Financial assistance conditionality and effective judicial protection: Chrysostomides

Anastasia Karatzia, Menelaos Markakis

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Abstract

The ECJ judgment in Chrysostomides is the last in the series of cases that started with Mallis and Ledra and concerned the conditionality measures that coupled the financial assistance received by Cyprus from the European Stability Mechanism (ESM) in 2013. The background to the case consists of a complex web of facts and decisions taken at multiple levels of authority in the crucial days of the Cyprus financial crisis that risked the country’s bankruptcy. The case includes appeals from both sides of the dispute. Although the General Court (GC) dismissed the case inter alia finding for the Council, the Council appealed the first instance judgments, on the ground that the GC erred in law when finding that the applicants’ actions for damages directed against the Eurogroup were admissible. In its cross-appeal, the Council also asked the ECJ to set aside those parts of the judgments in which the GC dismissed its pleas of inadmissibility insofar as they related to the actions directed against Council Decision 2013/236, which replicated parts of the conditionality found in the Memorandum of Understanding (MoU) signed between Cyprus and the ESM. The applicants at first instance also appealed, asking the Court to set aside the two first instance judgments. The GC had dismissed their claims for non-contractual liability against the EU, the Council, the Commission, the European Central Bank (ECB) and the Eurogroup regarding the conditionality measures that coupled the financial assistance received by Cyprus from the ESM.
The judgment is significant for a number of reasons. First, it marks the conclusion of the attempts by several depositors and shareholders of the Cypriot banks to challenge before EU Courts the haircut of deposits and the resolution of Cyprus’ biggest bank in the run-up to the financial assistance provided to the country by the ESM. Second –and perhaps most importantly–, the case afforded an opportunity to the ECJ for the first time to clarify whether the Eurogroup is an “institution” within the meaning of Article 340(2) TFEU whose actions may trigger the non-contractual liability of the Union. In the words of Advocate General Pitruzzella: “The present cases are unquestionably of constitutional significance. They afford the Court an opportunity to clarify the legal nature of the Euro Group, a body that certainly has considerable political influence, but is at the same time the body within the European constitutional and institutional framework that has perhaps aroused the most debate and is the least easy to circumscribe.” Third, and relatedly to the previous point, it sheds light on the judicial avenues available to litigants to challenge the conditionality attached to bailout programmes before the EU Courts, including in the case of “prior actions” which were implemented by the recipient country prior to the formal conclusion of the MoU.
In our analysis, we will first focus on the reasoning behind the ECJ’s findings regarding the legal nature of the Eurogroup. We will then explore the broader implications of these findings for the accountability of the Eurogroup as one of the main actors in the Economic and Monetary Union (EMU) and, finally, we will look at the justiciability of the actions of the other EU institutions (viz., the Council, Commission, and ECB) in the context of the financial assistance programme for Cyprus and in the EMU more generally. It will be argued that the ECJ could have instead concluded that the Eurogroup is an “institution” within the meaning of Article 340(2) TFEU. The ECJ’s ruling on the admissibility of the case has legal ramifications beyond the contours of the Chrysostomides case. The theoretical possibility to hold the other EU institutions involved in financial assistance programmes accountable for their actions does not always suffice to guarantee the effective judicial protection of aggrieved individuals. The added clarity provided by the ECJ regarding the acts or conduct of the other EU institutions that may be admissibly challenged before the CJEU under Article 340 TFEU is nevertheless to be welcomed.
Original languageEnglish
Pages (from-to)501-542
Number of pages42
JournalCommon Market Law Review
Volume59
Issue number2
DOIs
Publication statusPublished - 2022

Bibliographical note

Funding Information:
Understanding (MoU) signed between Cyprus and the ESM.5The applicants at first instance also appealed, asking the Court to set aside the two first instance judgments. The GC had dismissed their claims of non-contractual liability against the EU, the Council, the Commission, the European Central Bank (ECB) and the Eurogroup regarding the conditionality measures that coupled the financial assistance received by Cyprus from the ESM.

Research programs

  • SAI 2010-01 RRL

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