Events in Eastern Europe have yielded some sharp practice relating to the interaction of IMF requested austerity measures and national Constitutional Courts. While these decisions belong to distinct constitutional traditions, they embody underlying debates surrounding the judicial role, the influence of the IMF and the diminution of sovereignty in a global age.

The Latvian Constitutional Court State Pensions case of the 21st December 2009 considered the constitutional implications of government pension taken while under International Monetary Fund financing. The case originated in a constitutional complaint from over 9,000 pensioners against a law which decreased the amount received by current pensioners by 10% and that by future pensioners who were currently employed by 70%. The Government relied upon the emergency nature the measure as signaled by the involvement of the IMF. The applicants relied upon inter alia, the right to property under Article 105 of the Latvian Constitution (“…property rights may be restricted only in accordance with law. Expropriation of property for public purposes shall be allowed only in exceptional cases on the basis of a specific law and in return for fair compensation”), and Article 109, which provided for a right to social security in old age.

The Court found the law unconstitutional and in violation of an individual’s right to a pension because Parliament had not considered other less restrictive alternatives, had not provided an adequate transition period before the law came into effect and there was no plan for future compensation. Regardless of socio-economic nature of the right, it held that minimum essential levels must be guaranteed irrespective of resources and that pensioners were a vulnerable group who should be protected. It found that the IMF and other international creditors had not expressly demanded the reductions in pension funds, and that Ministers were responsible for the course of action. It noted however, that even if the conditions had been externally imposed, those conditions “cannot replace the rights established by the Constitution’. In a similar case, the Romanian constitutional court provoked enormous upheaval by overturning a proposed 15% cut in pensions, a decision which effectively added 1% Romanian GDP back into debt calculations. Both courts have, however, also regularly found other austerity measures constitutional, in decisions monitored and speculated upon by the international markets. The Romanian case forced the delay of the country’s scheduled IMF review on the ground that alternative means had to be identified.

To inject a heavy dose of constitutional realism and precedent, the substantive applicability of these cases to Ireland is minimal. Our Supreme Court has laid out very firmly its position in relation to socio-economic rights, and the respect it accords to legislators. A body of precedent has built up around the creation of retrospective laws and strong deference to the legislature in the examination of emergency legislation. However, the reasoning of the case touches upon the continuing demands of the rule of law, in particular the continuing duty of our legislators to consider fully the range of alternatives and the proportionality of interference.

The Eastern Europe experience also underlines increasing political tensions around the conception of the judicial role and the need for oversight. In Hungary, the constitutional court struck down several laws as unconstitutional, including a 98% tax on public sector severence pay packages worth more than 7,275 euros. The ruling suggested that the Court might take issue with more significant measures such as new surtaxes on businesses. The government then passed a constitutional amendment by two thirds parliamentary vote, which allows the Constitutional Court the power to annul laws affecting the budget, the implementation of the budget, central taxes, contribution payments and duties only if they violate the right to life and dignity, the right to protect personal data, the freedom of thought, conscience and religion, and rights connected to Hungarian citizenship. The Constitutional Court can still declare laws outside of this unconstitutional, but cannot annul them. In proposing the amendment, the majority leader in Parliament commented that ‘if the people cannot decide on an issue then the constitutional court does not have the right either’.

The bluntness of such a shared disempowerment, turned me to thinking about the provocative (just to register my non-endorsement of parts of it!) book by Professor Ulrich Beck, Power in the Global Age, where he argues that more attention must be paid to the trans-legal power of global capital markets, the dynamics of international economic competition and international actors such as the IMF. Beck reflects on the vulnerability he sees hidden within Article 20(2)(1) of the German Constitution:

All State authority rests with the people.

He argues that the impact of globalization and new forms of transnational power has simply diminished the scale of ‘state authority’. For our purposes, he notes the marginalization of national legal institutions, due, firstly, to the ability of international capital to exploit cooperative advantages and hidden niches of different national legal systems for purposes of expanding global business power. This was seen, for example, in the downward pressure exerted on financial and banking regulation throughout the past decade. Secondly, he argues that global actors also boast a new form of transnational law making power:

…the power to make laws, the authority over authority – in other words, the right to decide who may decide about what in a binding way – no longer lies with the ‘sole legitimate’ power of the state. Instead, forms of divided sovereignty come into being – divided between states and global business actors and organizations.  This means that, in the context of the private global economy, new organizational forms of non-public power are being created, a power that stands above sovereign states without itself making any claims to state sovereignty, yet still having a partial degree of law-making power…

This de-territorialised economic power requires neither political implementation nor political legitimacy. In establishing itself, it even bypasses the institutions of the developed democracies, including parliaments and courts. This meta power is neither legal nor legitimate; it is “translegal“. But it does alter the rules of the national and international system of power…The word “globalisation” stands for the organized absence of responsibility.”

The eventual creation of the Memorandum of Understanding with the IMF, is another instance of the transfer of state authority into a global sphere dominated by soft law and economic incentives. We speak often of the Separation of Powers, without remembering that, in geopolitical reality, it is a Separation of Diminishing Powers. This is what tumbles out of answering ‘yes’ to the New York Times’ question: Can a Bank Destroy a Nation? Ultimately, we need to work out precisely how Ireland wants to relate to international law and international institutions that can help put a brake on the diminution of the authority of the State by preventing the translegal undermining of the ideals of our Constitution and ensure re-empowering the people to genuine choice in law-making.

A really accessible summary of Beck’s arguments is available here

Addendum to Monday’s Post: Last Monday I discussed the need for a Dáil vote on the IMF Memorandum of Understanding. Further reading has thrown up an interesting judgment from Thailand in 1997, whose Constitution also requires a vote for the conclusion of international agreements. The Court ruled the IMF letters of intent and memoranda were not treaties, as internationally defined, because they were unilateral documents from the Thai government with no rules for enforcement or provisions for penalty review.  Moreover, the IMF itself had devised special wording to indicate that its correspondence with member states were not contractual agreements. We do need to see the Memorandum itself, especially to see whether any of the unilateral statements within it could ground an estoppel under international law – thus causing the agreement to have a legally binding nature and perhaps require a Dáil vote. (Professor Clive Symmons has written about the importance of considering this estoppel point when analysing the reasoning of the Supreme Court in Boland v An Taoiseach case).