The Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union is unlawful

Last January the EU leaders agreed on the final wording of the inter-governmental Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. Hence, as expected, on 2 March, the leaders of 25 EU Member States signed the treaty. Only the United Kingdom and the Czech Republic have not signed it. It should be bear in mind that the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union is a non-EU treaty but it confers functions on EU institutions, particularly the European Commission and the European Court of Justice. This treaty is, therefore, in breach of the European rule of law and that was the reason why Bill Cash requested to the Speaker of the House of Commons to grant an emergency debate in Parliament to discuss the action that should be taken by the Government in protecting UK interests in relation to this treaty. Bill Cash was successful in his request, and the debate took place on 29 February ahead of the European Council. Bill Cash said, “The rule of law is inseparable from democracy, which, based on freedom of choice, leads to the making of law through general elections in line with the wishes of the voters.” However, he noted, “Unfortunately, the European Union, despite its much-vaunted claims and aspirations, has increasingly departed from democratic principles and from the rule of law in the pursuit of ideology.”

The European Council President, Herman Van Rompuy, said, at the signing ceremony, that the Treaty “constitutes an important step in re-establishing the confidence in our Economic and Monetary Union.” According to Mr Van Rompuy “once this Treaty enters into force, its effects will be deep and long-lasting.” Moreover, according to José Manuel Barroso “The treaty is an important part in our global strategy to restore stability in our European finances,”. He also said “This treaty represents the very culture of financial stability that is the pre-requisite for a true economic union.” However, this treaty will do nothing to resolve the present debt crisis, which, in fact, is getting worse. Wolfgang Münchau, Douglas McWilliams and Roger Bootle in their evidence to the House of Commons European Scrutiny Committee’s inquiry Possibilities for Reinforcing the Eurozone following the December European Council, agreed that this treaty does not resolve the present crisis. They believe that the fiscal compact won’t achieve its objective of helping to save the eurozone immediate problems. In fact, Greece is not far from default, Portugal's sovereign debt situation is escalating, and a huge recession is on the cards for Europe. But the problem is not just the financial markets, but also social unrest. Citizens have been demonstrating against austerity measures and general strikes have been taking place all over Europe. As Bill Cash said “This Treaty of itself will not solve the root problems of the EU but will make them worse by cutting off the democratic oxygen of the voters who choose their governments in general elections and who decide what kind of economy and democracy they want for good or ill.”

According to Angela Merkel the eurozone member states have set themselves on an “irreversible course towards a fiscal union”. Moreover, Angela Merkel said in Davos “We have to become used to the European Commission becoming more and more like a government.” However, the answer is not “more Europe”, in fact as more Europe we have as worse become the situation. As Bill Cash pointed out “all we hear is demands by the Euro-establishment for more Europe and more integration, all of which will lead to less peace and prosperity, more chaos and more riots and disorder.”

The eurozone Member States would no longer be responsible for a great range of domestic economic policies. The so-called fiscal compact is the beginning of the end of budgetary sovereignty for eurozone member states. They will lose control over their financial and economic affairs. Member States further surrender of their national sovereignty is a recipe for failure. It remains to be seen how southern countries would be able to cope with Germany’s budget discipline. However, eurozone citizens have not been asked whether they accept a fiscal and political union with an economic policy imposed by Germany. Only Irish voters will have a say on this Treaty through a referendum. As Martin Callanan MEP, Chairman of the European Conservatives and Reformists group, noted “(…) an electorate's ability to vote for a high spending Keynesian economic policy is effectively being removed from them.” Moreover, he said “This pact is effectively rendering all elections null and void across much of Europe.”

It is important to note that Professor Simon Hix, in his written evidence submitted to the European Scrutiny Committee, pointed out that due to the fiscal compact “decisions at the European level will now have direct consequences on national taxing and spending policies, and the distribution of wealth between different groups in society and between member states” which “raises the issue of the lack of legitimacy of European integration to a new level.”

It has been said that the new rules enshrined in the Treaty do not contradict the EU's existing rules. Article 2 has subjected the treaty to EU law, whereby the contracting parties are required to “applied and interpreted” this treaty “in conformity with the Treaties on which the European Union is founded, in particular Article 4(3) of the Treaty on European Union (principle of sincere cooperation), and with European Union law, including procedural law whenever the adoption of secondary legislation is required.” Moreover, Article 2 (2) reads, “The provisions of this Treaty shall apply insofar as they are compatible with the Treaties on which the Union is founded and with European Union law. They shall not encroach upon the competences of the Union to act in the area of the economic union. (…)” David Cameron said, “It is not an EU treaty, because it does not amend EU law; it is not a treaty within all of the treaties of the EU”. He mentioned Article 2 and stressed, “this treaty is outside EU law (…)” Nevertheless, this does not mean that there is no overlapping between this treaty and EU’s law. In fact, this overlap might have adverse consequences, as Professor Craig noted, “there are going to be real problems about transparency and clarity of the legal provisions that are going to be applicable in any particular instance.” Moreover, there are some provisions of the treaty, which are inconsistent with the EU treaties.

It is well known that under Article 48 TEU any amendments to the Treaties must be agreed unanimously and ratified by all Member States. Hence, amendments to the treaties are impossible without the agreement of the UK. Professor Craig has stressed that the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union “It is not an EU treaty in the sense that it does not in any legal way modify the primary rules presently contained in the Lisbon Treaty. Unanimity is required for that and there is not unanimity.” They decided to go through the route of an intergovernmental agreement consequently the Treaty should have been agreed and implemented outside of the EU structures. However, as James Clappison MP pointed out “Although it is said to be an international agreement, it is not an EU treaty and it will not describe itself as such, but the EU runs through it like a golden thread.” He noted “It is as if the EU has come up against an obstacle in proper legal procedure and just decided to ignore proper legal procedure and go its own way;” In fact, Herman Van Rompuy said “Regrettably, it proved not possible to achieve our objectives via a regular revision of the EU Treaty, so we are working outside of it. Yet everything has been done to bring in the guarantees and qualities which only the EU's institutional actors can provide, in particular the European Commission and the Court of Justice.”

It is important to note that the eurozone member states can negotiate a treaty regarding an area outside the EU’s exclusive competence but they cannot breach EU law. Further powers over Member States’ budgets cannot be conferred beyond that which is foreseen in the Treaty for the EU institutions. In fact, any intergovernmental agreement changing the rules concerning the powers of the EU institutions is not possible without the consent of all Member States to amend the Treaties. Such Treaty cannot be subject to EU legislative procedures or to the EU institutions legislative control. The EU institutions legally cannot have a formal role in any agreement outside the EU treaties.

The treaty has been drafted in order to give the idea that the EU institutions would only be involved in actions and procedures that they already have under the EU treaties, that they would only act within the framework of the EU Treaties, particularly Articles 121, 126 and 136 TFEU. According to Professor Craig such statement “cannot in itself determine the issue of whether those Articles of the TFEU are indeed capable of being used in this way in the SCG Treaty.” Professor Craig also believes that it is not possible to give “through a treaty of this kind, new powers to the institutions.” However, the EU institutions will be used in new procedures and would exercise new powers created by the treaty. Professor Paul Craig has also noted that the treaty has been drafted on the assumption that there is no “legal difficulty in EU institutions using their existing functions under the Lisbon Treaty and legislation made there under in the context of the SCG Treaty.” However, he does not share the view that “provided that the SCG Treaty can be construed so as not to entail the grant of new functions/powers to EU institutions then it is not problematic in this respect.” According to Professor Craig there are different meanings of “existing powers” exercised by the EU institutions within the terms of this treaty. He noted that the “wording of the SCG Treaty is mixed” between two different interpretations of “existing power”: “the idea that an EU institution, such as the Commission, will exercise existing power in the Lisbon Treaty/EU legislation in the context of the SCG Treaty” and the idea “that an EU institution such as the Commission exercises a power under the SCG Treaty that is analogous to that which it possesses under the Lisbon Treaty/EU legislation.” According to Professor Craig both are “legally problematic.” He pointed out “The fact that a power is recognized in the Lisbon Treaty or EU legislation does not per se legitimate recognition and use of the same power in a different institutional context, viz under the SCG Treaty.” He takes the view “Whether any particular power granted to an institution under the Lisbon Treaty or EU legislation can be used in a different Treaty context must depend on interpretation of the relevant EU Treaty provision or EU legislation to sustain the conclusion that it can be used in this manner.” Moreover, Professor Craig believes “The fact that an EU institution has power pursuant to the Lisbon Treaty or EU legislation to do certain things, cannot per se legitimate use of an analogous power pursuant to a different Treaty.”

The drafters of the intergovernmental treaty have stretched the EU Treaties and pushed to the limit the involvement of the EU's institutions in the operation of the new fiscal compact. Unsurprisingly, Brussels has used its usual legal tricks.

As above-mentioned, being intergovernmental, this treaty must be formed outside the EU's existing Treaties and cannot be part of EU law. It will be legally binding as an international agreement. However, the preamble to the draft treaty includes a reference to the eurozone leaders and of other Member States of the EU to “incorporate the provisions of this Treaty as soon as possible into the Treaties on which the European Union is founded”. Moreover, at the European Parliament request, the Treaty also includes a provision, Article 16, which reads “Within five years at most following the entry into force of this Treaty, on the basis of an assessment of the experience with its implementation, the necessary steps shall be taken, in compliance with the provisions of the Treaty on the European Union and the Treaty on the Functioning of the European Union, with the aim of incorporating the substance of this Treaty into the legal framework of the European Union.” There is, therefore, a clear aim of incorporating this treaty into EU legal framework within five years of its entry into force. In fact, that is a certainty for Angela Merkel and José Manuel Barroso. It is important to mention that Herman Van Rompuy said, last Friday, “The so-called "repatriation clause", committing us to take steps to incorporate the substance of this Treaty into Union law five years after its entry into force, clearly sets the direction.”

According to Professor Craig “Article 16 contains a commitment by the existing 25 who signed up to this treaty that they will, at least by the end of five years, try to incorporate these provisions into the ordinary primary law, which is the Lisbon Treaty.” He stressed that “They cannot achieve it unless there is unanimity, so it depends on what the UK and the Czech Governments decide in five years’ time.” According to Martin Howe nothing removes the UK veto, as unanimity and ratification are required to amend the treaties.

It is important to recall that the 2005 Prüm Convention, agreed by a group of EU member states outside the EU framework, contained a clause stipulating “Within three years at most following entry into force of this Convention, on the basis of an assessment of experience of its implementation, an initiative shall be submitted, (…), with the aim of incorporating the provisions of this Convention into the legal framework of the European Union.” Then, in 2007, the Council Decision on the stepping up of cross-border cooperation, particularly in combating terrorism and cross-border crime, incorporated in the framework of the EU the main provisions of the Prüm Treaty.

The clause contained in the draft treaty above-mentioned, is very similar to the one included in the Prum Convention. There is no reference to incorporate the treaty into the EU treaties but into the EU legal framework, which would be done trough secondary legislation, as happened with the Prüm Convention. The incorporation of this treaty into the EU treaties would, obviously, entail a treaty change, which, accordingly, requires the agreement of all member states, including the UK. Bill Cash asked the Prime Minister “Will he give us his assurance that never, while he is Prime Minister, will we fold this non-EU treaty into the treaties as a whole?” David Cameron replied saying “(…) this treaty cannot be folded back into the EU without the agreement of every EU member state. We did not sign this treaty, because we did not get the safeguards that we wanted, and that position absolutely remains.” The Government would not change its position by agreeing to the incorporation of the new treaty into the EU Treaties. However, the aim is to integrate provisions of the draft treaty into the EU legal framework via secondary legislation. This would be, therefore, an attempt to bypass the UK veto.

According to David Cameron “(…) the treaty itself is clear that it has to be in line with EU law; it cannot override it, and it cannot get into areas such as the single market.” The negotiators have attempted to align as much as possible the draft treaty provisions with those provided in EU law. The Treaty was cautiously drafted so as to involve the EU institutions only in procedures and activities they already have under the EU Treaties, which according to Professor Craig is also “legally problematic.” Nevertheless, the contracting parties have accepted obligations, which contradict their obligations under the EU Treaties, and there are provisions in the text, which confer new powers for the EU institutions. Consequently, those provisions breach EU law. It is important to mention that Sir Jonathan Cunliffe, Britain's Permanent Representative to the European Union, in a letter to the Secretary-General of the Council of the European Union recording the UK position set out by the Prime Minister at the last January’s European Council on the Treaty, said that the Government “notes that the EU institutions must only be used outside the EU Treaties with the consent of all Member States, and must respect the EU Treaties.” Moreover the letter reads, “In view of the United Kingdom’s continuing concerns on these points we must reserve our position on the proposed treaty and its use of the institutions, in particular in Article 3 (2), Article 7 and Article 8.”

The treaty is aiming at forcing eurozone countries with high debt levels to bring their budget deficits down. Article 3 of the Treaty provides that “The Contracting Parties shall apply the following rules, in addition to and without prejudice to the obligations derived from Union Law”. Under Article 3 (1), “The budgetary position of the general government shall be balanced or in surplus.” Such rule, “shall be deemed to be respected if the annual structural balance of the general government is at its country-specific medium-term objective as defined in the revised Stability and Growth Pact with a lower limit of a structural deficit of 0.5 % of the gross domestic product at market prices.” This target is more stringent than the 1% deficit rule foreseen in the existing EU legislation. According to Professor Craig “The difference between the obligations imposed pursuant to these measures and those already contained in the EU Treaty plus the package of 2011 legislation is not very significant.” Nevertheless, it is possible to argue that the balanced budget rule goes beyond what has already been agreed under EU law. Moreover, under the Treaty “The Contracting Parties shall ensure rapid convergence towards their respective medium-term objective.” Furthermore, article 3 (1) (b) states “The time frame for such convergence will be proposed by the Commission taking into consideration country-specific sustainability risks.” Under the Treaty, in case of deviation from the balanced budget rule, a correction mechanism would be triggered automatically. Article 3 (1) (e) stipulates, “In the event of significant observed deviations from the medium-term objective or the adjustment path towards it, a correction mechanism shall be triggered automatically.” Moreover, under Article 3 (2) the contracting parties will have to “put in place a correction mechanism to be triggered automatically in the event of significant deviations from the reference value or the adjustment path towards it” which would be defined at national level, on the basis of “common principles to be proposed by the European Commission”. One could say that the contracting parties, under such provision, are making use of the European Commission for purposes not provided in the EU Treaties. According to Professor Craig “Article 3(2) SCG is framed in terms of the Commission devising principles concerning corrective action that may be analogous to those in EU legislation, but does not directly seek to use such powers” but it “does not in itself legitimate use by the Commission of analogous powers pursuant to Article 3(2) of the SCG Treaty.” It is important to note that, according to Sir Jonathan Cunliffe, the Government has also concerns over the use of the EU institutions as provided in Article 3 (2).

Originally the contracting parties would have been obliged to enshrine the "debt brake" in their constitutions. However, several countries, including Denmark and Ireland have indicated that they would have to hold referenda in order to change their constitutions to include the so-called golden rule on balanced budgets. This provision has been, therefore, watered down. Under the terms of the Treaty, although it is recommended, it is no longer a requirement that this rule on balanced budgets be introduced into the constitutions of the contracting parties. Hence, Article 3 (2) reads “The rules mentioned under paragraph 1 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.”

Under Article 5 of the Treaty, a contracting party that is subject to an excessive deficit procedure would have to submit to the European Commission and the Council “a budgetary and economic partnership programme including a detailed description of the structural reforms which must be put in place and implemented to ensure an effective and durable correction of its excessive deficit.” The drafters of the treaty have sought to align this provision with EU law so the involvement of the EU institutions concerns to activities and procedures that they already pursue under the EU Treaties. Hence, the Treaty provides “The content and format of such programmes shall be defined in European Union Law. Their submission to the Council of the European Union and to the European Commission for endorsement and their monitoring will take place within the context of the existing surveillance procedures of the Stability and Growth Pact.” It seems that existing EU law would apply to the endorsement and monitoring of the so-called budgetary and economic partnership programmes. Nevertheless, it remains to be seen what the term “endorsement” would entail. Moreover, Article 5 (2) reads “The implementation of the budgetary and economic partnership programme, and the yearly budgetary plans consistent with it, will be monitored by the Council of the European Union and by the European Commission.” There is no reference to EU legislation providing for such role to the European Commission and the Council. It is, therefore, possible to conclude that this provision confers a new role upon these EU institutions.

It is important to recall that, last November, the European Commission put forward a proposal for a regulation on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member states in the euro area which provides for similar rules. Under this proposal, eurozone member states would be required to submit annually to the Commission and the Eurogroup their draft budgetary plans for the forthcoming year for monitoring purposes before the plans being submitted to national parliaments. The Commission would be empowered to request a revised draft budgetary plan from Member States that have failed to comply with the obligations laid down in the Stability and Growth Pact. As Professor Simon Hix noted “the Commission does not have a sufficiently democratic mandate to pass judgement on national budgetary discipline.” The Commission has not legitimacy to intervene in member states’ matters in this way, nevertheless the Eurozone leaders called for a speedy approval by the Council and the European Parliament of the Commission proposal. In fact, on 21 February, the Council agreed a general approach on the so-called Economic governance – Second package ("Two-pack"), giving therefore a mandate for the Danish presidency to start negotiations on behalf of the Council with the European Parliament. According to the ECOFIN’s conclusions “The aim is to adopt the regulations in first reading, before the end of the Danish presidency.”

Moreover, the Treaty provides in Article 6 "With a view to better coordinating the planning of their national debt issuance, the Contracting Parties shall report ex-ante on their public debt issuance plans to the Council of the European Union and to the European Commission.” It is important to stress that the international agreement cannot bind the EU institutions therefore it remains to be seen what the Commission and the Council will be required to do with the information above-mentioned. Nevertheless, the European Commission is already planning to put forward legislative proposals within the EU Treaties framework, regarding a mechanism of ex ante reporting of debt issuance plans of the EU Member States.

Under the Treaty, the eurozone contracting parties “commit to supporting the proposals or recommendations submitted by the European Commission where it considers that a Member State of the European Union whose currency is the euro is in breach of the deficit criterion in the framework of an excessive deficit procedure.” There is, therefore, a clear and binding commitment to automatically accept Commission recommendations. The contracting parties can only reject the Commission proposal to place deficit countries under the excessive deficit procedure, when a qualified majority of eurozone contracting parties, “calculated by analogy with the relevant provisions of the Treaties on which the European Union founded”, without taking into account the position of the state concerned, is opposed to it.

The EU Treaties required qualified majority to support sanctions but not a qualified majority to stop them. This provision also goes beyond what is presently required under the so-called six-pack on economic governance, as reverse qualified majority voting is extended to all Excessive Deficit Procedure, including the preventive arm. According to Professor Paul Craig “There are circumstances under the Lisbon Treaty and EU legislation where reverse QMV applies, but Article 7 is not expressly based on such provisions,” hence “the SCG Treaty contains an institutional power that is analogous to that in the existing Lisbon Treaty/EU legislation.” Nevertheless, one could say that this is a new procedure. According to David Lidington, Minister for Europe, the government is concern with “the potential this might have for a precedent possibly being set for the use of this mechanism in other areas of the European Union treaties.”

The European Court of Justice has made clear that an international agreement cannot affect the allocation of responsibilities defined in the Treaties and, consequently, the autonomy of the Community legal order. The EU institutions legally cannot have a formal role in any agreement outside the EU treaties. The EU institutions were created by the EU treaties, which conferred upon them powers and duties. David Cameron rightly said, “The institutions of the European Union are the European Union, the 27. They are there to do the things that are in treaties that we have all signed up to over the years. That is an important protection for Britain." The role of the EU institutions is not only defined by the European Treaties but is limited by those Treaties and it would be unlawful for an institution to operate beyond the powers granted to it by the Treaties. According to Professor Craig “It would therefore be wrong if a Treaty other than the Lisbon Treaty could confer new powers or functions on the EU institutions.” He believes that it “would be contrary to the existing Lisbon Treaty and to legal principle” if “the SCG Treaty can confer new functions on the EU institutions”.

The main issue, during the negotiations, was whether the contracting parties are allowed to use the EU institutions to implement, monitor and enforce compliance with the draft treaty’s rules. One of the legal grounds for the use of the EU institutions outside the EU legal framework is based on a European Court of Justice ruling from 1993 on humanitarian aid to Bangladesh. The ECJ has ruled that Member States can act collectively outside the framework of the EU Treaties and that they can confer powers upon the EU institutions. However, these joined cases C-181/91 and C-248/91 involve “collective action”, there was, therefore, a unanimous decision of all member states in this regard. Therefore, it is possible to conclude that a group of member states cannot confer any role or further powers to the EU institutions, through an intergovernmental treaty, outside the EU framework, without the approval of all EU member states. According to Professor Paul Craig “These decisions are distinguishable in several respects from what is occurring pursuant to the SCG Treaty. Suffice it to say for the present that it would be a very significant extension of the reasoning therein to apply it to the instant circumstance.”

The Treaty establishing the European Stability Mechanism (ESM) also employs the European Commission and the European Central Bank to monitor the memoranda of understanding, however, it is important to note that there was an agreement among all EU member states to involve the EU institutions.

According to the Preamble to the treaty “the obligation to transpose the "Balanced Budget Rule" into national legal systems through biding and permanent provisions, preferably constitutional, should be subject to the jurisdiction of the Court of Justice of the European Union, in accordance with Article 273 of the Treaty on the Function of the European Union.” Hence, the legal basis used by the drafters to give jurisdiction to the Court under the draft treaty to verify the contracting parties compliance with their obligation to give effect to the balanced budget rule is Article 273 TFEU. Under Article 273 TFEU Member States are allowed to give powers to the ECJ to settle dispute between them in a special agreement relating to the subject-matter of the EU Treaties. However, the negotiators are making an extensive interpretation of this provision. Article 8 goes far beyond as a clause that intends to settle disputes between contracting parties, as foreseen in article 273. Article 8 of the treaty, by conferring jurisdiction upon the Commission and the ECJ as regards the obligation of the contracting parties to enshrine the balanced budget rule into national law, involves the use of the EU institutions in a way that breaches the EU Treaties.

Under the treaty, the Court would have competence to verify whether the contracting parties have put in place provisions complying with Article 3(2), whether they are biding and if there is a ‘correction mechanism”. The obligation to give effect in national law to the balanced budget rule is not an obligation under EU law. It is important to note that the European Court of Justice, without amending the treaties, cannot strike down national laws that conflict with such rule.

Under Article 8 (1) of the treaty “The European Commission is invited to present in due time to the Contracting Parties a report on the provisions adopted by each of them in compliance with Article 3(2). If the European Commission, after having given the Contracting Party concerned the opportunity to submit its observations, concludes in its report that a Contracting Party has failed to comply with Article 3(2), the matter will be brought to the Court of Justice of the European Union by one or more of the Contracting Parties.” Moreover, “(…) where a Contracting Party considers, independently of the Commission's report, that another Contracting Party has failed to comply with Article 3 (2), it may also bring the matter to the Court of Justice.”

The treaty just signed has conferred even more powers on the European Commission than previous drafts. The referral to the ECJ is no longer reserved to the contracting parties as foreseen on the first draft, but it has been indirectly extended to the Commission. The Commission no longer needs to be invited by contracting parties but is authorized, under the treaty, to issue a report on the provisions adopted by each contracting party in compliance with Article 3(2). The European Commission would be allowed to assess whether the contracting parties have properly implemented the balanced budget rule and to ask a country that has incorrectly incorporated such rule into its national law to give an explanation. Then, if the Commission is not satisfied and believes that a contracting party is in breach of Article 3 (2), the other contracting parties are obliged to refer the case to the ECJ. The contracting parties accepted therefore an obligation to bring the matter to the ECJ when the Commission finds that another contracting party has failed to comply with the article 3 (2) of the draft treaty.

As noticed by Professor Paul Craig “Article 8 in its current formulation gives the Commission the ‘trigger’ as to whether a legal action should be brought.” Moreover, he said “If the Commission produces a negative report on a particular contracting state, this triggers a mandatory obligation on one or more of the other contracting parties to bring the recalcitrant state to the ECJ.” In fact, he stressed “Not only is there a mandatory obligation, there is no doubt whatsoever that the substance of the legal argument would be the negative report by the Commission.” Consequently “the Commission is still ‘bringing’ the action.”

The Commission cannot take the contracting parties to the ECJ if they don’t comply with Article 3 (2) of the treaty. It is important to note that Article 273 TFEU does not foresees other forms of jurisdiction of the Court, namely infringement procedures brought by the Commission. It is also important to note even if those member states are allowed to use the EU institutions they cannot act against the treaties. For instance, the Treaties provide that the Court of Justice has no jurisdiction over the excessive deficit procedure. Article 126 (10) specifically excludes the launch of infringement procedures against member states who fail to comply with decisions taken under the excessive deficit procedure. The Commission cannot, without amending the treaties, initiate infringement proceedings against a Member State for having an excessive deficit and then ask the Court of Justice to impose fines on the Member State concerned. According to Professor Paul Craig there is a “tension between Article 8 SCG and Article 126(10), which precludes Commission enforcement actions under Articles 258-259, in relation to the subject matter of Articles 126(1)-(9) TFEU.”

Under Article 273 the ECJ has jurisdiction for settle disputes between member states, but no role is foreseen to the European Commission. The draft treaty does not allow the European Commission to directly take contracting parties to the ECJ as this would be a clear breach of the EU treaties, but it still plays a considerable role. The European Commission would be allowed to decide whether a country should be taken to the ECJ. This is another legal trick to overcome the EU treaties and provide the European Commission with a role on this matter – whether to take contracting parties to the ECJ. As Professor Paul Craig said “If Article 273 cannot accommodate enforcement actions brought directly by the Commission, we should not allow this injunction to be circumvented by devices that render a contracting state the ‘formal plaintiff’, when the imperative to bring the action and the substance of the argument to be made are determined by the Commission.”

In the history of the European Union there is only few cases of one Member State bringing an action before another in the ECJ. One can therefore conclude that it would be very unlikely member states taking each other to the ECJ under Article 8. In fact, as Professor Paul Craig pointed out “ If inter-state actions were the only way to invoke the ECJ’s jurisdiction under the SCG Treaty then it would in practice remain a dead letter” which “explains the Commission’s role as defined in the first half of Article 8 and the efforts made by the drafters to square this with the precept that the Commission cannot itself bring a legal action under Article 273.”

Under Article 273 only a Member State may be an applicant before the Court of Justice, having the Commission involved is incompatible with Article 273TFEU. Article 8 (1) of the treaty, confers additional powers upon the Commission, which would be allowed to participate in proceedings that go beyond those which already exist under the EU Treaties. In this way the contracting parties would be allowed to make use of the Commission for purposes, which are outside the scope of EU treaties, breaching, therefore, EU law. According to Professor Paul Craig is not lawful for this treaty to prescribe such a role to the Commission.

The treaty also reads, “The judgment of the Court of Justice of the European Union shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by said Court.” This is not provided in Article 273, but the Court’s jurisprudence makes clear that its rulings must always be binding. Under Article 260 “If the Court of Justice of the European Union finds that a Member State has failed to fulfil an obligation under the Treaties, the State shall be required to take the necessary measures to comply with the judgment of the Court.” Hence, if a member state does not comply with a judgment of the Court, the Commission may bring the case before the Court. If the Court finds that the Member State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it. The treaty provision is similar to Article 260 TFEU whereby the member states are required to comply with the ECJ judgments but if a Member State fails to comply with an ECJ’s ruling pursuant to Article 8 of the treaty, the Commission cannot bring the matter before the Court and ask for fines to be imposed. The ECJ cannot fine countries if they do not comply with such judgments, as foreseen in the EU Treaties. However, according to the Preamble to the treaty “Article 260 of the Treaty on the Functioning of the European Union empowers the Court of Justice of the European Union to impose the payment of a lump sum or penalty on a Member State of the European Union having failed to comply with one of its judgments.”

Moreover, Article 8 (2) provides, “Where, on the basis of its own assessment or that of the European Commission, a Contracting Party considers that another Contracting Party has not taken the necessary measures to comply with the judgment of the Court of Justice referred to in paragraph 1, it may bring the case before the Court of Justice and request the imposition of financial sanctions following criteria established by the Commission in the framework of Article 260 of the Treaty on the Functioning of the European Union.” According to the Legal Counsel of the Council opinion “The analogy between this Article and draft Article 8(2) could be further guaranteed by adding a mention, both in the recital and in the Article of the draft, to the criteria established by the Commission for the determination of the lump sum or the penalty to be paid in the framework of Article 260 TFEU.” It noted, “This would ensure that the request compares with what the Commission would do in a similar situation, and that an identical methodology is followed,”. This advice has therefore been followed. However, this is another legal trick, as under article 273 TFEU the European Commission cannot seek to impose upon contracting party penalties in accordance with Article 260 TFEU.

At Germany request, under Article 8 (2), “If the Court finds that the Contracting Party concerned has not complied with its judgment, it may impose on it a lump sum or a penalty payment appropriate in the circumstances and that shall not exceed 0,1 % of its gross domestic product.” The treaty confers, therefore, on the ECJ the power to impose fines on countries, which have failed to transpose or correctly incorporate the balanced budget rule into national law. Under the treaty the penalty must not be higher than 0.1% of a country’s GDP. Furthermore, article 8 provided “The amounts imposed shall be payable to the European Stability Mechanism.” This provision has been amended, in order to persuade Denmark to sign up to the treaty, and it now reads “The amounts imposed on a Contracting Party whose currency is the euro shall be payable to the European Stability Mechanism. In other cases, payments shall be made to the general budget of the European Union.” Hence, the fines imposed by the ECJ on eurozone contracting parties would be paid into the ESM whilst fines impose on non eurozone contracting parties would go to the EU budget.

One could say that Article 273 TFEU mainly refers to disputes concerning the interpretation or application of agreements, excluding the ECJ’s competence to impose penalties. Under Article 260 TFEU the Court has competence to impose penalties on Member States, which have not taken the necessary measures to comply with its judgments for violations of EU law, however Article 8(2) does not concern violation of EU law. The ECJ has no powers to impose fines on countries that failed to bring their national laws into line with article 3 (2).

According to the Legal Counsel of the Council, Article 8 is compatible with the choice of Article 273 TFEU as the legal basis for the jurisdiction of the Court. The Council Legal Service has defended the legitimacy of recourse to Article 273 TFEU but Professor Craig believes that “the Commission’s role under Article 8 is still problematic.” Professor Craig also noted “Even the Council’s legal service in that document does admit that the Commission has "a very decisive role within Article 273 as it is presently formulated under Article 8".” It is important to note that the Legal Counsel said, “that the substance of the draft Treaty is intended to be incorporated into the law of the Union” and “When this happens, Article 260 TFEU will be directly applicable to the norm concerned.” Consequently, according to the Legal Counsel “The construction of Article 8, including its paragraph 2, thus broadly anticipates the framework that will apply to the norm when it becomes an EU one, while being entirely compatible with the legal basis of Article 273 TFEU that has to be used before that date.” Nonetheless, if the contracting parties could use the EU institutions to enforce this treaty there would be no need to incorporate it into EU law.

Moreover, Article 8 (3) of the draft treaty also stipulates, “This Article constitutes a special agreement between the Contracting Parties within the meaning of Article 273 of the Treaty on the Functioning of the European Union”. This provision deceitfully gives the idea that the use of the ECJ and the European Commission by the contracting parties is legal under the EU treaties. Article 8 of the draft treaty is not compatible with the EU Treaties. The European Commission and European Court of Justice cannot enforce the draft treaty provisions. The Court of Justice has allowed Member States to use the EU institutions in procedures established outside the framework of the Treaties, but there was a unanimous agreement. Consequently, all EU Member States must agree on the use of the EU institutions outside the framework of the EU Treaties. Under this Treaty, the EU institutions would be exercising functions beyond those given to them under the EU Treaties, which breaches EU law. However, the drafters of the treaty are not particularly concerned with its legality, the main aim is to save the euro. Therefore, they have turned a blind eye to potential breaches of the EU Treaties. As Bill Cash pointed out “the treaty is based on the dangerous assumption that the end justifies the means, and that they would argue that, even if it is unlawful, the requirement to introduce the treaty for political reasons overrides the law.” Moreover, he stressed, “We are now facing the breaking of the rule of law through the imposition of European rules. It is an extraordinary paradox that the law should be used to break the principle of law itself.”

A group of Member States without unanimous approval of the other member states cannot confer any new powers to the EU institutions outside the EU legal framework. The Commission or the ECJ cannot enforce the draft treaty on stability, coordination and governance in the Economic and Monetary Union, as it’s not within their mandate. This intergovernmental treaty is not enforceable because the European Court of Justice has no competence to rule on the compliance of the agreement, but it has competence to consider any potential conflict with the EU treaties. If there is a conflict between the EU treaties and this intergovernmental treaty obviously the EU Treaties would take precedence.

David Cameron has been arguing that contracting parties to this treaty cannot use the EU institutions to enforce this treaty. However, David Cameron has not kept his pledge to do "everything possible" to stop the contracting parties of a new treaty from using the European Commission and the European Court of Justice, for purposes outside the EU framework. Nevertheless, David Cameron did not have much choice, as he could not prevent the other member states of inserting article 273 within the draft treaty. On 31 January, the Prime Minister made a statement at the House of Commons, on the Informal European Council, he said “there are uses of the EU institutions set out in previous treaties― mostly put through this House by the Labour Government― but this treaty outside the EU goes further than that, and that raises legal issues.” Hence, David Cameron acknowledged that the contracting parties are illegally using the EU institutions. He said the UK would take legal action if the new treaty undermines British interests, "There are a number of legal concerns about this treaty. That's why I reserved the UK position on it. We will only take action if our national interests are threatened."

It is important to recall that, the letter sent by Sir Jon Cunliffe to the secretary-general of the European Council, as above-mentioned, makes it clear that the government has serious reservations on the treaty and its use of the institutions, particularly in Article 3 (2), Article 7 and Article 8. In fact, David Lidington said to the European Scrutiny Committee “In Article 8, our concerns centre on the possible role both of the Commission and of the European Court of Justice.” However, Mr Lidington also said that the Government has “concerns about certain aspects of the Treaty, in respect of the proposed use of the institutions, but we do not want to stop our partners from getting on with the immediate firefighting task in hand, and it is in our interest as well as theirs that they succeed.” Nevertheless, David Lidington reiterated that “Our position as a Government is that the EU institutions, including the Commission but the Court too, must only be used outside the EU treaties with the consent of all Member States, and that any such action by the institutions must respect the EU treaties and not contravene them.” When James Clappison asked whether the Government has given consent to the use of the EU institutions in this Treaty, Mr Lidington repplied “No, we have not been asked so to do.” Hence, as noticed by Mr Clappison “As it stands, if we have not given our consent, then what the EU is doing is not lawful, in our view. The two conditions that are set here are, for the EU’s action to be lawful, it could only be done with our consent and must respect the EU treaties. If we have not given our consent, it is not lawful.”

The UK can, and should, challenge the use of Article 273 before the ECJ and argue that it does not cover the circumstance of the present Treaty. Ultimately, it would be for the ECJ to decide on this mater, which favours further EU integration. According to Professor Craig, “whether what is presently contained in Article 8 is lawful or not will ultimately depend on the interpretation by the ECJ of the meaning and scope of Article 273 of the TFEU, and it will depend upon whether the ECJ, if the question is put to it, finds that the present mechanism whereby the Commission, in effect, triggers the action-albeit not as the nominal plaintiff-is lawful under the Article 273.” He believes that the ECJ will “say that Article 273 can, in principle, be used in interstate suits.” As regards the Commission role, “There will be a temptation to validate it, to legitimate it, and say that the Commission is not formally bringing the action…” Nevertheless, Professor Craig believes that there is a possibility for the ECJ to rule against this and declare the first part of Article 8 ineffective.

Bill Cash believes that the Government knows that the treaty is unlawful and, stressed that the Government “must put referral to the European Court of Justice firmly on the agenda, follow that through and, at the same time, reassess our policy towards the European Union and insist on a renegotiation of the treaties to ensure that the United Kingdom is not found wanting.” According to David Lidington the government has not ruled it in or out going to the ECJ and pointed out “Our decision to reserve our legal position makes it clear that that option is one that is still available to us.” He said, during the House of Commons debate on the treaty, “we are vigilant and ready to act, including by taking legal action in the European Court of Justice, if we believe that the EU institutions are being used in a way that is contrary to the provisions of the EU treaties and that harms our national interest.” However, as Bill Cash noted “Undue delay in reserving our position on the necessity of getting concrete guarantees and an answer to the question of whether we will go to the European Court of Justice over this matter is no substitute for action.” He stressed “We must take action now because the advice from the legal adviser states: “within five years…when this happens” moreover “other Member States and their parliaments, such as the Bundestag, are deciding the issues and the ratification of this treaty.”

The treaty explicitly states that “the Contracting Parties stand ready to make active use, whenever appropriate and necessary, of measures specific to those Member States whose currency is the euro as provided for in Article 136 of the Treaty on the Functioning of the European Union and of enhanced cooperation as provided for in Article 20 of the Treaty on European Union and in Articles 326 to 334 of the Treaty on the Functioning of the European Union on matters that are essential for the smooth functioning of the euro area, without undermining the internal market.” This is clearly a false attempt to address the British concerns. They are referring to the possibility of using the general rules on enhanced cooperation within the current EU Treaties, to adopt EU measures that will apply solely to the member states that participate in this treaty. Under Article 326 TFEU the use of enhanced cooperation must respect the EU Treaties, consequently, it is impossible to amend the EU’s primary law. Moreover, this Article provides that enhanced cooperation “shall not undermine the internal market or economic, social and territorial cohesion. It shall not constitute a barrier to or discrimination in trade between Member States, nor shall it distort competition between them.”

It is important to note that enhanced cooperation measures must be based on a Commission proposal, which is then blocked in the Council, consequently the decision to enter into enhanced cooperation is “a last resort.” Following a request by the Member States that wish to establish enhanced cooperation, the Commission may submit a proposal to the Council to that effect. The Council will grant authorisation to proceed with the enhanced cooperation by a qualified majority of all Member States in the Council and after obtaining the consent of the European Parliament. However, the draft treaty refers to “whenever appropriate and necessary” bypassing the treaty requirement that it should solely be used as “a last resort.” As Bill Cash pointed out “This could cause serious damage to British national interests in relation to the internal market.” Professor Craig believes that “Article 10 of this treaty cannot alter the meaning of Article 20 of the TEU or Articles 326 to 324 of the TFEU. Insofar as they lay down different criteria, and they do, the provisions in the TEU and the TFEU govern.” Nevertheless, it is possible to argue that this provision is very likely to change the way enhanced co-operation is used from what was agreed in the treaties ceasing to be “last resort” to become a normal instrument.

Furthermore, enhanced cooperation shall be open to all Member States, consequently it cannot be address just to eurozone States, or the contracting parties to this treaty. Under Articles 20 TEU and 329 and 331 TFEU, it is required a minimum of nine participants, moreover, only willing Member States participate and any Member States can participate. If these criteria are not complied with the use of enhanced cooperation could be challenged at the ECJ. Professor Dougan has pointed out that the UK cannot block the use of enhanced cooperation, but it can challenge it before the ECJ as ultra vires.

It is important to note that according to the written evidence from Professor Michael Dougan and Dr Michael Gordon “If put seriously into practice, increased recourse to enhanced cooperation on matters essential to the smooth functioning of the single currency could imply the emergence of a bifurcated Union in all manner of fields related to economic policy – not only the regulation of specific sectors or markets, but also employment protection, consumer rights, taxation and social security.” Hence, it is not enough to have a provision stipulating, "without undermining the internal market", as it will have an impact on the internal market. According to Professor Hix “There is nothing you can write down in law that could stop a political agreement amongst states acting together in the Council.” Moreover, he pointed out “If the rule says you can adopt legislation by qualified majority voting on the basis of a proposal from the Commission and, under codecision, going through a majority in the European Parliament, and they decide that they want something in the internal market because they want some internal market legislation as part of this, I think it would be very difficult for the UK to stop that.”

Article 12 (1) of the treaty, confirms what the Eurozone leaders agreed at the Euro Summit of 26 October, that the eurozone Heads of State or Government and the President of the European Commission will meet informally in Euro Summit meetings. The appointment of the President of the Euro Summit by the eurozone leaders by simple majority was also enshrined in the treaty. It also provides that “Euro Summit meetings shall take place, when necessary, and at least twice a year, to discuss questions related to the specific responsibilities which the Contracting Parties whose currency is the euro share with regard to the single currency, other issues concerning the governance of the euro area and the rules that apply to it, and strategic orientations for the conduct of economic policies to increase convergence in the euro area.” According to the European Council and Euro summit President, Herman Van Rompuy, such meeting would be, in principle, held after meetings of the European Council.

Moreover, as it has already been agreed at the October’s summit, the other member states would be merely informed by the President of the Euro Summit of the preparation and outcome of the Euro Summit meetings. Article 12 (6) provides “The President of the Euro Summit shall keep the Contracting Parties whose currency is not the euro and the other Member States of the European Union closely informed of the preparation and outcome of the Euro Summit meetings.”

Poland has threatened not to sign the treaty unless it is allowed to take part in future eurozone summits. Consequently, in order to convince Poland to sign up to this treaty, Article 12 (3) stipulates “The Heads of State or Government of the Contracting Parties, other than those whose currency is the euro, who have ratified this Treaty shall participate in discussions of Euro Summit meetings concerning competitiveness for the Contracting Parties, the modification of the global architecture of the euro area and the fundamental rules that will apply to it in the future, as well as, when appropriate and at least once a year, in discussions on specific issues of implementation of this Treaty on Stability, Coordination and Governance in the Economic and Monetary Union.” Whereas under previous draft the non-eurozone countries would be invited to the eurozone summits “to discuss specific issues concerning the implementation of this Treaty”, under the agreed treaty they will be invited to meetings “concerning competitiveness for the Contracting Parties, the modification of the global architecture of the euro area and the fundamental rules that will apply to it in the future, as well as, when appropriate and at least once a year, in discussions on specific issues of implementation of this Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”. It would be like a European Council meeting without the UK and Czech Republic.

David Cameron was aware of the risk of fiscal union and economic government, hence he decided to use his veto. In fact, William Hague said "We are, by preventing a new Treaty or amendments to the Treaties of the European Union, ensuring that the key decisions that affect us, such as to do with the single market, are still made by the 27 nations including us…" However, Cameron by using his veto prevented the situation from getting worse but the status quo has not changed. The City of London continues to be subject to further EU regulations. It is important to recall that the single market, including financial regulations, is governed by qualified majority voting. From November 2014, QM will be calculated according to double majority: 55% of EU Member States (15 Member States) and 65% of the EU’s population. Hence, by 2014 the eurozone will have a qualified majority. The eurozone leaders well as other contracting parties to this treaty by having their own meetings, they will be able to agree positions on financial and economic issues, which they would then impose on the other member states, if unanimity is not required. Although they say that the Euro summits will just discuss eurozone issues, one can just expect that matters affecting British interests would be also discussed. The eurozone member states can use their voting power at EU level, and they will also have the support of the non-eurozone contracting parties to this treaty, to force through measures in detriment of the UK’s national interest. They will vote together outvoting the UK.

It is important to mention that Professor Hix is particularly worried “about the situation of the eurozone Heads of Government meeting, with the British Prime Minister and the Czech Prime Minister waiting outside the door to be called in once they have already decided, and then going through the charade of pretending that they are now discussing things with these other member states, when actually all the signatories of these states have qualified majority.” Moreover, he noted “Almost all single market legislation is qualified majority, and they themselves have a qualified majority vote, so this sets the precedent of allowing them to get together in a room and come to an agreement.” According to Professor Hix “That sets a really dangerous precedent from the point of view of the UK.”

On 2 March twenty-five EU member states signed the treaty. The contracting parties will ratify the agreement according to their constitutional requirements. Amid concerns that some countries might face difficulties in passing the treaty through national parliaments or it might be subject to referenda, the threshold of countries necessary to ratify the treaty is twelve. It specifically provides that “This Treaty shall enter into force on 1 January 2013, provided that twelve Contracting Parties whose currency is the euro” have ratified it. Consequently, it will still enter into force even if some countries national parliaments reject it or it is not approved in referenda. It remains to be seen what would happen if less than twelve eurozone states fail to ratify the treaty before 1 January 2013.

It is important to note that the socialist candidate for the French presidency, François Hollande said he would “renegotiate this deal” if elected in the upcoming presidential elections. Moreover, despite all the attempts of the EU negotiators to avoid an Irish referendum, in fact Germany's Europe Minister Michael Link conceded that the treaty has been designed in a way to avoid an Irish referendum, the treaty will be subject to referendum. Following the legal opinion of the Attorney General, the Irish government has recently announced that it will hold a referendum on the intergovernmental treaty. However, as above-mentioned, this treaty only requires 12 of 25 contracting parties to ratify before it comes into force, hence even if Ireland votes against it, the treaty will enter into force. As Bill Cash noticed “A new rule is being imposed through the arrangements under this treaty which involves a kind of qualified majority voting for referendums whereby if member states do not have the requisite number of referendums in which they say that they do not want the treaty, they will simply be ignored.”

Moreover, at Germany request, the preamble to the treaty provides that “the granting of assistance in the framework of new programmes under the European Stability Mechanism will be conditional, as of 1 March 2013, on the ratification of this Treaty by the Contracting Party concerned and, as soon as the transposition period mentioned in Article 3(2) has expired, on compliance with the requirements of this Article,” Hence, in order to an eurozone member state to be granted assistance within the framework of the ESM, which is expected to come into force in July 2012, it must ratify this treaty and comply and implement the so called balanced budget rule provided in Article 3 (2) within one year of entry into force of the intergovernmental treaty. Consequently, if Ireland votes No there is no ratification of the Treaty therefore Ireland would not be able to access to the ESM. According to Michael Meister, a budget and finance spokesman for German CDU party, “Whoever doesn't accept the treaty has no protection from the ESM bailout fund. If the Irish people think they don't need any ESM protection they can, of course, reject the fiscal treaty.” In fact, Ireland's Deputy Prime Minister, Eamon Gilmore, said “Ratifying the [fiscal] treaty will also provide Ireland with access to emergency funds in the future, if we need them, through the new European Stability Mechanism. Our intention is to emerge from the EU/IMF [bailout] programme without having to resort to the ESM, but the facility itself is an important backstop that will further enhance international confidence in Ireland.” This will be, therefore, used to bully the Irish people into voting yes.

Mr Van Rompuy said to the EU leaders “You now all have to convince your parliaments and voters that this treaty is an important step to bring the euro durably back into safe waters”. However, this is a misleading statement as this treaty won’t make any difference to the current crisis.

The treaty will apply as from the day of coming into force amongst the eurozone contracting parties, which have ratified it, but the provisions related to the Euro summit meetings will apply to all eurozone-contracting parties from the date of the entry into force of the agreement. In order to address several non-eurozone member states concerns and convince them to sign up, under the draft treaty non-eurozone contracting parties will be bound by it when they join the single currency, unless they decide to be bound at an earlier date, by all or part of the provisions in titles III (budgetary discipline) and IV (economic policy coordination and convergence) of the agreement. On the other hand, the eurozone member states might not be willing to accept a new member state that had not ratify this agreement.

The treaty also includes a provision, Article 15, which states, “This Treaty shall be open to accession by Member States of the European Union other than the Contracting Parties upon application that any such Member State may file with the Depositary." This provision is particularly addressed to the UK, but it also includes all states that initially signed up for this treaty but then have not become contracting parties. It provides,“This Treaty shall be open to accession by Member States of the European Union other than the Contracting Parties. Accession shall be effective upon the deposit of the instruments of accession with the Depositary, who shall notify the other Contracting Parties thereof.”

We must congratulate David Cameron for not yielding to Brussels, particularly to France and Germany arguments, and having refused to sign this treaty. In his statement at the House of Commons, on the Informal European Council, David Cameron said, “(…) this is a treaty outside the EU. We are not signing it, we are not ratifying it, we are not part of it and it places no obligations on the UK. (…) That is the fundamental protection that we secured with our veto in December, and that protection remains.” However, it is important to recall that David Cameron vetoed the EU treaty amendment to avoid having the eurozone club pursuing its interests using the EU institutions. He said, “the fact is that an organisation outside the EU treaties is not allowed to cut across those treaties or the legislation under those treaties.”

The use of the EU institutions by the treaty contracting parties is the outcome of stretching the EU treaties. David Cameron has decided to soften his opposition on the use of the EU institutions by the contracting parties to this draft treaty. He said, “(…) it is in Britain’s interests that the eurozone sorts out its problems. It is also in our interests that the new agreement outside the EU is restricted to issues of fiscal union and does not encroach on the single market.” According to David Cameron “The new intergovernmental agreement is absolutely explicit and clear that it cannot encroach on the competencies of the European Union and that measures must not be taken that in any way undermine the EU single market.” Nevertheless, it is far from certain that this won’t undermine the single market. But, the Prime Minister also said, "There are a number of legal concerns about this treaty”, stressing that “we will watch this matter closely and that, if necessary, we will take action, including legal action, if our national interests are threatened by the misuse of the institutions.”

One could wonder whether the UK will ever bring a legal action before the ECJ. According to Bill Cash the Government “must put referral to the European Court of Justice firmly on the agenda, follow that through and, at the same time, reassess our policy towards the European Union and insist on a renegotiation of the treaties to ensure that the United Kingdom is not found wanting.” As he pointed out “It is increasingly obvious that the position has become unacceptable and that the rule of law itself is now in jeopardy. We are involved and we must have a referendum on our relationship with the EU.”

As Bill Cash said if the UK as well as other member States want to regain their democracy and economic stability they must return to an EFTA-plus arrangement. The Prime Minister has accepted that the only possible way to protect British interests was for the Government to veto changes to the EU Treaties. However, David Cameron must accept that the only possible way to continue protecting British interests is for the Government to initiate the renegotiation process of all EU treaties, by taking the lead in creating an association of nation states – an EFTA-plus, as Bill Cash argued in his pamphlet – “It’s the EU Stupid”.

The time has come for David Cameron to define the terms of a fundamental renegotiation in the relationship between the UK and the EU. As Bill Cash said, at the European Parliament, “the cause of the problem, which no one seems to be prepared to recognise, is that these treaties require renegotiation in order to get back to that first principle of freedom and to give us back the democracy which has been taken away from us.”