Ambiguity or Flexibility: The Poor Drafting of the Fiscal Compact Treaty

Within its core obligations, the Fiscal Compact Treaty fails to secure basic values such as clarity and predictability. It omits express explanation of certain fundamental issues, which I want to clarify in order to inform debate on the document. This is a text rich in ambiguity. How that ambiguity will be resolved is critical. The ‘No’ side will cite the ambiguity as the space from which austerity will be imposed. The ‘Yes’ side will try to show the ambiguity is rooted in concessions to make the text weaker and more flexible. If we as a nation do vote yes, it should not be a passive yes. We often deride the referendum process – but it helps to stop and closely examine the text, to find out points of concern and act to defend our interests. If the referendum campaign identifies genuine concerns, the government must take steps to mark out our interpretations, to build support for our interpretations.

It is clear that the drafters, so long familiar with the self-contained, uniquely self-perpetuating universe of European Union Law, have been passive in dealing with some key factors which emanate from the fact that this intergovernmental treaty. Its terms and interpretation will be guided by the rules of general public international law. I believe there are key omissions and ambiguities in the document, which actually offer opportunities to both the ‘Yes’ and ‘No’ sides in the forthcoming referendum campaign. There are two pretty standard clauses you would expect to be in here, that are not.

(1)    A clause regulating withdrawal from or revocation of the Treaty

(2)   A clause regulating the ability of parties to lodge reservations or interpretive declarations

No Withdrawal Clause: Can Ireland Walk Away in the Future or would that be a Breach?

As a matter of international law, are Parties to the Fiscal Treaty allowed to withdraw unilaterally? (I will park the domestic legal steps to any supposed future renunciation until we get the amendment wording). On political websites and in commentary, I keep coming across people saying ‘we’ll try the Treaty for the next decade or so while we need funds, we can always withdraw’. We should avoid hasty assumptions. The drafters have failed to provide for any express right to withdraw or exit from the Treaties. We must then turn to the general rules of public international law as to whether Ireland would breach the Treaty (and could be sanctioned by the European Court of Justice) if we withdrew. This situation is regulated by Article 56 of the Vienna Convention on the Law of Treaties:

1. A treaty which contains no provision regarding its termination and which does not provide for denunciation or withdrawal is not subject to denunciation or withdrawal unless: (a) it is established that the parties intended to admit the possibility of denunciation or withdrawal; or (b) a right of denunciation or withdrawal may be implied by the nature of the treaty.

2. A party shall give not less than twelve months’ notice of its intention to denounce or withdraw from a treaty under paragraph 1.

There is past experience of this in European Union treaty drafting. You may recall, that one of the more counterintuitive reasons the ‘Yes’ campaign used in support of the Lisbon Treaty was that it, for the first time, created an express legal right to withdraw from the EU, in Article 50 of the Treaty of the European Union. Prior to that you had to attempt to imply a right on the basis of the above Article 56 of the Vienna Convention. Note that the Lisbon addition gave an express right to withdraw from the EU, with no mention of leaving the European Monetary Union/the eurozone. I’ll come back to this point in a later blog where I’ll reflect point on the notion of whether ‘leaving the euro’ could be anything but a legally chaotic process.

Reflecting on the Aims and Nature of the Fiscal Treaty

If you read the Preamble of the Fiscal Treaty, it continually references how important the cause of monetary union is. Remember that the fundamental rule for approaching every provision in the Treaty is that it “…be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose”. At the international level, you apply both a literal meaning and a purpose-driven method of interpretation. A lot of people when they pick up an international treaty for the first time tend to regard the Preamble as some sort of flowery decoration, but there is a legitimate reason for it– to inform the interpretation of the operative Articles. If the European Court of Justice was called to rule upon Ireland’s attempted withdrawal from the Treaty, it would have to take into account the manner in which the purpose of the Treaty is directly linked to the survival of the supposedly irrevocable eurozone. For example, legal protocols for the transition to the third stage of monetary union expressly referred to the ‘irrevocable’ fixing of the conversion rates at which national currencies are to be exchanged for the euro.

There is also a long-established debate on whether the European Union treaties themselves were a conscious attempt to create a permanent union – with various articles of the Treaty endorsing the idea of “an ever closer union”. For example, the Treaty on the European Union Article 53: “this Treaty is concluded for an unlimited period”. The ECJ would have to take into account that this Treaty is expressly drafted with the intention of incorporating it into the larger (and supposedly permanent) legal framework of the Treaties on the European Union after five years. In court, to argue for the right of withdrawal, you would have to keep stressing this is not an EU treaty, but a wholly distinct public international one. But within its preamble the goals of the Treaty are described extensively as being to secure closer co-ordination within the euro area and contains language describing it as aimed at ensuring a lasting, sound and robust management of public finances. The word permanent is used in certain duties placed on states. Does this support the idea that it was intended to allow for a right to withdraw unilaterally?

The final thing which pushed me over the edge to write this blog, was when a colleague of mine reminded me of a statement President Merkel made at a January 30th/31st press conference following the announcement and publication of the text. She declared that the Treaty would be ‘eternally valid. The Open Democracy website notes these comments here. If we could source some video of Merkel’s statement (it’ll be in German) I would be grateful. Was Merkel attempting to say that it was not the agreed intention to allow a right of withdrawal under Article 56 and the Treaty is of a permanent nature?

There are some academic studies and judicial sources that Ireland could invoke to support a right to withdraw. Ironically, some of these supports come from the German Constitutional Court.  It had consistently stood up the right to unilaterally denounce even before Article 50 withdrawal was created by Lisbon. The Court held that sovereign states remained, ultimately, the Masters of the Treaties. Those cases were in the EU membership context of course, and it would be the philosophically distinct European Court of Justice that would decide on the right to withdraw for Ireland under the Fiscal Pact and the ESM – backed by the ability to punish us. A number of academics have tried to argue that there is a right to exit multilateral treaties under Article 56, within general international law, there is a co-ordinated guide on reservations by the International Law Commission here. Their arguments have met with the criticism that there is no consistent state practice of countries being allowed to renounce or withdraw due to the multilateral ‘nature’ of the Treaty.

Before I conclude this point, some people may have spotted that the Vienna Convention allows for the renunciation of a Treaty due to a fundamental change of circumstances. While this seems open at first look, its practical utility as a ground for withdrawal is limited to exceptional circumstances and is to be invoked sparingly as it has been viewed as a ‘threat it poses to the stability of treaties’. In the main case in the area, Hungary v Slovakia, an agreement to build a dam agreed between the two countries made during the terms of Cold War era governments was held to still bind their democratic, successor governments. Even though the project was now of dubious economic viability and arguably went against modern environmental standards, the agreement still stood, underlining how difficult it is to withdraw on this ground because of the supposed damage of an agreement to your economic sovereignty.

So is that it, can we expect to the No campaign fill their posters with ‘the eternal treaty’, ‘no going back – ever!’?? Well, perhaps not, as I see it, another omission in the drafting of the Treaty opens up way for Ireland to strengthen its hand in any future dispute and defend its right to withdraw.

The Right to Make Reservations and Interpretive Declarations

The second major omission from the Treaty is any provision addressing the right of states to make reservations and interpretive declarations.

A reservation can be defined as ‘a unilateral statement, however phrased or named, made by a State… [when ratifying a treaty]… whereby it purports to exclude or to modify the legal effect of certain provision of the treaty in their application to that State. A reservation essentially is an attempt to get out an obligation’ (Article 2, Vienna Convention on Law of Treaties)

Clearly, there are limits to their use, otherwise it would turn international law into ala carte dining. A reservation cannot be incompatible with the object and purpose of the treaty. So if you made a reservation saying we don’t recognize the debt brake rule obligation – this would not be allowed – the debt brake rule is core to fulfilling the purpose of the treaty. But I don’t think things are as clear cut if Ireland when ratifying the Treaty makes a statement such as ‘Ireland reserves its sovereign right to denounce this Treaty, [in certain listed circumstances], upon appropriate notice to all relevant Parties and EU institutions’ or ‘Ireland regards withdrawal, as permissible according to the nature of this treaty, as provided for in Article 56 of the Vienna Convention on the Law of Treaties’. It is interesting that it appears Bulgaria made a reservation on an unrelated matter when it signed (Ireland can place reservations when it ratifies). Now, any party to that Treaty would have a period of time to reject that reservation,more specific rules here, thus putting the onus on them to come out and attack our position. If someone did object, the ECJ would have to rule on whether Ireland’s reservation was contrary to the object and purpose of the Treaty. If we managed to attract support from as many other parties to the Treaty this would further solidify our argument for the right to withdraw.

If the State wanted to be more collaborative and less aggressive, it could make an interpretive declaration. An interpretive declaration is a declaration by a State as to its understanding of some matter covered by a treaty or its interpretation of a particular provision. Unlike reservations, an interpretive declaration merely clarifies the State’s position, and does not purport to exclude or modify the legal effect of a treaty. However, it lays down clearly what you believe the text mean, and any court would have to address your (non-binding) declaration in its consideration of the issues. Furthermore, your statement can attract support from other similarly minded countries, a way of illustrating further support for your overall argument that it was not the intent of the negotiating parties to exclude withdrawal.

Such steps could also be considered wherever there is ambiguity in the terms, such as ‘structural deficit’ and ‘severe economic downturn’. These are terms which have already been the subject of Commission reflection and inter-state negotiation, but will now, under this Treaty, may become the subject of  binding court judgments. Throughout the next months, we must mount sharp supervision of how the European institutions and the other Parties to this Treaty view and interpret its contents. If may be that, as the Irish Times state, the Irish Government faces ‘an enormous challenge’ to succeed in the referendum, from their perspective, perhaps action to cure some of the many ambiguities is what is required.


I’ll be returning to the ambiguous nature of the duties we are signing up to, the compatibility the roles assigned to the ECJ and the Commission with the EU Treaties and other issues in later blogs. I’m happy to hear any discussions on issues our readers have identified, just use the comments section below to submit questions.

Ambiguity or Flexibility: The Poor Drafting of the Fiscal Compact Treaty

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