be scarcely any expectation of profit in Germany. The lack of commercial prospects, in turn, had negative effects on the development of basic research itself. (4) The cutoff date provision resulted in considerable problems in international cooperations because there was an extremely high risk that criminal offences would be committed by German and foreign researchers in collaborative projects where work was done using “new” stem cell lines. Consequently, German researchers scarcely ever succeeded in being involved in international cooperations or in obtaining foreign researchers to cooperate on joint projects. A large number of opinions and reports referred insistently to the problem of the increasing international isolation of German researchers, for example that of the Central Ethics Commission at the German Medical 50
Association, the Association of the Scientific Medical Societies in Germany (Arbeitsgemeinschaft der Wissenschaftlichen Medizinischen Fachgesellschaften), 51 the Central Ethics Commission for Stem Cell Research, 52 the Bio‐Ethics Commission of the Land Rhineland‐Palatinate (Bioethik‐Kommission des Landes Rheinland‐Pfalz), 53 the GRF 54 and 50
See Zentrale Ethikkommission, supra note 42, at 233, 270. 51
See Arbeitsgemeinschaft der Wissenschaftlichen Medizinischen Fachgesellschaften [Association of the Scientific Medical Societies in Germany], Opinion of 11 July 2003, available at http://www.uni‐
duesseldorf.de/WWW/AWMF/res/res‐estz.htm. 52
See Zentrale Ethikkommission für Stammzellforschung, supra note 49, at 6. 53
See Bioethikkommission Rheinland‐Pfalz, Fortpflanzungsmedizin und Embryonenschutz of 12 December 2005, 71‐72, 115. 54
See Deutsche Forschungsgemeinschaft, supra note 45, at 5, 52. 1386 G e r m a n L a w J o u r n a l
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the German National Ethics Council. 55 The German Bundestag also considered this problem as early as in 2005. 56 Admittedly, at the time the cutoff date provision was probably the only political possibility of continuing with at least a small part of basic research. In fact, over time it has resulted in a nearly complete prohibition of research with hES cells in Germany. 57 This consequence is constitutionally more than questionable: the constitutional mandate of protection of embryos situated abroad is indisputably unlike that of embryos situated in Germany. 58 And still, it is the declared goal of the Stem Cell Act itself not to completely prevent stem cell research in Germany, yet it is an effect created by the Act itself which is, equivalent to a prohibition, inconsistent with that goal. From the point of view of legal policy too, the cutoff date came under increasing pressure as it became clear that German researchers were cut off from international progress. Thus, for example, the FDP parliamentary group in the German Bundestag as early as in 59
60
2005 and the German Research Foundation in 2006 called for the cutoff date to be abolished, while the literature also called for a “flexible” cutoff date. 61 In the year 2007, the German National Ethics Council suggested that the cutoff date should be replaced, and instead to consider each case individually in order to judge whether the derivation of stem cells was initiated from Germany or not. 62 II. Risks of Criminal Liability in International Collaborative Research A serious problem of the original Stem Cell Act was, as mentioned above, the possible criminal liability of German and foreign researchers if they were involved in international collaboration (for example in the Sixth or Seventh EU Framework Programme). §13 (1) SCA reads as follows: “Any person who imports or uses embryonic stem cells without approval 55
See supra NATIONALER ETHIKRAT, note 28, at 31 ff. 56
Minor interpellation of the FDP parliamentary group of 15 March 2005 on the cooperation of German scientists with foreign scientists in EU stem cell research projects, BT 15/5165; Answer of the Federal Government of 30 March 2005, BT 15/5196. 57
For this case at all events, the legislator’s solution was described as unconstitutional immediately after the provision entered into effect: Kloepfer, supra note 28, at 427 (2002); Raasch, supra note 21, at 285, 294. 58
See supra note 28. 59
Motion of the FDP Parliamentary Group of 18 January 2005, BT 16/383; Motion of the FDP Parliamentary Group of 1 June 2005, BT 15/5584. 60
See DEUTSCHE FORSCHUNGSGEMEINSCHAFT, supra note 45 at 7, 50‐51. 61
Taupitz, supra note 12, at 113, 117–118. 62
See NATIONALER ETHIKRAT, supra note 28, at 51. 2010] German Stem Cell Act
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pursuant to §6 (1) shall be liable to imprisonment of up to three years or to a fine.” It was disputed whether “use” only means “use within Germany” and whether the general system of criminal law on liability for involvement in acts abroad also applied, as a result of which a researcher who collaborated from within Germany with another researcher, who legally carried out stem cell research abroad, was also criminally liable. The literature increasingly and correctly held up the opinion that the area of application of the Stem Cell Act was restricted from the outset to German territory, since only import 63
into Germany and use in Germany could be approved. Following this opinion though– contrary to the discussions in the course of deliberation on the Act 64 – participation (instigating or aiding and abetting) in the use of embryonic stem cells abroad was not punishable under §13 SCA in conjunction with §9 (2) German Criminal Code. For if the principal offence in which the instigator or accessory participates can, by reason of the restricted territorial application of the Stem Cell Act, only be committed in Germany, then participating in an act abroad cannot be a criminal offence. However, the uncertainty remained as to whether this interpretation of the Stem Cell Act– which was certainly not 65
undisputed – would also be shared by the courts. In addition, even according to this opinion, there remained the risk of criminal liability for joint commission and indirect commission. This is because under the general system of criminal law, an accomplice in Germany is also held liable for a contribution of his or her own to an act which is committed abroad. 66 This risk existed in particular in the case of close collaboration, by sharing work with a person researching abroad (legally under the foreign law). Consequently, a German researcher commits an offence under the German Stem Cell Act if the foreign researcher he was collaborating with worked with embryonic stem cells abroad, even if the foreign researcher worked in accordance with the local law. The international exchange of scientists also carried a particular risk of criminal liability under §5 no. 12 or no. 13 German Criminal Code if they were “officials” or “persons with particular obligations for the civil service.” 67 If German criminal law was to be interpreted broadly, in some circumstances even foreign researchers, working with stem cells abroad, committed criminal offences under the German Stem Cell Law. 68 This all resulted in considerable uncertainty among German and foreign scientists, and as a result the 63
See Eser & Koch, supra note 44, at 118; Dahs & Müssig, Forschung mit humanen embryonalen Stammzellen im In‐ und Ausland in DEUTSCHE FORSCHUNGSGEMEINSCHAFT, note 44, at 18; BREWE, supra note 5, at 250. 64
For a more detailed treatment, see BREWE, supra note 5, at 251–252. 65
For a different view, see, e.g. Eric Hilgendorf, Strafbarkeitsrisiken bei der Stammzellforschung mit Auslandskontakten, 39 ZEITSCHRIFT FÜR RECHTSPOLITIK 22, 23–24 (2006). 66
See Eser & Koch, supra note 44, at 136; Hilgendorf, supra note 65, at 24 (2006). 67
See Eser & Koch, supra note 44, at 151. 68
See Hilgendorf, supra note 65, at 24 (2006). 1388 G e r m a n L a w J o u r n a l
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international competitiveness of German researches and their ability to collaborate was increasingly called into question (B.I. above). In its opinion of November 2006, the GRF pointed out that it knew of examples of scientists who deliberately avoided this area of research or had withdrawn from it, because of what they thought was a lack of prospects and because embryonic stem cell research was frequently discredited in Germany. 69 The Opinion stated that this was not only reflected in the relatively small number of applications made, but also in the global comparison of the number of publications on the subject: German researchers were virtually unrepresented. It was widely argued that legal certainty would be attained if it were made clear both in §2 SCA and in §13 SCA that the Stem Cell Act relates only to the use of stem cells located in 70
Germany. In addition, the German National Ethics Council called for the provision of §13 SCA, which created a criminal offence, to be downgraded into one creating a regulatory offence. 71 The demands of the GRF went even further: 72 it called for §13 SCA to be completely discarded. III. The Restriction of the Use of Stem Cells to Research Purposes Although stem cell research is above all intended to serve the purpose of developing new therapies, the prohibition of the use of hES cells for every purpose except narrowly defined research prohibits their use for diagnostic, therapeutic and preventive purposes. This prohibition also applies to individual attempts to achieve a cure, which normally precede clinical trials (which themselves constitute research) 73 and all the more precede the use of tested therapies in clinical practice. The restriction of the importation of stem cells for research purposes was and is therefore criticised as short‐sighted and inconsistent. 74 There are calls to permit the use of human embryonic stem cells for health‐related purposes too. Failing this, German research – as the Central Ethics Commission for Stem Cell Research complained – will remain restricted “to creating fundamental principles for the future use of the cells for therapeutic, preventive and diagnostic purposes outside 69
See Deutsche Forschungsgemeinschaft, supra note 45 at 54. 70
See NATIONALER ETHIKRAT, supra note 28, at 47‐48. 71
See NATIONALER ETHIKRAT, supra note 28, at 48‐49, 51‐52. 72
See supra Deutsche Forschungsgemeinschaft, opinion “Stammzellforschung – Möglichkeiten und Perspektiven in Deutschland”, note 45 at 8, 61‐62. 73
Clinical trials are permissible under the SCA; so also argued in Ralf Müller‐Terpitz, Humane Stammzellen und Stammzellderivate, in JAHRBUCH FÜR WISSENSCHAFT UND ETHIK 79, 90–91 (2006). 74
See Bioethik‐Kommission des Landes Rheinland‐Pfalz, supra note 53, at 75–76, 115; Zentrale Ethikkommission für Stammzellforschung, supra note 49, at 4; DEUTSCHE FORSCHUNGSGEMEINSCHAFT, supra note 45 at 7, 61‐62; BREWE, supra note 5, at 198–199; Klopfer, supra note 25, at 89–90; Raasch, supra note 21, at 293; Schroth, supra note 34, at 249, 280; Taupitz, supra note 21, at 104. 2010] German Stem Cell Act
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Germany.” 75 But also this contribution to research will increasingly atrophy, as the Stem Cell Act prevents the indispensable cooperation of scientific research and clinic application. 76 However, an extension of the legitimate uses is problematical because it can scarcely be implemented while the current requirement of official approval of every “use” continues to be in effect. It is therefore understandable that the discussions in parliament (C. below) have excluded this point. IV. The Prohibition of the Importation of Stem Cells from Intracorporeally Fertilised Embryos Under §4 (2) no. 1 b) SCA, the imported stem cells may not have been derived from intracorporeally fertilised embryos (A.III. above). No plausible justification can be seen for such embryos not being used for the derivation of stem cells, provided that the other 77
requirements of the Stem Cell Act are satisfied. Nor is it supplied in the legislator’s statement of intention. The literature therefore calls for this restriction to be removed. 78 V. The Prohibition of the Importation of Stem Cells from Embryos That Were Not Created By Way of Fertilisation HES cells offer the opportunity of analysing development processes of diseases on the cellular level by establishing cell lines from embryos that carry genetic defects which cause specific diseases. These cells also make it possible to test new medicinal products in vitro before they are used on human beings. New hES cell lines established since the cutoff date are now available to investigate thalassemia, Huntington’s disease, muscular dystrophy 79
and other genetic disorders. They were either created by the method of cell nuclear transfer or derived from embryos which were not transferred to the mother as the result of a PID. However, §4 (2) no. 1 b) SCA provides that such cells may not be imported into Germany (A.III. above). As a result, research using these disease‐specific hES cells is prohibited in Germany. And yet, precisely such research would be desirable, not least in pharmacogenetics or toxicity testing, because it avoids endangering patients. Here too there are calls in the literature to relax the restrictions of the statute, 80 but no activity in parliament to date. 75
See Zentrale Ethikkommission für Stammzellforschung, supra note 49, at 6. 76
See Klopfer, supra note 25, at 90. 77
See Raasch, supra note 21, at 294. 78
See Taupitz, supra note 12, at 120. 79
See Deutsche Forschungsgemeinschaft, supra note 45, at 34‐35. 80
Taupitz, supra note 12, at 120–121. 1390 G e r m a n L a w J o u r n a l
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C. Parliamentarian Initiatives Resulting in the Decision of the German Bundestag of 11 April 2008 In spring 2008, five bills were introduced to the German Bundestag proposing an amendment of the Stem Cell Act. The bills reflect the whole spectrum of opinions found in Germany on the question of the permissibility of research with embryonic stem cells. The most radical proposal 81 called for both the cutoff date provision and the criminal provision of the Act to be repealed without replacement. But this would not have corresponded to the logic of the Act (although it would be constitutional). The less radical second proposal 82 provided for the cutoff date to be changed to 1 May 2007; further, it also restricted the area of application of the Act as a whole and also of the criminal provision expressly (in addition to importation) to embryonic stem cells that are situated “in Germany.” This was intended to counteract the considerable legal uncertainties with regard to the risk of criminal liability in international cooperations arising from the previous version of the Act (B.II. above). The third bill 83 provided for the same restriction to embryonic stem cells situated in Germany, but it did not alter the cutoff date. A fourth proposal, 84 in contrast, called for the existing legal position to remain unchanged and for the promotion of research using adult stem cells. Finally, a fifth proposal 85 called for a complete prohibition of the importation and use of embryonic stem cells, because research with them was unnecessary and no therapeutic uses could be foreseen. On 11 April 2008, the German Bundestag, after intensive discussion, voted in favour of the second proposal (Bundestag printed paper 16/7981), by a clear majority of 346 votes to 228 votes with 6 abstentions. 86 As a result, the cutoff date was moved to 1 May 2007 and the area of application of the Act as a whole and also of the criminal provision was expressly restricted to the importation of embryonic stem cells and the use of embryonic stem cells that are situated “in Germany.” 81
See Entwurf eines Gesetzes für eine menschenfreundliche Medizin – Gesetz zur Änderung des Stammzellgesetzes, BT 16/7982. 82
See Entwurf eines Gesetzes zur Änderung des Stammzellgesetzes, BT 16/7981. 83
See Entwurf eines Gesetzes zur Änderung des Stammzellgesetzes, BT 16/7984. 84
See Keine Änderung des Stichtages im Stammzellgesetz–Adulte Stammzellforschung fördern, BT 16/7985. 85
See Entwurf eines Gesetzes zur Änderung des Gesetzes zur Sicherstellung des Embryonenschutzes im Zusammenhang mit menschlichen embryonalen Stammzellen, BT 16/7983. 86
Second and Third Reading, Bundestagsprotokolle (Minutes of Bundestag Plenary Proceedings), BT 16/155; the first reading of the bills took place on 14 February, BT 16/142. In its session 844 of 23 May 2008, the Bundesrat rejected the motion of Bavaria of 20 May 2008, BUNDESRAT DRUCKSACHEN [BR] 278/08, for an appeal to the Mediation Committee (Vermittlungsausschuss). 2010] German Stem Cell Act
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The alteration of the cutoff date is completely in compliance with the basic intention of the Stem Cell Act (A.II. above). It is also in compliance with the view, which is also rightly expressed in the Stem Cell Act, that acts of exploitation must be evaluated differently from acts of production and that (assumed) injustice in the past is not undone or eliminated by a prohibition of the act of exploitation. In addition, the original Act already contained the possibility of an amendment to the Act by changing the cutoff date. The duty to provide information, which was and is imposed on the Federal Government by in §15 SCA, 87 can have no other purpose than to permit the experience gained in the implementation of the Act to be incorporated, where appropriate, in discussions on an amendment of the Act. Otherwise, the report called for would not need to be provided to the German Bundestag, which has sole responsibility for the amendment of the Act. However, it is not very convincing that a cutoff date relatively far in the past (1 May 2007) was chosen; this holds true regarding the date when the amendment to the Act was 88
passed (11 April 2008), as well as the date when it entered into effect (21 August 2008). The date 1 May 2007 was clearly chosen because there was a hearing in the Committee on Education, Research and Technology Assessment of the German Bundestag on 9 May 2007 89 and this was obviously regarded as the starting signal for the discussions in parliament on an amendment of the Stem Cell Act. However, it cannot seriously be assumed that in the following months even one single stem cell line was produced abroad because there was a discussion in Germany in May 2007 on an amendment to the Stem Cell Act with the possibility of the cutoff date being changed or removed as a consequence. Firstly, it should be obvious even to every foreign researcher that a discussion – on an extremely controversial issue – in a committee of the German Bundestag does not automatically result in a statute. And secondly, the significance of the German market (as is shown by the small number of research projects carried out here to date) is not likely to be so great that it gives a notable impetus to the production of embryonic stem cell lines abroad. It must therefore again be emphasised that the unconstitutionality is all the more tangible the further the cutoff date lies in the past, even then if it is in fact moved, but on the date when the amendment to the Act enters into effect, it is still a considerable time in the past. The clarification concerning the application of the Act and its criminal provision, that is, the specific restriction of the prohibition of a use of hES cells to those that are located in 87
"The Federal Government shall submit to the Deutscher Bundestag a report presenting the experience gained with the implementation of the present Act every two years, beginning the end of 2003. The report shall also describe the results of research using other types of human stem cells." 88
The Act was promulgated in the Bundesgesetzblatt (Federal Law Gazette) on 20 August 2008 and pursuant to its Article 2, it therefore entered into effect on 21 August 2008. 89
Protokoll 16/53 des Ausschusses für Bildung, Forschung und Technikfolgenabschätzung des Deutschen Bundestages, BT 16/53. 1392 G e r m a n L a w J o u r n a l
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Germany is more than welcome. The full implications of the uncertainties in relation to the risk of criminal liability (B.I. above) were clearly not fully understood when the Act was passed. In addition, it can also be assumed that this was not desired at the time and that “use” was to be interpreted as use in Germany. The amendments therefore correspond to the fundamental intention of the Stem Cell Act: to deal with the importation of stem cells and also with their use in Germany. D. Final Remarks (1) In the discussions in parliament, there was and is clearly an agreement that the Embryo Protection Act is not to be touched. This means that the production of embryonic stem cells will continue to remain prohibited in Germany. (2) The political discussion on the law of embryonic stem cell research will continue in Germany. In the near future, it will, above all others, be the turn of the scientists to speak. It will depend on their research results whether research using human embryonic stem cells will continue to be seen as necessary, whether it must even be expanded or whether, on the contrary, it will become obsolete and it will retrospectively be seen that Germany made the right decision in taking a position that is extremely restrictive in comparison to that of other countries. (3)The Stem Cell Act relates to a rather small area of biomedical research. However, it clearly has symbolic significance far exceeding its concrete area of application. This is the only explanation for the violent discussion, sometimes accompanied by a great deal of emotion. However, it is inappropriate to stir up fears in the population with the argument that the destruction of embryos will soon be followed by the killing of humans already born, for example old people and sick people, for the purposes of research. Such an argument ignores the ability of a society to differentiate – and the responsibility of parliament as the legislator. Significantly, the liberalisation of abortion law did not lead to a weakening of the right to life of human beings already born. This also applies with regard to the permissibility of an abortion of defective embryos and foetuses. On the contrary: the sensitisation of society for the needs of people with disabilities has increased, possibly even because embryos and foetuses in the womb do not have an absolute right to life. Developments The Gäfgen Judgment of the European Court of Human Rights: On the Consequences of the Threat of Torture for Criminal Proceedings By Stephan Ast * A. Introduction Whether or not the prohibition of torture allows exemptions is controversial not only in Germany but worldwide. The European Court of Human Rights (ECHR) had to answer this question in the case of Gäfgen versus Germany (App. 22978/05). The Grand Chamber of the Strasbourg court delivered its judgment on 1 June 2010. It held that the prohibition of torture (Article 3 of the European Convention for the Protection of Human Rights and Fundamental Freedoms) does not grant any exemptions, even if the life of another is at risk. The present case commentary agrees with this result of the judgment. The next question is even more interesting from the legal point of view: What are the legal consequences of a violation of Article 3 of the Convention, especially with regard to criminal court cases against the offender and the victim of torture? The ECHR emphasizes the necessity of the effectiveness of the protection of the fundamental rights under the Convention. As a result, it argues for a thorough investigation and deterrent punishment of the offenders on the one hand and for an extensive exclusion of evidence obtained as a consequence of torture from the proceedings against the victim of torture on the other. This case note follows the structure of the judgment. First the facts of the case are presented (see B.). Within the legal assessment of the case the ECHR holds that the threat of torture is inhuman treatment in the meaning of Article 3 of the European Convention on Human Rights (see C.I.). This treatment cannot be justified even if the life of another is at stake (see C.II.). A sufficient redress for the victim of such treatment has to entail a noticeable punishment (see D.). Finally, the court had to decide, whether items of evidence that were obtained in consequence of a confession under the threat of torture are admissible in criminal proceedings (see E.). The ECHR tends with regard to Article 6 of the European Convention on Human Rights (hereafter: “the Convention”) to exclude all of them. The commentary analyzes the arguments of the ECHR and affords an overview of the German jurisdiction and discussion of this issue. * The author is research assistant at the Chair for Criminal Law and Philosophy of Law (Prof. Dr. Joachim Renzikowski), Martin‐Luther‐University Halle‐Wittenberg. Email: [email protected]‐halle.de, [email protected]. 1394 G e r m a n L a w J o u r n a l
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The relevant laws are Articles 3 and 6 of the Convention. 1 Article 3 reads as follows: “No one shall be subjected to torture or to inhuman or degrading treatment or punishment.” Article 6: “In the determination . . . of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.” The Convention as interpreted by the rulings of the ECHR has in Germany the same status as statutory law. 2 This is why the German courts including the German Federal Court are obliged to apply the Convention. B. The Case On 27 September 2002 Magnus Gäfgen (G.), a student in Frankfurt am Main, lured Jakob von Metzler (J.), son of a banking family, into his flat, killed the eleven year old boy, and hid his dead body. Subsequently he extorted the parents for a ransom. From the moment, when G. picked up the ransom, he was under police surveillance. On 30 September 2002 he was arrested. When searching G.´s flat the police found parts of the ransom money and a note concerning the planning of the crime. G. indicated that two kidnappers held the boy hidden in a hut by a lake. Concerned about the life of J., D., deputy chief of the Frankfurt police, ordered E., an officer, to threaten G. with considerable physical pain and, if necessary, to subject him to such pain in order to make him reveal the boy´s whereabouts. Because of E.´s threat, G. disclosed the whereabouts of J.´s corpse. The police found it under a dock at a pond around 60 miles from Frankfurt. Near that place the police discovered tire tracks left by G.´s car. G. confessed that he kidnapped and killed J. He indicated the police officers various other locations where the officers secured J.´s clothes and other items of evidence. On 9 April 2003, the first day of the proceedings in the Frankfurt am Main Regional Court, G. made a preliminary application for the proceedings to be discontinued because of the threat of violence. Alternatively he sought at least a declaration, that all statements he had made to the investigation authorities and all items of evidence that had become known because of his confession were prohibited. The court found, that the threat was a violation of Article 136a of the Code of Criminal Procedure (CCP), of Article 1 and 104 § 1 of the German Basic Law and of Article 3 of the European Convention on Human Rights. Notwithstanding this breach of G.´s constitutional rights the court decided that the 3
criminal proceedings were not barred. The court accepted that in accordance with Article 136a § 3 of the CCP the confessions and statements of G. were inadmissible as evidence, but it refused to exclude the items of evidence that were found in consequence 1 The text of the Convention is available at http://echr.coe.int (all citations last assessed Nov. 1, 2010). 2 See CHRISTOPH GRABENWARTER, EUROPÄISCHE MENSCHENRECHTSKONVENTION, para. 3, 6 (4th ed. 2009). 3 Landgericht Frankfurt am Main [LG – Regional Court], 23 Strafverteidiger 327 (2003). 2010] Gäfgen Judgment 1395
of G.´s statements. 4 After that, in his statements to the charges, G. admitted killing J. Later he also admitted that he had intended to kill J. from the outset. On 28 July 2003 the court convicted G., inter alia, of murder and sentenced him to life imprisonment. 5 The findings of facts concerning the commission of the crime were based on G.´s confession at the trial and were confirmed by the other items of evidence. After the conviction G lodged an appeal on points of law with the Federal Court of Justice (BGH) and complained that the Regional Court had refused his preliminary application. The BGH refused the appeal without furnishing any reasons. Then G. lodged a complaint with the Federal Constitutional Court. It refused the complaint as inadmissible because it held that G. had failed to raise the question of the exclusion of the impugned items of evidence in the proceedings before the BGH. On 15 June 2005 G. lodged an application with the European Court of Human Rights. On 30 June 2008 a Chamber of the Fifth Section held, that there has been a violation of Article 3 of the European Convention on Human Rights, but that G. could no longer claim to be a “victim” of that violation. The chamber further 6
denied a violation of Article 6 of the Convention. The Grand Chamber of the ECHR, which G. requested to refer the case, held by eleven votes to six that G. may still claim to be the “victim” of the violation of Article 3 for the purposes of Article 34 of the Convention and by eleven votes to six that there had been no violation of Article 6 §§ 1 and 3 of the Convention. C. Violation of Article 3 of the European Convention on Human Rights Article 3 of the Convention forbids torture and inhuman or degrading treatment or punishment. The ECHR had to answer two questions: first, whether the threat of considerable pain was an inhuman treatment or even torture (see I.), second, whether it was justified in the case (see II.). I. Classification of the Threat 7
The ECHR has developed in its case‐law some criteria to define inhuman treatment. Considering the effects of a conduct, it must cause either actual bodily injury or 4 LG Frankfurt am Main, 23 Strafverteidiger 325 (2003). 5 LG Frankfurt am Main, 5‐22 Ks 2/03 3490 Js 230118/02, available at http://juris.de. 6 Gäfgen v. Germany, Application 22978/05 (June 30, 2008), available at http://cmiskp. echr.coe.int/tkp197/view.asp?action=html&documentId=837249&portal=hbkm&source=externalbydocnumber&t
able=F69A27FD8FB86142BF01C1166DEA398649. 7 Gäfgen v. Germany, Application 22978/05 (June 1, 2010), para. 88‐91, available at http://cmiskp.echr.coe.int/tkp197/view.asp?action=html&documentId=868977&portal=hbkm&source=externalb
ydocnumber&table=F69A27FD8FB86142BF01C1166DEA398649 [hereinafter Gäfgen v. Germany]. 1396 G e r m a n L a w J o u r n a l
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considerable physical or mental suffering. 8 Only if such effects occur may the person who was subjected to the conduct be called a “victim”. Furthermore the treatment must attain a “minimum level of severity”. 9 The assessment of this minimum depends on all the circumstances of the case: the intention to cause suffering, the purposes of the conduct, its duration and context, and the state of the person who was subjected to the treatment. Inhuman treatment is called torture, if there are aggravating circumstances: intentional and severe pressure and intense physical pain or mental suffering. 10 Besides, the aim of a conduct, stigmatized as torture, is generally to obtain information, inflict punishment, or intimidate someone. 11 To threaten somebody with torture is forbidden and may constitute at least inhuman treatment. 12 In the present case the ECHR finds that the threat of torture caused considerable fear, anguish and mental suffering, because G. was incited to confess where he had hidden the corpse. Furthermore, the officers had intended these effects. Regarding the circumstances of the case, the court holds that the impugned conduct attained the minimum level of severity to bring it within the scope of Article 3. The court does not find, however, the level 13
of cruelty that is required to attain the threshold of torture. II. Justification of the Threat The question, whether or not an impugned conduct is justified, the ECHR discusses while assessing the circumstances of the case. It has to do so, because at first glance the definition of inhuman treatment also includes unprohibited behaviour such as the justified use of force by the police, the imprisonment of an offender or the fighting of a war. If these actions are justified, they cannot be classified as inhuman treatment. Thus, the 8
Kudla v. Poland (GC), 2000‐XI Eur. Ct. H.R. 510, para. 91‐92. 9 Ireland v. the United Kingdom, 2 Eur. H.R. Rep. 25, para. 162; Labita v. Italy, 2000‐IV Eur. Ct. H.R., para. 120; Gäfgen v. Germany, para. 88, 89; see JACOBS AND WHITE: THE EUROPEAN CONVENTION ON HUMAN RIGHTS 80 (4th ed. 2006); DAVID HARRIS, MICHAEL O´BOYLE, EDWARD BATES, & CARLA BUCKLEY – LAW OF THE EUROPEAN CONVENTION ON HUMAN RIGHTS 75 (2nd ed. 2009). 10
Ireland v. the United Kingdom, para. 167; Gäfgen v. Germany, para. 90. 11 Akkoç v. Turkey, 2000‐X Eur. Ct. H.R., para. 115; Gäfgen v. Germany, para. 90. Compare also the definition of Art. 1 para. 1 of the UN Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, 1465 U.N.T.S. 85. See also, e.g., Eric Hilgendorf, Folter im Rechtsstaat?, 59 JURISTENZEITUNG 331, 334 (2004). 12
Campbell and Cosans v. the United Kingdom, 4 Eur. H. R. Rep. 293, para. 26 (1982); Gäfgen v. Germany, para. 91, 108. 13 Gäfgen v. Germany, para. 101 – 108. 2010] Gäfgen Judgment 1397
argument of the ECHR that an inhuman treatment can never be justified 14 is correct, but it comprehends the petitio principii that the threat of torture by governmental authorities is inhuman treatment in every case one could imagine, even if it was to save a child´s life. The ECHR does not accept weighing up interests at this point. 15 The law is unambiguous; the prohibition of torture in Article 3 of the Convention does not allow any exemptions. 16 It is only consistent that the same applies to the prohibition of the threat of torture. 17 The strict prohibition of torture is a lesson from history. 18 In the recent past Guantanamo is an example that argues for the inadmissibility of exemptions. 19 So it is not appropriate to differentiate between justified torture and not justified torture or between torture for the purposes of prosecution and of security. A situation in which torture suggests itself is always a situation of a mere suspicion, and a suspicion can be false. Furthermore, if torture is admitted, there will not be self‐evident limits of its application. 20 These are historical and practical reasons. In the legal and ethical view one can deduce the severity of the prohibition of torture from the guarantee of human dignity or the conditions of the state´s legitimacy. This suggests a priority of a deontological over a consequentialist or teleological ethical theory. 21 14 Gäfgen v. Germany, para. 107. 15 Gäfgen v. Germany, para. 87, 176. See also Ireland v. the United Kingdom, para. 163; Chahal v. the United Kingdom, 23 Eur. H. R. Rep. 413, para. 79‐81 (1997); Saadi v. Italy, Application 37201/06, para. 138 (February 28, 2008), available at http://cmiskp.echr.coe.int/tkp197/ view.asp?action=html&documentId=829510&portal=hbkm&source=externalbydocnumber&table=F69A27FD8FB8
6142BF01C1166DEA398649 16 Explicitly stated in Article 15 para. 2 of the Convention and Article 2 para. 2 of the UN Convention Against Torture. See also Article 5 of the Universal Declaration of Human Rights, Article 7 of the UN Convenant on Civil and Political Rights and common Article 3 para. 1 a and c of the Geneva Convention. 17 Contra e. g., Rolf Dietrich Herzberg, Folter und Menschenwürde, 60 JURISTENZEITUNG 321, 325, 328 (2005). 18 EDWARD PETERS, TORTURE (1996) (providing a historical overview). 19 Amnesty International, USA: Shadow over Justice, available at http://amnesty.org/en/library/ info/AMR51/094/2010/en (Oct. 1, 2010). 20
See Jan Joerden, Über ein vermeintes Recht (des Staates) aus Menschenliebe zu foltern, 13 JAHRBUCH FÜR RECHT UND ETHIK 495, 518 (2005). 21
Luis Greco, Die Regeln hinter der Ausnahme: Gedanken zur Folter in sog. Ticking Time bomb‐ Konstellationen, 154 GOLTDAMMER’S ARCHIV 628 (2007), LUIS GRECO, LEBENDIGES UND TOTES IN FEUERBACHS STRAFTHEORIE 128, 138 (2009). 1398 G e r m a n L a w J o u r n a l
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The consequences of the court´s position might be difficult to accept, 22 as a variation of the present case illustrates. Assume that J. was still alive and no attempt to incite G. to confess was successful. In this case G. would have been legally obligated to disclose where he had hidden the boy, otherwise he would be a murderer by omission. But it would be unlawful for the police to constrain him to observe the law. Taking into account the interests at stake, there is on the one hand the life of the boy and on the other the autonomy (freedom) of G.´s will. Another aspect is that in this case everybody would have been allowed to threaten the suspected person with torture except the public authorities. Thus, it could be admissible to surrender this person to someone, who may act in justified self‐defense. This reveals that the reason of the prohibition of torture is not the mere effect of this treatment on the person who is subjected to it. The primary reason is to limit the public power for protecting the people in general from dangers of the kind of violence that has no inherent limits. Torture and the threat of torture convey perhaps the most intense form of power, because the subjected person is entirely at the mercy of the 23
state. As a consequence, the court was right not to admit an exemption from the prohibition of torture. D. The “Victim” Status The status of a “victim” of a violation of the Convention remains as long as the national authorities do not afford sufficient redress to the person injured. In cases of willful ill‐
treatment it is necessary to investigate thoroughly and effectively what happened and to award compensation to the person injured. 24 Beyond that, the ECHR demands the prosecution and appreciable punishment of the persons responsible. 25 Furthermore, they should be suspended from duty while being investigated and in grave cases should be dismissed if convicted. 26 In the present case the violation of Article 3 of the Convention was recognized by the German courts. The two police officers were convicted of coercion and incitement of 22
For a justification of torture in cases like this see, e. g., Winfried Brugger, Vom unbedingten Verbot der Folter zum bedingten Recht auf Folter?, 55 JURISTEN ZEITUNG 165 (2000). See also Joerden, supra note 20, at 503 (many further references to the German literature). 23 The situation of torture would be the highest challenge for the power, because nobody can substitute the action, which is ordered. About the correlation between force, threat and power as a generalized medium of interaction, see NIKLAS LUHMANN, MACHT 9, 60 (2d ed. 1988), NIKLAS LUHMANN, DIE POLITIK DER GESELLSCHAFT 45, 55 (2000). 24 Gäfgen v. Germany, para. 116‐118. 25
Gäfgen v. Germany, para. 117, 119, 123. 26 Gäfgen v. Germany, para. 125 with further references. 2010] Gäfgen Judgment 1399
coercion by the Frankfurt am Main Regional Court. But the fines were very modest, a suspended payment of 3.600 € for E. and of 10.800 € for D. 27 As for disciplinary sanctions both were transferred to posts, which do not involve association with the investigation of criminal offences, but D. later was promoted as the chief of a Headquarter of Administration. The ECHR deems that in spite of some mitigating circumstances these sanctions were in a manifest disproportion to the gravity of the criminal offence. 28 It holds that they do not have the necessary deterrent effect in order to prevent further violations of Article 3 in future difficult situations. The court refers to the case Nikolova and Velichkova v. Bulgaria. 29 In this case two police officers willfully inflicted on a person grievous bodily harm negligently resulting in death. These officers were as in the present case sentenced to the minimum penalty allowed by law. The ECHR infers the principle that the Convention should prevent effectively human rights violations from Article 1 of the Convention. A state is obliged to secure the Human Rights guaranteed by the Convention. These rights have to be “practical and effective” and not 30
“theoretical or illusory”. Therefore a state even can be obliged to enact a certain penal 31
law. Consistently, also the courts of a state are obliged by the Convention as by every other law. This is why the criminal courts have to take account for the effectiveness of the rights guaranteed by the Convention. Besides, the victim has no right to claim a certain level of punishment which would correspond to that obligation. Its status as a “victim” is only a means to prevent future violations of the convention. Moreover, the ECHR itself concedes that it is not able to determine the appropriate 32
sentence of an offender. This is a question of individual guilt. This question can be assessed only by the court that is familiar with the criminal case and the persons involved. Thus, the ECHR should only intervene, if the national courts apparently protect the offenders from adequate punishment. The present case is not an example of this. Among other circumstances and in contrast to the case of Nikolova cited above, the person injured has given reason for the offence. G. was suspected rightly to have hidden J. and J.´s life was 27 LG Frankfurt am Main, 58 NEUE JURISTISCHE WOCHENSCHRIFT 692 (2005). 28 Gäfgen v. Germany, para. 123‐125; contra Gäfgen v. Germany (Casadevall, J., dissenting), para. 6. 29
Nikolova and Velichkova v. Bulgaria, Application 7888/03, para. 60‐64 (Dec. 20, 2007). See, in this context, HARRIS, ET AL., supra note 9, at 48, 108. 30 Artico v. Italy, 3 Eur. H.R. Rep. 1, para. 33 (1980). 31 X and Y v. Netherlands, 8 Eur. H.R. Rep. 235, para. 27 (1985). See HARRIS, ET AL., supra note 9, at 107, 384. 32 Gäfgen v. Germany, para. 123. 1400 G e r m a n L a w J o u r n a l
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supposed rightly to be in danger. Thus, even though the injustice was a violation of a human right, it was of minor severity. In another case the same injury that G. suffered could have been caused by a justified defense. An offender always puts his own rights at stake. Furthermore it is not clear that a more severe punishment of the officers would be more effective at preventing future offences. It was rather essential that the criminal court clarified in this precedent that the threat of torture is prohibited under all circumstances. In addition to the objection of the lenient sanctions the ECHR criticizes the fact that G.´s compensation claim and the preliminary action to attain legal aid for that claim has taken 33
more than three years to this point. Beyond that, the court does not determine, whether sufficient redress for the violation of Article 3 of the Convention had to entail the exclusion of all items of evidence obtained as a result of the violation at the criminal proceedings. 34 This question coincides with the other question, whether or not the right to a fair trial (Article 6 of the Convention) was violated. In effect, though G. still may claim to be a “victim” of a violation of Article 3, he has scarcely attained an advantage. The sanctions for the two police officers cannot legally be changed, and the compensation claim is still pending and cannot be criticized in advance. E. Violation of Article 6 of the European Convention on Human Rights The real concern of G. was obtaining a new criminal trial from which the impugned evidence would be excluded. In this regard G. failed. The ECHR concludes that the Frankfurt Regional court did not violate G.´s right to a fair trial under Article 6 of the 35
Convention. The following section first explores the structure of the right to a fair trial in relation to more specific procedural rules (see I.). It then shows that the ECHR concludes implicitly that the admission of the impugned evidence was a mistake. After that I will discuss the exclusionary rule that the ECHR postulates and put it into the context of the jurisdiction of the ECHR and of the German courts (see II.). Finally, I will explain, why, nevertheless, the ECHR denies a violation of the right to a fair trial (see III.). The trial as a whole was fair in terms of Article 6 of the Convention, because the conviction was founded by G.´s confession at the trial. This confession was not influenced in a relevant way by the inhuman treatment that he had suffered. 33 Gäfgen v. Germany, para. 126; Gäfgen (Casadevall, J., dissenting), para. 8. 34 Gäfgen v. Germany para. 128, 129. 35 Article 6 of the Convention is quoted in the Introduction of this case note. 2010] Gäfgen Judgment 1401
I. The Right to a Fair Trial in Relation to Specific Procedural Rights At first it is important to analyze the structure of the rules that the ECHR postulates, because it is not clear that the ECHR postulates specific rules on the admissibility of evidence. In its arguments the ECHR distinguishes implicitly between a single procedural act (“Prozesshandlung”) that can be called unfair and the trial as a whole. A single “unfair” procedural act is able to make the whole trial unfair but does not do so necessarily. The unfairness of the trial is not a matter of necessity or causation but of an assessment of the 36
trial as a whole. Accordingly, it is possible to distinguish two kinds of rules respectively
rights of the defendant. The primary rule is the precept to the court to provide a fair trial and a fair judgment. This rule refers to the results of a proceeding. Rules of the second kind prescribe and forbid specific procedural acts. 37 The violation of such rules does not result necessarily in a violation of the first rule, because the fairness of a trial is a matter of assessment of the trial as a whole. This is why a violation of a rule of the second kind has in some cases no legal consequences in respect of Article 6 of the Convention. However, it is necessary that the ECHR accepts a rule of the second kind if it only denies the unfairness of the trial as a whole. The court has to indicate procedural acts that are able to make a trial unfair. The fairness of a trial cannot depend exclusively on random circumstances as in the present case the confessions of G. or in other cases the question, whether or not other rights of defense were disregarded. Thus, the ECHR postulates necessarily specific rules 38
also in respect of the use of evidence. However, one could say that these rules are weak, because its violation does not lead to a “sanction” necessarily. 39 The question whether or not the ECHR postulates specific rules in this context remains controversial. 40 The court itself has denied postulating such rules to this point, for example in the case Schenk v. Switzerland: 41 “While Article 6 of the Convention guarantees the right 36
Gäfgen v. Germany, para. 163‐165. 37 For a similar differentiation of two kinds of rules in another context, see STEPHAN AST, NORMENTHEORIE UND STRAFRECHTSDOGMATIK 16, 22 (2010). One can distinguish effect‐ or causation‐ norms and action‐ norms. It is a peculiarity of the precept to render a fair trial that the ascertainment of this “effect” is a matter of evaluation. 38 On the character of procedure rules as constitutive rules and their relation to regulative rules like the prohibition of torture, see Matthias Mittag, A Legal Theoretical Approach to Criminal Procedure Law: The Structure of Rules in the German Code of Criminal Procedure, 7 GERMAN LAW JOURNAL 637, 643 (2006). 39
One could understand the judgment in an alternative way. Possibly the ECHR assumes only hypothetically rules of the second kind and denies anyway the impact of the breach of these rules on the results of the proceeding. However, by reading the judgment it seems that that the court does not assume these rules only hypothetically. 40
For a detailed analysis, see KARSTEN GAEDE, FAIRNESS ALS TEILHABE – DAS RECHT AUF KONKRETE UND WIRKSAME TEILHABE DURCH VERTEIDIGUNG GEMÄß ART. 6 EMRK 804, 813 (2007). 41 Schenk v. Switzerland, 13 Eur. H.R. Rep. 242, para. 46 (1988). 1402 G e r m a n L a w J o u r n a l
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to a fair trial, it does not lay down any rules on the admissibility of evidence as such, which is therefore primarily a matter for regulation under national law. The Court therefore cannot exclude as a matter of principle and in the abstract that unlawfully obtained evidence of the present kind may be admissible. It has only to ascertain whether [the] trial as a whole was fair.” 42 One can understand well that the ECHR abstains from clear conclusions. As opposed to the national courts it is not its task to determine the procedural law in detail. However, both, the national courts and the ECHR, have necessarily to make explicit the rule, whether certain evidence may be used. Furthermore, they have to give reasons for such a rule (see II.) and have to decide, whether a violation of that rule should be subjected to a legal sanction in a single case (see III.). II. The Exclusionary Rule The rule that all evidence obtained as a remote result of a breach of Article 3 of the Con‐
vention must not be used in criminal proceedings is the most important outcome of the judgment, because this is a new rule in the context of the German law as well as in the 43
case‐law of the ECHR itself. The ECHR justifies this rule with two reasons. The first one refers to the legitimation of a criminal proceeding: “There is also a vital public interest in preserving the integrity of the judicial process and thus the values of civilized societies founded upon the rule of law.” 44 The second argument refers to the effectiveness of the protection of the human rights under the Convention: “Admittedly, in the context of Article 6, the admission of evidence obtained by conduct absolutely prohibited by Article 3 might be an incentive for law‐enforcement officers to use such methods notwithstanding such absolute prohibition.” 45 This preventive purpose is only carefully accepted within the German discussion, because the specific means to prevent infringements by law‐enforcement officers are penal and disciplinary sanctions, but not a sanction, which could paralyze a criminal proceeding and impede a just punishment. 46 Instead, the German jurisprudence has recognized three 42 See Khan vs. the United Kingdom, 2000‐V Eur. Ct. H.R., para. 35; Gäfgen v. Germany, para. 162‐165. 43
The ECHR has already decided that statements obtained as a result of ill‐treatment in breach of Art. 3 are generally inadmissible, as well as real evidence obtained as a direct result of acts of violence. See Gäfgen v. Germany, para. 166‐168; HARRIS, ET. AL., supra note 9, at 257. The most important judgment in this context is Jalloh v. Germany, 2006‐IX Eur. Ct. H.R., para. 105‐108. The U.S. Supreme Court, to which the ECHR refers, in Gäfgen v. Germany, para. 73, accepts the doctrine of the “fruit of the poisonous tree.“ Nix v. Williams, 467 U.S. 431 441 (1984). 44 Gäfgen v. Germany, para. 175. 45 Gäfgen v. Germany, para. 176‐178. 46 See, e.g., CLAUS ROXIN, BERND SCHÜNEMANN – STRAFVERFAHRENSRECHT, para. 24/60 (26th ed. 2009). 2010] Gäfgen Judgment 1403
principles respectively purposes at stake if one justifies or repudiates the so called “Beweisverwertungsverbote” (prohibitions of the use of evidence). 47 The first purpose is to retain the legitimation of punishing. 48 This principle is important in the present case, because the criminal trial has to avoid the impression of being based on an act of torture or inhuman treatment. The second principle corresponds to the purpose of the criminal proceeding itself, namely to find out the truth and to render a just punishment. 49 This purpose mostly contradicts prohibitions to use manifest evidence. Finally one could accept in general so‐called “Informationsbeherrschungsrechte” (rights to control information). 50 These are legal admitted rights of a person to determine when and how she or he provides information. If such a right is violated—e. g. if the person is coerced unlawfully to reveal information—then the person has a right to the reversal of the consequences of the violation (“Folgenbeseitigungsanspruch”). Similar rights are accepted widely in the public law if a subjective right is violated. 51 By means of these assumptions one can justify the “Fernwirkung” (long range effect) of prohibitions to obtain certain evidence. In principle, all evidence that is found in consequence of the threat of torture is inadmissible. The right to the reversal can only be limited if the information would have been attained also in a legal way. De facto the ECHR has acknowledged the aforementioned right in case of the violation of Article 3 of the Convention, but the arguments of the court are based exclusively on an objective point of view. German law accepts only restrictively long‐range effects of prohibitions to obtain or use evidence. The Federal Court of Justice (BGH) has delivered some judgments concerning the problem, whether evidence that was found as a consequence of an unlawful investigatory 52
measure is admissible in criminal proceedings. To resolve this problem the BGH considers the circumstances of the case, above all the gravity of the defendant´s charge and of the unlawfulness of the measure in question. In the case 34 BGHSt 362 the court, as in the present case, found a coercion contrary to Article 136a of the Code of Criminal Procedure (CCP). The defendant was imprisoned in his cell with another defendant who collaborated with the police. He disclosed the robbery that he had committed to the other defendant. Consequently, a further witness of prosecution was found. The court decided that the 47 KNUT AMELUNG, INFORMATIONSBEHERRSCHUNGSRECHTE IM STRAFPROZEß 14‐29 (1990). 48
See 31 BGHSt, 304, 308. 49 See 27 BGHSt, 355, 357. 50 AMELUNG, supra note 47, at 24, 30. With reference to the American information‐transaction approach, Schrock & Welsh, Up from Calendra: The Exclusionary Rule as a Constitutional Requirement, 59 MINN. L. REV. 251 (1975). 51 See HARTMUT MAURER, ALLGEMEINES VERWALTUNGSRECHT, para. 30 (17th ed. 2009). 52 29 BGHSt 244; 32 BGHSt 68; 34 BGHSt 362. 1404 G e r m a n L a w J o u r n a l
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testimony of this witness was admissible. In regard to effective prosecution and crime‐
prevention the court held that a single unlawful act should not disable the whole proceeding. Furthermore, it was hardly possible to conclude that the witness would not have been detected otherwise. Article 136a § 3 of the CCP establishes solely that statements obtained in breach of the prohibition of coercion, threat and deceit must not be used in evidence. Thus, the more remote results of the statements are not inadmissible in general. The present judgment of the ECHR can be integrated in this jurisdiction, because the impugned evidence was found in consequence of the violation of a basic human right. For example in the case 27 BGHSt 355 the Federal Court accepted a long‐range effect, because 53
the constitutional right to freedom of telecommunication was violated. Admittedly, the crime charged was of minor gravity. III. Limits of the Exclusionary Rule Thus, the ECHR assumes that the criminal court has violated a rule that follows from the precept of a fair trial. The criminal court was not allowed to admit the evidence that had been found in consequence of the threat of torture. Nevertheless, the ECHR denies a violation of Article 6 of the Convention. The trial as a whole was fair, because the breach of Article 3 of the Convention did not have a bearing on the conviction and sentence. At the beginning of the proceeding G. confessed voluntarily that he had murdered J. Before this confession the court instructed him that none of the statements he had previously made on the charges could be used as evidence against him. The judgment was primarily based on this confession. The impugned items of evidence only were used to test its veracity. The ECHR concludes: “It can thus be said that there was a break in the causal chain leading from the prohibited methods of investigation to the applicant´s conviction and sentence in 54
respect of the impugned real evidence.” Six judges of the court were dissenting in this respect. 55 They argued that the violation of Article 3 had a bearing on the confession of G as well as his conviction and sentence. On the first day of the proceeding G. made a preliminary submission to exclude the impugned evidence. After the refusal of this submission he only confessed to what had already been proven. It is obvious that G.´s defense‐strategy depended on this point. Thus, the refusal was a condition of the concrete confession. 53 In contrast, the ECHR considered in cases of a violation of Art. 8 of the Convention the obtained evidence admissible. See Schenk v. Switzerland, supra note 41, at para. 46‐49; Khan v. the United Kingdom, supra note 42, at para. 38‐40. Kühne & Nash, Case Commentary on Khan v. the United Kingdom, 55 JURISTENZEITUNG 997 (2000) (skeptical). 54 Gäfgen v. Germany, para. 180. 55 Gäfgen v. Germany (Rozakis, J., dissenting). 2010] Gäfgen Judgment 1405
To analyze this problem it is important to differentiate between the bearing of the violation of Article 3 on the conviction and the bearing of the exclusionary rule that the ECHR postulates. Surely, the refusal of G.´s preliminary submission was a condition of the confession and had in this way a bearing on the trial and the conviction. But this is not relevant. The main purpose of the exclusionary rule is to prevent the breach of Article 3 from having an influence on the conviction. This follows from the argument of the ECHR in respect of the legitimacy of the trial and judgment. The conviction may in no way be affected by the breach of Article 3 of the Convention. However, in the present case the conviction and sentence are apparently not, or only marginally, based on the items of evidence that were found in consequence of the violation of Article 3. This is why the purpose of the exclusionary rule is achieved. The confession of G. itself was not a consequence of the violation of Article 3. It was a consequence of the court´s announcement of the breach of the exclusionary rule. However, the right way to react to mistakes of a court is always to appeal to a higher court. Because of this, the court´s 56
mistake does not have the effect to exclude the freedom of G.´s confession. Thus, his 57
confession “breaks the causal chain” as the ECHR states. This is not a matter of a naturalistic understood causation but of an assessment which is primarily based on the purposes of the rules in question. F. Conclusion In summary, the result of the judgment in ECHR´s own words is that “the repression of, and the effective protection of individuals from, the use of investigation methods that breach Article 3 may . . . also require, as a rule, the exclusion from use at trial of real evidence which has been obtained as the result of any violation of Article 3, even though that evidence is more remote from the breach of Article 3 than evidence extracted immediately as a consequence of a violation of that Article. Otherwise, the trial as a whole is rendered unfair. However, the Court considers that both a criminal trial´s fairness and the effective protection of the absolute prohibition under Article 3 in this context are only at stake if it has been shown that the breach of Article 3 had a bearing on the outcome of the proceedings against the defendant, that is, had an impact on his or her conviction or 58
sentence.” This has not been shown in the present case. 56 In conformity with 27 BGHSt 355, 358. 57 Gäfgen v. Germany, para. 180. 58 Gäfgen v. Germany, para. 178. 1406 G e r m a n L a w J o u r n a l
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Developments The Politics of Constitutional Identity and its Legal Frame—the Ultra Vires Decision of the German Federal Constitutional Court By Matthias Mahlmann * A. The Old Story and its New Turn Since the ECJ handed down the Mangold v. Rüdiger Helm (Mangold) decision in 2005, 1 scholars have provided sometimes quite far reaching and sharp critiques of the decision and of what they took to be its consequences for European Union law. The decision concerned several questions, but the core issue was the applicability of (then) Community (now European Union) age‐based anti‐discrimination law in the case of a fixed‐term employment contract. The contract at issue was based on a law that allowed fixed‐term contracts without demanding objective reasons justifying the limitation of the period of employment beyond the age of 52. 2 The law is enmeshed in the political problem of including people older than 52 in the workforce without depriving them of secure working conditions. The legal issue was complicated by the fact that the transposition time of the relevant directive 2000/78/EC including the prohibition of discrimination on the ground of age had not yet expired because of a permissible extension of that time by Germany. 3 The ECJ declared the relevant norm to be contrary to Community law and thus not applicable in the case at hand. 4 It applied the directive in question despite the still pending time limit for transposition, arguing with the requirement under Community law that Member States refrain from taking any measures liable to seriously compromise the attainment of the result prescribed by the directive. 5 It buttressed its argument with the duty to report about the progress made during the extended transposition time. This provision was held *
Chair of Legal Theory, Legal Sociology and International Public Law, Faculty of Law, University of Zurich. Email: [email protected]. 1 Case C‐144/04, Werner Mangold v Rüdiger Helm, 2005 E.C.R. I‐9981 [hereinafter Mangold case]. 2 Paragraph 14 (3) Law On Part‐Time Working and Fixed‐Term Contracts (Gesetz über Teilzeit und befristete Arbeitsverträge) (BGBl. 2000, p. 1966) as amended by the First Law for the Provision of Modern Services on the Labour Market of 23 December 2002 (BGBl. 2002 I, p. 14607). 3 Art. 18 EC Directive 78 of 27 November 2000, O.J. 16 L 303 establishing a general framework for equal treatment in employment and occupation. 4 Mangold, para. 78. 5 Id. at para. 67. This principle was established in Case C‐129/96, Inter‐Environnement Wallonie ASBL v. Region Wallone, 1997 E.C.R. I‐7411, para 45. 1408 G e r m a n L a w J o u r n a l
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to imply that the Member State was not allowed to adopt measures incompatible with progressive implementation. 6 Furthermore, the ECJ interpreted the prohibition of age discrimination as an expression of a fundamental principle of Community law: the principle of equal treatment in the field of employment and occupation. 7 Applying a proportionality test, the court found this foundational principle to have been violated. The ECJ also underlined the broad discretion the Member States retained in the field of social and employment policies. Because the provision’s only criterion for allowing fixed‐term contracts without an objective reason was age, without any other consideration linked to the structure of the labor market in question or of the personal situation of the person concerned, the Court found that even in light of this broad discretion, the respective norm was not appropriate and necessary to vocationally integrating unemployed older workers, 8
which formed the purpose of the norm. Critiques of the decision found these arguments unconvincing. For some, the idea of a general principle prohibiting age discrimination appeared especially surprising. Sometimes, the decision was taken as an indicator of a spreading divide between the rationale of Community law and the legal principles of the national German legal order. 9 The issue was then taken to the German Federal Constitutional Court. The case originated from a constitutional complaint against a decision of the Federal Labor Court applying the findings set out in Mangold to a fixed‐term contract of an employee with a supplier of automobile manufacturers. 10 The complainant (a legal person) argued that the Mangold decision was contrary to the system of competences of Community law as the ECJ handed down legal principles that were not part of community law. As a consequence, it was ultra vires, violating the complainant’s contractual freedom according to Art. 2.1 and Art. 12.1 in conjunction with Art. 20.3 of the Basic Law. In addition, these norms were violated by a lack of protection of legitimate expectations by the decision of the Federal Labor Court, as the contract was concluded before the ECJ handed down Mangold. Finally, the complainant argued that its right to its lawful judge, via Art. 101.1 sentence 2 of the Basic Law, had been violated as the Federal Labor court did not submit a preliminary reference to the ECJ to clarify whether the standards developed in Mangold also apply to contracts concluded before this decision was handed down. 6 Mangold, paras. 71–72. 7 Mangold, paras. 74–76. 8 Mangold, para. 65. 9
BVERFG, 2 BvR 2661/06, 6 July 2010. English http://www.bverfg.de/entscheidungen/rs20100706_2bvr266106en.html. 10 Bundesarbeitsgericht [Federal Labor Court], Case 7 AZR 500/04, April 26, 2006. version available at 2010] Identity and Ultra Vires
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This complaint offered the first (and for some, the best) opportunity to apply the recently developed standards for establishing a violation of Germany’s constitutional identity by Community law, as set out in the decision of the Federal Constitutional Court on the reconcilability of the Treaty of Lisbon with the German Basic Law. 11 The complaint thus presented the Federal Constitutional Court with an intricate mix of a very distinct legal flavour: the case raised a core issue of the relationship between national and EU Law and thereby forced the Court to write another chapter in the story of its relationship with the ECJ that has for decades engaged not only the German legal audience. In addition, the issue had to be decided on an emotionally loaded subject matter, as (surprisingly, from other perspectives) modern European anti‐discrimination law is in general of great concern 12 for some in Germany, though decreasingly so. 11
BVerfG, Case No. 2 BvE 2/08, headnote http://www.bverfg.de/entscheidungen/es20090630_2bve000208en.html: 5 (June 30, 2009), The Federal Constitutional Court examines whether legal instruments of the European institutions and bodies keep within the boundaries of the sovereign powers accorded to them by way of conferral (see BVerfGE 58, 1 <30‐31>; 75, 223 <235, 242>; 89, 155 <188>: see the latter two concerning legal instruments transgressing the limits), whilst adhering to the principle of subsidiarity under Community and Union law (Article 5.2 ECT; Article 5.1 second sentence and 5.3 of the Treaty on European Union in the version of the Treaty of Lisbon (Lisbon TEU). Furthermore, the Federal Constitutional Court reviews whether the inviolable core content of the constitutional identity of the Basic Law pursuant to Article 23.1 third sentence in conjunction with Article 79.3 of the Basic Law is respected (see BVerfGE 113, 273 <296>). The exercise of this review power, which is rooted in constitutional law, follows the principle of the Basic Law’s openness towards European Law (Europarechtsfreundlichkeit), and it therefore also does not contradict the principle of sincere cooperation (Article 4.3 Lisbon TEU); otherwise, with progressing integration, the fundamental political and constitutional structures of sovereign Member States, which are recognised by Article 4.2 first sentence Lisbon TEU, cannot be safeguarded in any other way. In this respect, the guarantee of national constitutional identity under constitutional and under Union law go hand in hand in the European legal area. 12
For some comments on that matter, see MATTHIAS MAHLMANN, GLEICHBEHANDLUNGSRECHT, 33 et seq., 87 et seq. (2007). 1410 [Vol. 11 No. 12
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B. Circumscribing Ultra Vires—The Decision of the Federal German Constitutional Law The Federal Constitutional Court rejected the constitutional complaint as unfounded. 13 Decisive for this outcome is an effort to circumscribe narrowly the possibility of an ultra vires control, the necessity of which it reiterated. Given the principle of conferral as set out in Art. 5.1 sentence 1 and Art. 5.2 sentence 1 of the Treaty on the European Union (TEU), it took itself to be “empowered and obliged to review acts on the part of the European bodies and institutions with regard to whether they take place on the basis of manifest transgressions of competence or on the basis of the exercise of competence in the area of constitutional identity which is not assignable (Article 79.3 in conjunction with Article 1 and Article 20 of the Basic Law), and where appropriate to declare the 14
inapplicability of acts for the German legal system which exceed competences”. This task, however, had to be balanced against the ECJ’s duty to interpret and apply the Treaties as to maintain the supremacy, unity and coherence of Union law. If every national court were to judge by itself the validity of legal acts, it argued, “the primacy of application could be circumvented in practice, and the uniform application of Union law would be placed at risk”. 15 Consequently, the Court held the ultra vires review, “can only be considered if a breach of competence on the part of the European bodies is sufficiently qualified. This is contingent on the act of the authority of the European Union being manifestly in breach of competence, and the impugned act leading to a structurally significant shift to the detriment of the Member State in the structure of the competences.” 16 The court thus significantly raised the bar for establishing an ultra vires act by requiring a manifest breach leading to a shift in the structure of the competences between Member States and the Community. However, such a breach does not have to reach the level of touching upon the constitutional identity of a state. 17 Consequently, any such act has to have more than punctual importance and has to show relevance for the system of competences as such. The Mangold case raised the question of the extent to which the ECJ could adjudicate on fundamental rights. Though the Federal German Constitutional Court did not doubt the 13
BVerfG, Case No. 2 BvR 2661/06, para. 48 http://www.bverfg.de/entscheidungen/rs20100706_2bvr266106en.html. 14 Id. at para. 55 (internal quotations omitted). 15
Id. at para. 57. 16 Id. at para. 61 (referencing the concurring German legal literature). 17
Id. at para. 65. et seq. (July 6, 2010), 2010] Identity and Ultra Vires
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legitimacy the ECJ on this matter, it did, however, indicate some limits to such jurisprudence: Further development of the law transgresses these boundaries if it changes clearly recognisable statutory decisions which may even be explicitly documented in the wording (of the Treaties), or creates new provisions without sufficient connection to legislative statements. This is above all not permissible where case‐law makes fundamental policy decisions over and above individual cases or as a result of the further development of the law causes structural shifts to occur in the system of the 18
sharing of constitutional power and influence. With these standards, the Court explicitly established the space for judicial leeway, including the acceptance of, as it put it, “the right to tolerance of error” of the ECJ. 19 The Federal Constitutional Court did not decide whether Mangold was ultra vires. Even assuming that it was, it argued that it was in any case not of such a nature that the demanded quality of an act manifestly beyond the competence of the ECJ and of an impact for the balance of the structure of competences was reached. The opening of the field of community law through directives was based on standards, it argued, developed by the 20
case law of the ECJ in the past. The advance effect of the directive 2000/78/EC formed just another case group of the “negative effect” of directives, ruling out certain measures by Member States putting into question the efficient transposition of directives. 21 Finally, the recourse to the general principle of the prohibition of discrimination based on age was in any case not regarded as a sufficiently qualified ultra vires act, since the issuance of a secondary act through the Council (the Directive 2000/78/EC) tied it back to acts of the Member States (including Germany). 22 18
19
20
21
22
Id. at para. 64. Id. at para. 66. Id. at paras. 72–74. Id. at paras. 76–77. Id. at para. 78–79. 1412 G e r m a n L a w J o u r n a l
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In addition, it reiterated a procedural provision, contained in the Lisbon‐decision: Prior to the acceptance of an ultra vires act, the Court of Justice of the European Union is to be afforded the opportunity to interpret the Treaties, as well as to rule on the validity and interpretation of the acts in question, in the context of preliminary ruling proceedings according to Article 267 TFEU, insofar as it has not yet 23
clarified the questions which have arisen. In order to account for possible hardship in individual cases it mobilized the constitutional principle of legitimate expectations. It argued that this principle was not violated by the decision of the Federal Labor Court. Because of the primacy of application of Union law, the Federal Labor court was allowed to consider itself not in a position to grant protection of legitimate expectation contrary to the jurisprudence of the ECJ. 24 It advised, however, that “it should be considered, in constellations of retroactive inapplicability of a law as a result of a ruling by the Court of Justice of the European Union, to grant compensation domestically for a party concerned having trusted in the statutory provision, and having made plans based on this trust.” 25 Such a situation was at stake in the case at hand: the automobile supplier had trusted the statutory provision concluding a contract before the Mangold decision was handed down. After Mangold, it faced a legal situation with potentially substantial financial consequences, due to a fixed‐term contract being turned into an unlimited employment contract. 26 Finally, the Federal Constitutional Court confirmed its consistent case law on the right of one’s lawful judge according to Art. 101.1 sentence 2 Basic Law. It can constitute a denial of the lawful judge if a German court does not comply with its obligation to make a submission to the Court of Justice of the European Union in a preliminary ruling according to Art. 267.3 TFEU. The decision not to submit the case has to, however, be the kind that no longer appears to be comprehensible and manifestly untenable. The impugned judgment of the Federal Labor Court, which had not engaged the ECJ at another time, did not meet this standard and was thus not regarded as violating the right to the lawful judge 23 Id. at headnote 1, para. 60. 24 Id. at para. 86. 25 Id. at headnote 2, para. 85. 26 The Federal Labor Court (Bundesarbeitsgericht) had denied a protection of legitimate expectations in favour of the complainant irrespective of EU law. It argued with the lack of prior rulings by the Federal Labor Court regarding the permissibility of a fixed‐term contract based solely on age without objective reasons and the lack of consensus on the matter in legal literature. See Bundesarbeitsgericht [Federal Labor Court], Case 7 AZR 500/04, April 26, 2006. 2010] Identity and Ultra Vires
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as it reasonably applied the content of the Mangold ruling. 27 With this decision, the senate of the Federal Constitutional Court contradicted a recent decision of one of its chambers formulating a stricter control of the duty to submit cases to the ECJ. 28 C. The Dissent The decision was handed down by a majority of six votes to two with regards to the grounds, and seven votes to one with regards to the outcome. Dissenting judge Landau argued that the majority placed “excessive requirements on the finding of an ultra vires act on the part of the Community or Union bodies by the Federal Constitutional Court.” 29 He agrees that a qualified, “manifest” breach is necessary to trigger the ultra vires control. To demand in addition a significant shift in the structure of competencies between the Member States and the supranational organization, however, in his view, does not sufficiently protect the democratically legitimized competencies of the Member States. 30 The danger of an incremental shift of competencies was underestimated by the majority, according to his view. 31 Handing down Mangold, the ECJ manifestly transgressed the competences granted to it and thus acted ultra vires. The main points of contention are the advance effect of the directive and the assumption of a general principle of community law prohibiting age discrimination. 32 Finally, he argues that the Federal Labor Court should have engaged the ECJ another time and solved the case—in the event of a complete confirmation of the Mangold case by the ECJ—on the basis of the principles of cessation of the operational foundation of the contract. 33 27
BVerfG, Case No. 2 BvR 2661/06, para. 2010),http://www.bverfg.de/entscheidungen/rs20100706_2bvr266106en.html 28
92 (July 6, BVerfG, 1 BvR 230/09, para. 20–21 (Feb. 25, 2010), http://www.bverfg.de/entscheidungen/rk20100225_1bvr023009.html. 29
BVerfG, Case No. 2 BvR 2661/06, para. 95 http://www.bverfg.de/entscheidungen/rs20100706_2bvr266106en.html 30 Id. at paras. 101–102. 31
Id. at para. 103. 32 Id. at paras. 105–113. 33 Id. at para. 116. et seq. (July 6, 2010), 1414 G e r m a n L a w J o u r n a l
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D. Did the Court Do the Right Thing? The decision of the Federal Constitutional Court was met with immediate criticism. 34 The decision merits, however, assenting support. Though there are other interesting dimensions to this case, there are two central questions to be considered here. First, does the developed standard make any sense? Second, if so, was it applied convincingly? Let’s consider these questions in turn. I. The Standard of Ultra Vires Control One may ask many questions about the constitutional merits of the identity control developed by the Federal German Constitutional Court. There is a rich debate about it that cannot be pursued here. Given the case at issue, the question is rather, given this jurisprudence, whether its concretization and application is convincing. Here it seems that any other less qualified standard is hard to reconcile with the general normative structure of the process of European integration and the provisions concerning integration of the Basic Law. Evidently, not just any misapplication of the law can possibly suffice because the consequence would be that the Federal Constitutional Court would become a Cour de cassation for all acts of EU organs that are (as any act of a public authority) open to the claim of misapplying the law. On this point, the dissent agrees. But is there perhaps another standard covering some middle ground between this standard and that which the Federal Constitutional Court developed that can be applied in practice? It seems not. Such a fine‐grained standard would demand that misapplications of the law be clearer and more evident than they are. Especially the second element of the test developed by the Federal German Constitutional Court demanding the structural significance of the possible breach of competencies is a workable tool to identify acts that can be regarded with good reasons as ultra vires. The Federal Constitutional Court stated that the ECJ has a “right to tolerance of error.” The Federal Constitutional Court, however, also protects itself against the consequences of its own possible errors by demanding a specifically qualified degree of breach of the order of competencies. Sufficient certainty of such violations is only possible if the breach must be qualified and manifest and needs a systemic impact. The Court thus shields itself against the danger to confuse perhaps justified criticism of a decision with the sufficiently secure establishment of an ultra vires act. There are many decisions of the ECJ that are (sometimes rightly) contested. To open Pandora’s box of ultra vires control for many of these cases would endanger the working of the intertwined legal order of the European Union to a degree not desirable if European integration is to succeed. The criterion of structural importance of the ultra vires act serves another decisive function: to give legitimacy to the effects of the ultra vires control by the Federal 34
See, e.g., Dieter Grimm, Die groβe Karlsruher Verschiebung, FRANKFURTER ALLGEMEINE ZEITUNG, available at http://www.faz.net/‐01hz2b. 2010] Identity and Ultra Vires
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Constitutional Court. These effects may be very significant: declaring a judgment of the ECJ ultra vires and thus not applicable in Germany means a major disruption of the legal order of the EU with evident, far reaching and certainly long lasting consequences for the whole of the project of European legal integration. If a Court of a Member State wants to find acceptance of its ultra vires control mechanism and avoid the suspicion of trying to foster particularistic intentions contrary to the principles of Union law behind the façade of ultra vires discourse by not applying judgments of the ECJ, certainly nothing but a violation of the structure of competencies of the EU and the Member States will suffice. Only such a violation carries enough weight to justify the consequences of the ultra vires control that can be nothing else but a measure of last resort. It is not quite clear, however, why the decision is supposed to not rule out a shift of competencies in a piecemeal process of erosion as the dissent and critics argued: If such a process is detectable, the developed standard can certainly apply. The same reasoning, it seems, is mutatis mutandis, valid for acts of organs of the EU other than the ECJ. II. The Application to Mangold The problems raised by a different standard can be well illustrated with the Mangold case itself. One may ask namely with some legal ground under one’s feet whether Mangold was really a decision of a Court led astray by judicial activism unbound by law. Mangold is in many technical aspects a complex case. Nevertheless, three main points were the main object of critique. First, the application of the directive before the transposition date. Second, and connected with the first, the application of the principle of equal treatment to this case. Third, the concrete application of the principle of proportionality in the framework of a possible justification of the unequal treatment of employees with respect to the admissibility of fixed‐term contracts depending on their age. The argument of the ECJ that Member States are obliged, during the time of transposition, not to create facts that are detrimental to the final transposition of a directive seems reasonable enough and is not contested as such. That this rule should lead to an application of the prohibition of discrimination before the transposition date is buttressed with another argument, namely the connection of the prohibition of discrimination with the principle of equal treatment in the field of employment and occupation. That this principle was central was clear from the argument of Mangold and has recently been 35
underlined by the ECJ confirming its Mangold ruling. A right to equal treatment formed 35 Case C‐555/07, Seda Kücükdeveci v. Swedex GmbH & Co. KG (Jan. 19, 2010). The Court stated that the “Directive 2000/78 merely gives expression to, but does not lay down, the principle of equal treatment in employment and occupation, and that the principle of non‐discrimination on grounds of age is a general principle of European Union law in that it constitutes a specific application of the general principle of equal treatment.” Id. at paras. 20, 50. On the matter see Skouris, Methoden der Grundrechtsgewinnung in der EU, in HANDBUCH DER GRUNDRECHTE, VOL. VI/1, § 157, 21‐24 (Merten & Papier eds., 2010). 1416 G e r m a n L a w J o u r n a l
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part of the catalogue of fundamental rights of the Community Law even before the Charter of Fundamental Rights became mandatory containing equality and non‐discrimination provisions. 36 But how to interpret such a praetorian right to equal treatment? Many proposed to look at the Charter for guidance after it was “solemnly” declared in 2000 for the interpretation of the fundamental rights of then Community law. 37 However, the Charter non‐
discrimination clause, Art. 21.1, contains a prohibition of age discrimination. The ECJ thus acted squarely within the framework of the consensus on fundamental rights established by the Charter. Another avenue usually applied by the ECJ (and invoked in Mangold) to interpret fundamental rights is to find inspiration apart from international instruments, especially the ECHR in the constitutional traditions of the Member States, and engage on that basis in evaluative comparative law. One example of such a constitutional tradition could be the German Basic Law. More precisely, one can point to the general equality provision, as the special prohibitions of discrimination in Art. 3.2. and 3.3 of the Basic law do not include age. The guarantee of equality before the law, via Art 3.1 of the Basic Law, has been interpreted in the older case law of the Court as an interdiction of arbitrary treatment within the limits 38
of material justice. More recent decisions have increased the demands for unequal treatment to be justified beyond this position. The Federal German Constitutional Court has ruled that as the principle of equality before the law intends to prevent the unjustified 36
Case C‐147/79, Hochstrass v. European Court of Justice, 1980 E.C.R. I‐3005. The argument of the ECJ in Mangold has not made the doctrinal construction very transparent, which is a general problem of the ECJ jurisprudence in comparison with more discursive traditions of other courts. From the context, however, it seems rather clear that the central principle that is the base of argumentation is the principle of equal treatment in the field of employment and occupation, not only the prohibition of discrimination of age. The derivation of the principle of non‐discrimination on the ground of age is a consequence of this principle of equal treatment, as others on the ground of religion or belief, disability, age or sexual orientation. See id. at para 75. The court could have made clearer how the principle of equal treatment in the field of employment and occupation is derived from international instruments and constitutional traditions. One way would be to explicitly include the general principle of equal treatment (not only in the field of employment and occupation) into the doctrinal construction. This principle, it seems, is the content of recital 3 (principle of equal treatment) and 4 (right of all persons to equality before the law) of the Directive the ECJ refers to in Mangold at paragraph 74 and found in the legal orders of the Member States. This principle is the object of the international treaties and constitutional traditions the court refers to as well. The argument that there are no international instruments on age discrimination or many constitutional traditions of that kind (this argument is, for example, discussed by the Federal Constitutional Court, see BVerfG, 2 BvR 2661/06, 6 July 2010, para. 78) then loses its doctrinal force. For an example for the complexities of reconstructing what national constitutional traditions actually mean, see infra the remarks on Art. 3.1 of the Basic Law. 37
Matthias Mahlmann, 1789 Renewed? Prospects of the Protection of Human Rights in Europe, 11 CARDOZO J. OF INT’L & COMP. LAW 903 (2003‐2004). 38
BVerfGE 1, 14 (52); 25, 101 (105). 2010] Identity and Ultra Vires
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unequal treatment of persons, the legislature is regularly subject to strict constraints in cases of unequal treatment based on characteristics of a person as such. These legal constraints become stricter depending on the extent to which the personal characteristics that constitute the ground for unequal treatment resemble the characteristics listed in Article 3.3 of the Basic Law and there is therefore greater danger that unequal treatment based on them will lead to discrimination against a minority. The strict constraint is, however, not limited to discrimination against persons. It also exists where unequal treatment of subject matters leads to the unequal treatment of groups of people. The strictness of the constraint depends on the degree to which the persons affected are able to change the characteristics that are the ground of unequal treatment through their behavior. In addition, the limits on the legislature are more narrowly circumscribed depending on the extent to which the unequal treatment of persons or subject matters can 39
affect disadvantageously the enjoyment of basic liberties. As a result, direct discrimination under the guarantee of equality is possible, but only within the limit of differentiated standards of justification. These standards range from a test of arbitrariness to strict scrutiny of proportionality, in the case of unequal treatment based on personal characteristics. Age is certainly a personal characteristic not open to change by the individual. Consequently, a test of proportionality applies. How strictly it is formed may be open for debate given the intricacies of the necessary differentiations based on age. What could the ECJ thus learn from the constitutional law of Germany? It seems not very far‐fetched that the conclusion would be that unequal treatment on the ground of the personal characteristic of age by a legal provision has to match a test of proportionality. This, however, is, in a nutshell, the guiding principle applied in Mangold. How can this decision then be ultra vires in the qualified sense if it arguably mirrors the standing case law of the Federal Constitutional Court in central respects? There is certainly a deeper irony here: the Federal Constitutional Court was a key player demanding the creation of an order of fundamental rights in the Community Law by the case law of the ECJ. This is a standard story in the making of EU law. It would have been an interesting turn of events if the ECJ had been reprimanded to draw conclusions from one of these fundamental rights—the principle of equal treatment—and to do so in a manner that is (at least arguably) even similar to the one drawn by that Court itself on the matter at stake which demanded the creation of these rights in the first place. Finally, one may of course disagree with the application of the proportionality test in Mangold, perhaps valuing the integration in the labor market of older employees higher than maintaining the prospect of 39
BVerfGE 88, 87 (96); BVerfG, 1 BvR 611/07, http://www.bverfg.de/entscheidungen/rs20100721_1bvr061107.html. para. 84 (July 21, 2010), 1418 G e r m a n L a w J o u r n a l
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constant employment. But to make such fine distinctions the basis of an ultra vires decision seems hard to justify. This leaves us with the question of a piecemeal erosion of competencies through jurisdiction. If one looks at the concrete matter, age discrimination, most of the discrimination decisions handed down by the ECJ, apart from gender and nationality issues, deal with the characteristic of age. This jurisdiction, as it has evolved, shows a 40 mixed balance sheet of an all in all hardly activist jurisprudence. A general shift of competencies away from the Member States, e.g. as far as social policies are concerned, is not detectable. These remarks are not about Mangold. However the aforementioned arguments for the path taken in Mangold which is—after its mentioned confirmation—to be regarded as 40
See Case C‐17/05, Cadman v. Health and Safety Executive, 2006 E.C.R. 1‐9583, paras. 26–40: length of service legitimate criterion for unequal treatment; no obligation to establish specifically that recourse to that criterion is appropriate to attain that objective as regards a particular job, unless the worker provides evidence capable of raising serious doubts in that regard; no need to show that an individual worker has acquired experience during the relevant period which has enabled him to perform his duties better (on Art. 141 EC); Case C‐411/05, Felix Palacios de la Villa v. Cortefiel Servicios SA, 2007 E.C.R. 1‐8531, para. 77): compulsory retirement clauses contained in collective agreements acceptable where such clauses provide as sole requirements that workers must have reached retirement age, set at 65 by national law, and must have fulfilled the conditions set out in the social security legislation for entitlement to a retirement pension under their contribution regime; Case C‐388/07, Age Concern England v. Secretary of State for Business, Enterprise and Regulatory Reform, 2009 E.C.R. 1‐1569, para. 68: no preclusion of a national measure which does not contain a precise list of the aims justifying derogation from the principle prohibiting discrimination on grounds of age. Derogation from that principle only in respect of measures justified by legitimate social policy objectives, such as those related to employment policy, the labor market or vocational training; burden of proof of legitimacy of the aim relied on for justification; Case C‐
88/08, Hütter v. Technische Universität Graz, 2009 E.C.R. 1‐5325, para. 52: preclusion of a national legislation which, in order not to treat general education less favourably than vocational education and to promote the integration of young apprentices into the labor market, excludes periods of employment completed before the age of 18 from being taken into account for the purpose of determining the incremental step at which contractual public servants of a Member State are graded; Case C‐229/08, Colin Wolf v. Stadt Frankfurt am Main (Jan. 12, 2010), para. 48: maximum age for recruitment to intermediate career posts in the fire service at 30 acceptable; Case C‐341/08, Petersen v. Berufungsausschuss für Zahnärzte für den Bezirk (Jan. 12, 2010), para. 82: preclusion of setting a maximum age for practising as a panel dentist where the sole aim of that measure is to protect the health of patients against the decline in performance of those dentists after that age, since that age limit does not apply to non‐panel dentists; regulation admissible, however, the aim of which is to share out employment opportunities among the generations in the profession of panel dentist, if, taking into account the situation in the labor market concerned, the measure is appropriate and necessary for achieving that aim; Case C‐555/07, Seda Kücükdeveci v. Swedex GmbH & Co. KG, para. 57 (Jan. 19, 2010): preclusion of not taking into account periods of employment completed by an employee before reaching the age of 25 in calculating the notice period for dismissal; Case C‐499/08, Ingeniorforeningen i Danmark acting on behalf of Ole Andersen & Region Syddanmark, para 50 (Oct. 12, 2010): preclusion of national legislation pursuant to which workers who are eligible for an old‐
age pension from their employer under a pension scheme which they have joined before attaining the age of 50 years cannot, on that ground alone, claim a severance allowance aimed at assisting workers with more than 12 years of service in the undertaking in finding new employment; Case C‐45/09, Gisela Rosenbladt v Oellerking Gebäudereinigungsges, para 81 (Oct. 12, 2010): clauses on automatic termination of employment contracts on the ground that the employee has reached the age of retirement valid. 2010] Identity and Ultra Vires
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standing case law, illustrate that what seems from one legal perspective as inventing new legal positions may reasonably appear from another as the consequence of well‐
established principles of law. A court asked to decide, not on the merits of such cases, but rather on whether another court in this maze of supranational legal uncertainty has sufficiently erred, such as to deem its decision legitimately ultra vires, cannot but show restraint and put the bar high enough to leave room for such necessary judicial disagreement. This protects the right to error of others while shielding itself against the perhaps quite detrimental consequence of the errors it may commit itself assessing the ultra vires quality of an act of a different court. This is what the German Federal Constitutional Court did, and it was well advised to do so. 1420 G e r m a n L a w J o u r n a l
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