Ending the three shell game

The Fiscal Treaty is not particularly coherent economics, nor does it appear to be particularly coherent law. By Darren O'Donovan.

The word at the forefront of everyone’s mind for the next two weeks will be “referendum” – whether one is required or, from a more jaundiced perspective, whether the Government has leveraged the Fiscal Treaty text sufficiently to evade one. In this piece, I want to explore why even the most careerist of us should not envy the position of Attorney General Maire Whelan this weekend.

Firstly to explain my title: a three shell game is the one played at carnivals where after three shells are shuffled with bewildering speed, you have to guess under which shell the pea is hidden. It is a useful image for understanding the game that is currently being played out by politicians across the EU. The goal has been to confuse and keep events moving, not allowing them to settle at any point, shifting rapidly between politics, economics and law, to give the markets, and the people, an impression of action in the absence of concrete result.  The creation of the Fiscal Treaty, represents a rare moment of substance in a process of rhetoric and politicking. From the commentary of the last number of days, it seems many believe it to be incoherent economics, and neither, as I think we’ll see, is it particularly coherent law. It is clear, by process of elimination, that politics, and German and French electoral politics in particular, are the key to understanding its difficult birth.

First of all, to set the scene, I would recommend reading the piece by Carol Coulter from this morning’s Irish Times, which draws upon Dr. Gavin Barrett’s and Professor Gerry Whyte’s views on the referendum question. I want to use this format to provide a couple of posts, so I am going to concentrate here on analysing one of the core parts of the Treaty’s text. Later on, I’m going to talk about the Crotty judgment and how the Supreme Court will attempt to approach the issue of protecting and defining the value of sovereignty in Ireland’s constitution.

Issue 1: Does Article 3(1) of the Treaty require Ireland to place the debt brake rule into our Constitution or can it be done using legislation?

*Note: If the answer is the Constitution, start preparing the electoral posters*

Article 3(2) states that the agreed European rules governing the management of budget shall:

…take effect in the national law of the Contracting Parties at the latest one year after the entry into force of this Treaty through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.

This quote to put it mildly, is a mangled mess of legalese. Let’s break down the important phrases.

1. "binding force and permanent character": Does legislation qualify as permanent or binding? All legislation created by the Parliament can be amended or revoked by the Dáil. It’s worth noting as well that a Constitution isn’t necessarily ‘permanent’ either of course: it can be amended by referendum, but a constitutional provision would ‘bind’ the Dáil; the final decision-maker on budgetary matters.

A separate interpretation is that the use of the word ‘permanent’ could refer to the idea that the rules and commitments contained within the legislation would not be time-limited - e.g. that it stops the government passing a law saying Ireland would keep a balanced budget for the next five years, and makes us commit to doing it for all time. This is I think why Whyte and Barrett in the Irish Times this morning can legitimately differ in their interpretation.

2. "preferably constitutional": This seems promising from a Government point of view, especially considering that it is far more open than the earlier drafts which demanded ‘constitutional or equivalent’. That latter phrase would have guaranteed a referendum. But ‘preferably’ seems to soften the demand. But that is only an appearance, not a guarantee. Chancellor Merkel herself indicated in her post-summit press conferences that it may have been included to cover states without constitutions or to accommodate different constitutional cultures, and that Ireland could require a referendum. It is open to an Irish or International Court to find that the ‘preferably constitutional’ phrase is an accessory to ‘binding force and permanent character’, and doesn’t open up the possibility for us to use legislation –  a form of law which lacks that permanent character. Just to note also that any attempt to innovate, and to pass a unique form of special legislation which could not be amended or revoked for even a short period, would be clearly unconstitutional.

3. “or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes”:

I haven’t yet read anyone address this last phrase in commentary. For restrictions on Ireland’s debt ratio to be “fully respected and adhered to” throughout the national budgetary process, the Dáil itself would have to obey the rule when it votes through the Budget. This last clause contains the word "otherwise", which indicates that the purpose of the article as a whole is to ensure the full removal of any possibility of going against the rules in the budgetary process. The implication may be construed that the Dáil is to have its freedom of action removed. If this interpretation is taken, it is clear that our sovereign powers are being transferred and a referendum must occur, which I will explore that more fully in my next piece on how the Supreme Court will interpret the idea of sovereignty under Ireland’s Constitution.

Understanding how to interpret treaties in international law

We have ambiguity, and an important point for anyone involved in trying to access a referendum or avoid it, is that as this is an intergovernmental treaty, it is subject to the rules of general public international law relating to Treaty interpretation.

The first rule of identifying the content of a treaty is to read it according to the ordinary meaning given to the words. We attempted this above, and came to a number of possible interpretations. Under international law, the next thing we must do is to look at the words of the treaty in the light of its overall “object and purpose”. The object and purpose of the Treaty as a whole includes the three-page long preamble, and clearly the aim is to ensure an effective debt brake rule. In addition, international law requires us to interpret the words in order to give “maximum effectiveness to the treaty” – clearly a debt brake rule would be most effective if it was in the Constitution where it could only be changed with great difficulty.

These rules are counterbalanced by a need to take into account the intention of the parties when writing treaties. So in order to help its interpretation along, the Government should have ensured that throughout drafting process, it was common knowledge that the clause was drafted with the intent of avoiding a referendum in Ireland. Reference to this in the preparatory materials, official record of discussions and public statements by relevant countries will boost this case. At the political level, I would be intrigued to find out the extent of international legal knowledge of those Irish participants at the summit – the negotiations were not simply a matter of diplomacy but of defending Ireland’s interests. Was the Government sufficiently aware of the importance of extracting direct statements about the intention of the clause from each government signing up to the Pact?

Conclusion

The fact that there are a number of possible interpretations of the obligations Ireland has signed up to under Article 3(2) is a matter of grave concern. Let’s say the Supreme Court decides that the Treaty permits Ireland to use legislation to pass the debt brake. If later, an International  Court (whether the ECJ, the ICJ or other body), decides to interpret Article 3(2) differently, it could be found that Ireland is in breach of the Treaty. It was also a concerning development that access to stability funds from the European Stability Mechanism is going to be linked to the Fiscal Pact. The European Stability Mechanism Treaty was signed yesterday, and it states not just that we must ratify the Pact to receive funds from the ESM, but that, after an initial one year period, our compliance with Article 3 is required to access fund.

So let’s say the government implements the debt brake by legislation, and the Supreme Court allows this. Now imagine a scenario where financial conditions are so dire in Europe, that France or Germany want to find a way to deny us access to funds. They could take a case that Article 3(2) requires a constitutional debt brake, and without it Ireland is in breach of the Treaty and is therefore not entitled to funds from the European Stability Mechanism. It would be no defence for the government to say it was obeying its domestic legal requirements and the advice of our Supreme Court in attempting to implement the debt brake through legislation (this is a rule of general public international law). This might be an informal point that the pro-referendum side could use in any litigation; that the Supreme Court should be cautious in reaching its decision and a referendum is the safer course as an international court may not follow the Supreme Court’s interpretation of Article 3(2).

In my next piece I’m going to pin down what the existing Supreme Court case-law tells us about how this will ultimately play out. I would be delighted to hear people’s reactions to the above, I haven’t yet roadtested this interpretation!

Originally published on Human Rights in Ireland under a Creative Commons by-nc-nd 3.0 license.

Image top: infomatique.