The ECB's performance under the ESM treaty on a sliding scale of delegation

Published date01 May 2019
Date01 May 2019
AuthorUte Lettanie
The ECB's performance under the ESM treaty on a
sliding scale of delegation
Ute Lettanie*
Two opposing theories explain the European Central Bank's (ECB) farreaching powers: principal
agent and trusteeship. This article situates both theories on a sliding scale of delegation, with agents
on one end of the spectrum, and trustees on the other. Applying this new perspective to the
European Stability Mechanism (ESM) allows us to understand how the ECB, positioned on the agent
side of the scale by the ESM Treaty, slides towards the trustee side in practice. This way, the article
identifies two problems. Firstly, the ECB assumes a zone of discretionthat is not captured by the
control mechanisms, thereby disregarding an essential feature of delegation. Secondly, the rationale
of the Meroni doctrine, judicial review, is disregarded given the insufficient protection against the
ECB's actions. These findings become increasingly important with the longterm aim to incorporate
the ESM in the EU legal order.
During the financial crisis the European Stability Mechanism (ESM) was established to act as the European financial
rescue body.
The Troika, consisting of the European Commission, the International Monetary Fund (IMF) and the
European Central Bank (ECB) plays a key role in this rescue mechanism. In December 2017, the EuropeanCommission,
initiated a proposal to integrate the ESM into the EU legal order.
In this proposal, as in Regulation 472/2013
*PhD Researcher, Government and Law, University of Antwerp, Belgium. I would like to thank the anonymous reviewers, the editors, the participants at the
PhD workshop held at Maastricht University in March 2018, the participants at the conference held at Université Libre de Bruxelles in March 2018, and
Professor Dr. P. Popelier for their valuable feedback. The usual disclaimer applies.I would like to thank the anonymous reviewers, the editors, the partici-
pants of the PhD workshop held at Maastricht University in March 2018, the participants of the conference held at UniversitéLibre de Bruxelles in March
2018, and Professor Dr. P. Popelier for their valuable feedback. The usual disclaimer applies.
The ESM has been examined from different angles such as an historicalinstitutional and legal approach. See, for instance, L. Gocaj and S. Meunier,
Time Will Tell: The EFSF, the ESM, and the Euro Crisis(2013) 35 European Integration, 239253; A. Verdun, A Historical Institutionalist Explanation
of the EU's Responses to the Euro Area Financial Crisis(2015) 22 Journal of European Public Policy, 219237, respectively B. de Witte and T. Beukers,
The Court of Justice Approves the Creation of the European Stability Mechanism outside the EU Legal Order: Pringle(2013) 3 Common Market Law
Review, 805848.
Proposal for a Council Regulation on the Establishment of the European Monetary Fund. Brussels 6.12.2017 COM(2017) 827 final 2017/0333 (APP).
Received: 17 November 2018 Revised: 26 March 2019 Accepted: 17 April 2019
DOI: 10.1111/eulj.12323
Eur Law J. 2019;25:317332. © 2019 John Wiley & Sons 317
strengtheningeconomic governance,
the ESM Treaty (ESMT)
provisions were simply copied, whilst the ECB's involve-
ment in theTroika is widely discussed.
For the time being, the plans have been frozen,
but in the long term, the aim is to
integrate the ESM in the EU, increasing the importance of the discussion.
For now, the ESM's role would be strength-
ened to create a deeper Economic and Monetary Union (EMU) and the ECB's tasks under the ESMT remain unchanged.
Note that changes to the ECB's responsibilities under the ESMT would raise questions as to the ECB's role under
Regulation 472/2013 strengthening economic governance because the same wording, in liaison with, has been used.
The article's aim is twofold. Firstly, it reviews the wellestablished agenttrustee distinction by creating a sliding
scale of delegation, based on a combination of both theories. Secondly, the article applies the delegation framework
to the ECB's role under the ESMT. The analysis shows that the ECB's role is problematic as it is not captured by the
control mechanisms. Consequently, the monitoring mechanisms should be intensified to keep the ECB within the
limits of the ESMT. Although the academic literature often refers to delegation theory to explain the exercise of pow-
ers in the European Union (EU), to date, it has neglected to determine the ECB's role in the Troika from a delegation
perspective. This is a lacuna, for two reasons. Firstly, delegation theories provide us with such concepts as agents
and trustees, which help to reveal a discrepancy between theory and practice regarding the ECB's role or shows a
shift in practice over time. While the ESMT assigns to the ECB the role of an advisor, the politics of postdelegation
reveal that the ECB's performance actually shifts towards the role of a trustee. Secondly, although the Meroni doc-
trine is limited to EU agencies, taking into account its rationale, we detect a problem of judicial protection against
the ECB's actions regarding the ESM.
This article proceeds as follows. Section 2 sets forth a theoretical framework for the delegation of powers. After a
brief overview of the principalagent theory (PA theory) and the fiduciary theory, we argue that both theories can be
reconciled on a sliding scale with PA on one side of the spectrum and trusteeship on the other. The scale is governed
by four denominators: (i) the delegation's nature, (ii) the contract of delegation, (iii) the delegator's control, and (iv) the
delegate's zone of discretion. While all four denominators are essential to both theories, their intensity varies,
depending on their position on the sliding scale. Next, the article analyses the legal boundaries to delegation as devel-
oped in the Meroni doctrine. Section 3 applies the four denominators to the ECB's task description under the ESMT,
which shows that the ECB is designed to act as an advisor. In reality, however, the ECB performs the role of an agent.
Moreover, taking into account the Meroni doctrine, a problem of judicial protection is identified concerning the ECB's
duties enshrined in the ESMT. The last section concludes.
Some scholars have doubted whether it is useful to apply delegation theories, designed for Member States, to supra-
national institutions.
The latter differ in that they often consist of several boards or committees, generating
Regulation (EU) No. 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveil-
lance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability (2013) OJ 2013, L 140/1.
Consolidated Version of theTreaty Establishing the European Stability Mechanism between the Kingdom of Belgium, the Federal Republic of Germany, the
Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus, the Republic of
Latvia, the Republic of Lithuania, the Grand Duchy of Luxembourg, Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Repub-
lic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland (2012).
For instance, Transparency International, Two Sides of the Same Coin? Independence and Accountability at the ECB(2017), at
Eurogroup, Eurogroup Report to Leaders on EMU deepening(4 December 2018), at releases/2018/
K. Regling, What Comes after the Euro Summit? The Role of the ESM in a Deepened Monetary Union(29 January 2019), at
H. Kassim and K. Menon, The PrincipalAgent Approach and the Study of the European Union: Promise Unfulfilled?(2003) 10 Journal of European Public
Policy, 121, 133. In the same sense regarding central banks: G.E. Chortareas and S.M. Miller, The PrincipalAgent Approach to Monetary Policy Delegation,
in P.L. Siklos, M.T. Bohl and M.E. Wohar (eds.), Central Banking: The Current Institutional Environment and Forces Affecting Monetary Policy (Cambridge Uni-
versity Press, 2010), at 56.

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