Understanding the European System of Central Banks (ESCB) is essential to grasping Europe's monetary mechanisms. This complex structure, born of the Maastricht Treaty, governs our daily economic life without us always being aware of it.
1. Introduction to the ESCB and the Eurosystem
Definition and composition of the ESCB
The ESCB, created on 1 June 1998, brings together the European Central Bank (ECB) and the national central banks (NCBs) of the Member States of the European Union. Its main task is to maintain price stability in the eurozone, as stipulated in Article 105 of the EC Treaty.
The ESCB does not have its own legal personality. The ECB does. This essential distinction explains why decisions on monetary policy are taken by the organs of the ECB.
Distinction between ESCB and Eurosystem
A nuance is in order. The Eurosystem comprises only the NCBs of countries that have adopted the euro, i.e. currently 20 countries. This distinction arose from a practical necessity: some Member States have not adopted the single currency.
The term "Eurosystem" does not appear in the Treaty. It was created by the ECB's Governing Council to designate this more restricted group. This terminology has the merit of clarifying the situation.
Member States with a derogation
These states (Denmark, Sweden) retain their monetary sovereignty. They issue their own currency and conduct their own monetary policy.
Article 122 of the EC Treaty and Chapter IX of the Statute of the ESCB set out the rules governing the ESCB. They do not participate in decisions relating to the single monetary policy. Before leaving the EU, the United Kingdom benefited from a specific opt-out clause under Protocol 11.
2. Legal organisation of the ESCB
The central role of the ECB
The ECB, based in Frankfurt, is the keystone of the system. It centralises decisions, while execution is decentralised to the NCBs.
According to Article 107 of the EC Treaty, "the ESCB shall be governed by the decision-making bodies of the ECB". This model is reminiscent of the American federal organisation, but with specific European features.
Decision-making bodies
The ECB has three governing bodies.
Board of Governors brings together the six members of the Executive Board and the governors of the Eurosystem NCBs. It defines monetary policy and sets key interest rates. Article 10 of the Articles of Association states that its decisions are taken by simple majority, with the President having the casting vote in the event of a tie.
The Directoire comprises the Chairman, the Vice-Chairman and four other members. Appointed for non-renewable eight-year terms, they implement monetary policy according to the guidelines laid down by the Governing Council. This long term strengthens their independence.
General Council comprises the President and Vice-President of the ECB and the governors of all the EU's NCBs. It is a transitional body that will disappear once all Member States have adopted the euro.
Relations between the ECB and the NCBs
The NCBs are the operational arms of the system. Article 14.3 of the Statute subjects them to the "guidelines and instructions of the ECB".
The centralisation of decisions and the decentralisation of their implementation create tension. The NCBs retain their legal personality but must act in accordance with the ECB's decisions. Article 35.6 of the Statute provides for recourse to the CJEU in the event of non-compliance.
3. Legal status of the ECB
Independence and control
The independence of the ECB is a pillar of the system. Article 108 of the EC Treaty and Article 7 of the Statute clearly state that neither the ECB nor the NCBs may seek or take instructions from governments or European institutions.
However, this independence is not absolute. In its judgment of 10 July 2003 (Commission and Others v ECB, Case C-11/00), the CJEU specified that it is "functional" and limited to the performance of the ECB's specific tasks.
An inter-institutional dialogue exists. The President of the ECB presents an annual report to the European Parliament. Regular hearings are held before parliamentary committees.
Privileges and immunities
The ECB shall enjoy the privileges and immunities accorded to the European institutions by the Protocol on the Privileges and Immunities of the Communities.
These privileges include inviolability of premises and archives, tax exemption and certain immunities from jurisdiction. These protections guarantee its independent operation.
A recent ruling by the Court of Cassation on 12 May 2021 (no. 19-13.853) confirms the unseizability of central bank assets under article L. 153-1 of the Monetary and Financial Code. The Court ruled that this protection was compatible with the European Convention on Human Rights.
Capital and financing
The ECB's capital, initially set at €5 billion, is subscribed by the NCBs according to a key combining each State's share of the EU's GDP and population.
The ECB is endowed with foreign reserve assets by the NCBs of the Eurosystem. These reserves, currently totalling 50 billion euros, enable intervention on the foreign exchange market.
The income generated by these assets ensures the ECB's financial independence. Part of the surplus is paid into a reserve fund and the balance is distributed to the NCBs.
4. Litigation relating to the ESCB
Jurisdiction of the Court of Justice
Article 35 of the Statute governs ESCB litigation. The CJEU has jurisdiction over the acts and omissions of the ECB, as well as over the interpretation of its acts.
The division of jurisdiction between the CJEU and the national courts depends on the nature of the dispute. Actions against the ECB are heard by the General Court of the EU, with the possibility of an appeal to the Court.
Possible remedies
There are several types of recourse:
- Actions for annulment of ECB decisions (Article 230 of the EC Treaty)
- Action for failure to act in the event of abstention (article 232)
- Action for failure to fulfil obligations against an NCB (Article 35.6 of the Statute)
- Liability proceedings (Article 288 of the EC Treaty)
A specific procedure protects NCB governors. If an NCB governor is dismissed in breach of Article 14.2 of the Statute, the matter may be referred directly to the CJEU by the governor or by the Governing Council.
Recent case law
Recent case law sheds light on the contours of the ESCB.
In the OMT case (C-62/14, 16 June 2015), the CJEU validated the ECB's sovereign bond purchase programme. It ruled that it fell within the scope of monetary policy and complied with the principle of proportionality.
On the immunity of governors, the CJEU clarified in the LR Ģenerālprokuratūra judgment (C-3/20, 30 November 2021) that acts of fraud, corruption or money laundering do not benefit from immunity from jurisdiction as they are not carried out in an official capacity.
The EU General Court also censured the Eurosystem's supervisory framework in its judgment of 4 March 2015 (T-496/11) regarding the location requirement for CCPs.
Sources
- Treaty on the Functioning of the European Union, art. 119-135
- Protocol No. 4 on the Statute of the ESCB and of the ECB
- Monetary and Financial Code, art. L. 153-1
- CJEU, 10 July 2003, Commission v ECB, Case C-11/00
- CJEU, 16 June 2015, Case C-62/14 (LMO Programme)
- CJEU, 30 November 2021, LR Ģenerālprokuratūra, Case C-3/20
- Civ. 1st, 12 May 2021, no. 19-13.853
- EU General Court, 4 March 2015, Case T-496/11
- MONTAGNIER Gabriel, "Système européen de banques centrales et Banque de France", Répertoire de droit commercial, Dalloz, 2004
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