EU Law: Euro exchange-rate system agreements

The EU Treaty of Lisbon would move the provision on international agreements concerning the euro exchange-rate system under the Title on international agreements, where these agreements form an exception to the normal procedures with regard to international agreements.




***

Current treaty

The existing Article 111 of the Treaty establishing the European Community (TEC) is situated in Title VII Economic and monetary policy, Chapter 2 Monetary policy; OJEU 29.12.2006 C 321 E/89–90.

The first paragraph concerns formal agreements on an exchange rate system for the ecu (euro) in relation to non-Community currencies.

The second paragraph provides for general orientations for exchange-rate policies in relation to non-Community currencies (if there is no binding exchange-rate system).

The third paragraph sets out a special legal base for negotiating and concluding agreements on monetary or foreign‑exchange regime matters with third countries or international organisations.

Paragraph 4 refers to the external representation of the economic and monetary union (EMU).

Paragraph 5 rules the residual right of member states to negotiate in international bodies and conclude international agreements.

From the latest consolidated version of the treaties, here is the text of Article 111:




Article 111 TEC

1. By way of derogation from Article 300, the Council may, acting unanimously on a recommendation from the ECB or from the Commission, and after consulting the ECB in an endeavour to reach a consensus consistent with the objective of price stability, after consulting the European Parliament, in accordance with the procedure in paragraph 3 for determining the arrangements, conclude formal agreements on an exchange-rate system for the ecu in relation to non-Community currencies. The Council may, acting by a qualified majority on a recommendation from the ECB or from the Commission, and after consulting the ECB in an endeavour to reach a consensus consistent with the objective of price stability, adopt, adjust or abandon the central rates of the ecu within the exchange-rate system. The President of the Council shall inform the European Parliament of the adoption, adjustment or abandonment of the ecu central rates.

2. In the absence of an exchange-rate system in relation to one or more non-Community currencies as referred to in paragraph 1, the Council, acting by a qualified majority either on a recommendation from the Commission and after consulting the ECB or on a recommendation from the ECB, may formulate general orientations for exchange-rate policy in relation to these currencies. These general orientations shall be without prejudice to the primary objective of the ESCB to maintain price stability.

3. By way of derogation from Article 300, where agreements concerning monetary or foreign‑exchange regime matters need to be negotiated by the Community with one or more States or international organisations, the Council, acting by a qualified majority on a recommendation from the Commission and after consulting the ECB, shall decide the arrangements for the negotiation and for the conclusion of such agreements. These arrangements shall ensure that the Community expresses a single position. The Commission shall be fully associated with the negotiations.

Agreements concluded in accordance with this paragraph shall be binding on the institutions of the Community, on the ECB and on Member States.

4. Subject to paragraph 1, the Council, acting by a qualified majority on a proposal from the Commission and after consulting the ECB, shall decide on the position of the Community at international level as regards issues of particular relevance to economic and monetary union and on its representation, in compliance with the allocation of powers laid down in Articles 99 and 105.

5. Without prejudice to Community competence and Community agreements as regards economic and monetary union, Member States may negotiate in international bodies and conclude international agreements.



***

Original Lisbon Treaty


Article 2, point 174 of the original Treaty of Lisbon inserted an Article 188o into the Title on international agreements (OJEU 17.12.2007 C 306/99):


174) An Article 188 O shall be inserted, with the wording of paragraphs 1 to 3 and 5 of Article 111 and paragraph 1 shall be split into two subparagraphs, the last two sentences becoming the second subparagraph; the Article shall be amended as follows:

(a) paragraph 1, first subparagraph, shall be replaced by the following:
‘
1. By way of derogation from Article 188 N(1), the Council, either on a recommendation from the European Central Bank or on a recommendation from the Commission and after consulting the European Central Bank, in an endeavour to reach a consensus consistent with the objective of price stability, may conclude formal agreements on an exchange-rate system for the euro in relation to the currencies of third States. The Council shall act unanimously after consulting the European Parliament and in accordance with the procedure provided for in paragraph 3.’.

In the second subparagraph, the words ‘on a recommendation from the ECB or from the Commission and after consulting the ECB in an endeavour to’ shall be replaced by the following: ‘either on a recommendation from the European Central Bank or on a recommendation from the Commission, and after consulting the European Central Bank, in an endeavour to’;

(b) in paragraph 2, the words ‘non-Community currencies’ shall be replaced by ‘currencies of third States’;

(c) in paragraph 3, in the first sentence of the first subparagraph, the reference to Article 300 shall be replaced by a reference to Article 188 N and the word ‘States’ shall be replaced by ‘third States’, and the second subparagraph shall be deleted;

(d) paragraph 5 shall be renumbered ‘4’.


***

Consolidated Lisbon Treaty

Renumbered Article 219 of the Treaty on the Functioning of the European Union (TFEU) and made readable once again, the provision looks like this in the consolidated version of the Lisbon Treaty (OJEU 9.5.2008 C 115/146–147):


Article 219 TFEU
(ex Article 111(1) to (3) and (5) TEC)

1. By way of derogation from Article 218, the Council, either on a recommendation from the European Central Bank or on a recommendation from the Commission and after consulting the European Central Bank, in an endeavour to reach a consensus consistent with the objective of price stability, may conclude formal agreements on an exchange-rate system for the euro in relation to the currencies of third States. The Council shall act unanimously after consulting the European Parliament and in accordance with the procedure provided for in paragraph 3.

The Council may, either on a recommendation from the European Central Bank or on a recommendation from the Commission, and after consulting the European Central Bank, in an endeavour to reach a consensus consistent with the objective of price stability, adopt, adjust or abandon the central rates of the euro within the exchange-rate system. The President of the Council shall inform the European Parliament of the adoption, adjustment or abandonment of the euro central rates.

2. In the absence of an exchange-rate system in relation to one or more currencies of third States as referred to in paragraph 1, the Council, either on a recommendation from the Commission and after consulting the European Central Bank or on a recommendation from the European Central Bank, may formulate general orientations for exchange-rate policy in relation to these currencies. These general orientations shall be without prejudice to the primary objective of the ESCB to maintain price stability.

3. By way of derogation from Article 218, where agreements concerning monetary or foreign exchange regime matters need to be negotiated by the Union with one or more third States or international organisations, the Council, on a recommendation from the Commission and after consulting the European Central Bank, shall decide the arrangements for the negotiation and for the conclusion of such agreements. These arrangements shall ensure that the Union expresses a single position. The Commission shall be fully associated with the negotiations.

4. Without prejudice to Union competence and Union agreements as regards economic and monetary union, Member States may negotiate in international bodies and conclude international agreements.


***

Comments

The bulk of Article 111 TEC has been moved from monetary policy to international agreements to become Article 219 TFEU.

We see that concluding formal agreements on an exchange-rate system for the euro and agreements concerning monetary or foreign exchange regime matters derogates from the general procedure for the conclusion of EU international agreements in Article 218 TFEU.

A minor detail is that ‘third States’ is a rare hybrid expression, since the amending treaties normally refer to (Member) States and to ‘third countries’.

Article 219 TFEU is one of the treaty provisions which will not apply to member states with a derogation (which do not fulfil the conditions for the adoption of the euro), according to Article 139(2)(g), so member states means ones whose currency is the euro. .

In substance Article 219 TFEU corresponds with Article III-326 of the Constitutional Treaty.



Ralf Grahn