Masterthesis The incorporation of the Fiscal Compact in the legal system of the Netherlands Jorick Straatman, ANR 383693 The incorporation of the Fiscal Compact in the legal system of the Netherlands Masterthesis on the Europeanization of public finances Author: Jorick Straatman Administration number: 383693 Student number: 1254934 Study: Law Field of Study: Constitutional and Administrative Law Institution: Tilburg Law School, Tilburg University Supervisors: Dr. Federico Fabbrini Dr. Gert-Jan Leenknegt Date: 5th of July 2013 Jorick Straatman Tilburg University 2 ANR 383693 Preface This thesis is the conclusion of my one year Master program at Tilburg Law School, Tilburg University. After seven years studying at Utrecht University it was quite an experience to change Law Schools. Writing this thesis was a big challenge for me since writing in English caused me, especially in the beginning, some troubles. With help from my supervisors I was able to expand my vocabulary quickly and I am pleased with the result. Therefore, I would like to thank Federico Fabbrini and Gert-Jan Leenknegt of Tilburg Law School. They helped me writing this thesis and were always available to meet and give me instructions to improve my work. Second, I would like to extend my gratitude to Paul van Seters who helped me with the structure of my thesis and provided instructions on the content and layout of my work. Furthermore, I would also like to thank my parents for their support to let me finish my study on Constitutional and Administrative Law at Tilburg University. Last, but definitely not least, I would like to thank Marloes van Tergouw for her help and support during my last year of study. Thank you for reading my entire thesis and your recommendations during the finalizing stages of my writing process. I am looking forward to our holidays and future! Jorick Straatman Tilburg University 3 ANR 383693 Table of contents Preface ........................................................................................................................... 3 Table of contents........................................................................................................... 4 1. Introduction .............................................................................................................. 5 2. Social and scientific relevance ................................................................................. 8 3. Legal framework..................................................................................................... 10 3.1 The Fiscal Compact...................................................................................................... 10 3.1.1 The Fiscal Compact, why?................................................................................................... 10 3.1.2 Legislative content of the Fiscal Compact........................................................................... 12 3.1.3 Ratification of the Fiscal Compact ...................................................................................... 14 3.2 The constitutional system of the Netherlands............................................................ 17 3.2.1 The constitutional order of the Netherlands......................................................................... 17 3.2.2 The adoption of international law into the Dutch legal system ........................................... 19 3.2.3 Concluding of treaties .......................................................................................................... 20 3.2.4 Hierarchy of legal norms ..................................................................................................... 22 4. Incorporation of the Fiscal Compact .................................................................... 24 4.1 What are the legal consequences of the ratification of the Fiscal Compact?.......... 24 4.1.1 The bill of approval.............................................................................................................. 24 4.1.2 Advice from the Council of State ........................................................................................ 26 4.2 Which (legislative) developments can be found in the Netherlands to meet the provisions that are laid down in the Fiscal Compact?.................................................... 27 4.2.1 Bill for sustainable public finances...................................................................................... 27 4.2.2 Budget cuts........................................................................................................................... 30 4.3 How has the role of the Dutch parliament developed during the financial crisis? 33 4.4 Does the “Dutch solution” for the implementation of the Fiscal Compact satisfy the requirements of the Fiscal Compact? ........................................................................ 37 5. Conclusion ............................................................................................................... 40 References.................................................................................................................... 44 Jorick Straatman Tilburg University 4 ANR 383693 1. Introduction On the 2nd of March 2012, 25 out of 27 member states of the European Union (EU) agreed to sign the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. This treaty is generally referred to as the Fiscal Compact. The Fiscal Compact has been adopted following the turmoil on the financial markets and problems subsequently arising for the public finances and budgets of several member states. The Fiscal Compact aims to strengthen economic and budgetary surveillance of member states, which experience serious difficulties with respect to their financial stability. The Fiscal Compact is technically drafted as an international treaty. However, it is functionally connected to the legal framework of the EU.1 This development raises a number of new issues in the field of international law, EU law and constitutional law. In this thesis I will examine the provisions in the Fiscal Compact and what one of the EU member states, the Netherlands, has done to adopt these provisions into its own legal system. Also, I will examine how the Fiscal Compact influences the national economic and budgetary policies of the Netherlands and how the sovereignty of the government and parliament of the Netherlands with respect to these policies is affected. With the introduction of the Fiscal Compact the contracting parties wanted to ensure the sustainability of state budgets by monitoring and controlling their public deficit and debt. According to article 3, paragraph 1 sub a of the Fiscal Compact “the budgetary position of the general government of a contracting party shall be balanced or in surplus.” The framework to monitor and control the budgetary positions of the contracting parties are, according to the preface of the Fiscal Compact, the EMU-deficit and -debt criteria. These two criteria originated in the Maastricht Treaty (1992) and further specified in the Stability and Growth Pact (SGP). However, the Fiscal Compact goes further than reminding the parties of these provisions, it also introduces a measure to adopt the EMU-criteria into the legal systems of these parties. This is laid down in article 3.2 of the Fiscal Compact, which states: “The rules set out in 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 provision of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.” Article 3.2 of the Fiscal Compact raises serious questions regarding the mandatory introduction of specific rules at the member state level. Hereby, the content of the Fiscal Compact goes beyond traditional 1 Fabbrini, 2012, p. 2. Jorick Straatman Tilburg University 5 ANR 383693 international law. The budgetary rules need to be included into national constitutions or organic law or, if this is impossible, into another source of law with permanent character that is superior to regular statutes. The development of this new rule and the challenges that member states face with the adoption of the provisions into their national constitutions can possibly be related to the evolution of the EU. The influence of the EU is growing and it looks as if the EU is widening its current role regarding member states policies to include areas in which member states traditionally enjoyed wide autonomy. The Fiscal Compact is the latest instrument which forces member states to hand over further control to the EU regarding their state budgets and, furthermore, to change their constitutions. Bearing in mind the provisions in the Fiscal Compact, I will discuss these developments and their possible impact on the legal system of the Netherlands, one of the member states of the EU. To understand the Fiscal Compact in relation to the constitutions of the member states, it is necessary to analyse the constitution and examine how EU treaties are implemented by a member state. The focus will be on the Netherlands because of the fact that the Netherlands has a special system when it comes to certain aspects of its constitutional system and the adoption of international law. The Constitution of the Netherlands is rigid and vey hard to amend. Furthermore, there is no constitutional review by the judiciary