ESM Immunity from Prosecution

beeftotheheels

I've seen time and again, on this site, in Ganley's awful bit in the Sindo, the line that the ESM is answerable to no one and will descend into all manner of corruption etc.

Ganley says

That's not even the worst bit -- the worst bit is the fact that this ESM, as constituted, is completely above the law. It has almost limitless power, and complete legal immunity. No court, no force of law, no police force can ever oversee it or question its decisions. We're creating a loan shark that will be desperate for funding, and giving it unlimited unaccountable power. That's not a leap of faith, it's downright foolhardy.

http://www.independent.ie/opinion/analysis/declan-ganley-this-vote-in-the-dark-will-rob-us-of-fiscal-sovereignty-3119612.html
First off let's look at the two provisions in the ESM treaty.

ARTICLE 35

Immunities of persons

1. In the interest of the ESM, the Chairperson of the Board of Governors, Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official
capacity and shall enjoy inviolability in respect of their official papers and documents.

2. The Board of Governors may waive to such extent and upon such conditions as it determines any of the immunities conferred under this Article in respect of the Chairperson of the Board of Governors, a Governor, an alternate Governor, a Director, an alternate Director or the Managing Director.

3. The Managing Director may waive any such immunity in respect of any member of the staff of the ESM other than himself or herself.

4. Each ESM Member shall promptly take the action necessary for the purposes of giving effect to this Article in the terms of its own law and shall inform the ESM accordingly.

So, in so far as any member of the board or staff is doing their job, they cannot be subjected to legal action. However, if they're not doing their job e.g. if they're robbing the tea kitty, then they can be prosecuted.

Furthermore, the board may waive their immunity, the board may remove the managing director's immunity, and the managing director may remove any staff member's immunity.

So all employees are subject to internal checks and balances, and potentially external ones if they're not doing their job properly.

This is what the IMF has to say about similar rules which apply to its employees.

http://www.imf.org/external/pubs/ft/sd/index.asp?decision=DN11

Now that employees are dealt with - what about the ESM itself? Is it above the law?

Clearly not. This is what the ESM treaty says about it

ARTICLE 37

Interpretation and dispute settlement

1. Any question of interpretation or application of the provisions of this Treaty and the by-laws of the ESM arising between any ESM Member and the ESM, or between ESM Members, shall be submitted to the Board of Directors for its decision.

2. The Board of Governors shall decide on any dispute arising between an ESM Member and the ESM, or between ESM Members, in connection with the interpretation and application of this Treaty, including any dispute about the compatibility of the decisions adopted by the ESM with this Treaty. The votes of the member(s) of the Board of Governors of the ESM Member(s) concerned shall be suspended when the Board of Governors votes on such decision and the voting threshold needed for the adoption of that decision shall be recalculated accordingly.

3. If an ESM Member contests the decision referred to in paragraph 2, the dispute shall be submitted to the Court of Justice of the European Union. The judgement 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.

So, if a Member State has an issue with the ESM, they should try to sort it out between themselves first off, but if they can't then the Court of Justice will sort it out.

A fund, like the IMF lending to distressed sovereigns, wants to mitigate the risk of their staff being harrassed by angry taxpayers in program countries, so gives them immunity from prosecution while they're doing their job.

They're not immune if they're not doing their job. Their immunity can be waived by their employer, the board of Governors of which includes representatives of all ESM member countries.

Even if it were possible for a corrupt employee to benefit from their immunity, and even if it were possible that the managing director and board of governors would continue to protect them, the fund itself could still be subject to litigation in the CJEU if it broke the law.

Can any one explain to me why this is considered so sinister?

meglome

I've been having the same conservation online for weeks. According to some the ESM can rape and murder if they like. I'd actually laugh at that nonsense but they are really being serious, such is the level of debate... sadly.

oscarBravo

...all the while accusing the 'yes' side of scaremongering.

meglome

beeftotheheels wrote: »

Can any one explain to me why this is considered so sinister?

Anyone?

StealthRolex

I don't know about sinister but there are distasteful things within the ESM treaty

First off it has not yet been ratified but apparently we are due to start paying vast sums of money in to in in July. (That's July 2012 for anyone revisiting this thread later)

If it does not get ratified, which is a risk, will we get the money we pay in to it back?

Another issue is that it will be staffed by people who will be paid who knows how much and who will pay no tax on their salaries.

It could be surmised that apart from being possibly immune from prosecution they will most certainly be immune from austerity.

beeftotheheels

StealthRolex wrote: »

I don't know about sinister but there are distasteful things within the ESM treaty

First off it has not yet been ratified but apparently we are due to start paying vast sums of money in to in in July. (That's July 2012 for anyone revisiting this thread later)

If it does not get ratified, which is a risk, will we get the money we pay in to it back?

Another issue is that it will be staffed by people who will be paid who knows how much and who will pay no tax on their salaries.

It could be surmised that apart from being possibly immune from prosecution they will most certainly be immune from austerity.

First off - the ratification point.

With treaties, they get signed (By each State). Then they get ratified (by each State) and certain paper work takes place. Then, if certain conditions are met, they enter into force (become binding on everyone who has signed and ratified and submitted their paperwork).

The first installment is due 15 days after the treaty enters into force.

So there is no risk of us paying the monies before the treaty enters into force, they're not due until it does.

Since entry into force occurs once States accounting for 90% of the total pot have submitted their paper work it is technically possible we could have to pay in before Estonia or someone ratifies, but the treaty will still be binding on us and on everyone (apart from Estonia in my example).

If France or Germany or Italy or Spain refuse to ratify the treaty then it isn't binding on any one and we don't have to pay over any cash. Each of them alone accounts for more than 10% of the pot so the 90% test cannot be met without any one of them.

The 90% rule really only leaves open a risk that one or two smaller states might not do so on time.

In terms of the tax exemption I think you're putting the cart before the horse. While signatory nations should exempt salaries of ESM employees, the ESM itself taxes those employees for its own benefit.

Chances are however, the ESM will set an internal tax rate broadly in line with EZ averages, if you read on to the reason behind the internal tax.

The alternative would be to have most of the staff taxed in Luxembourg where all the Staff will be based (or more likely, they'll be living in Belgium and Germany and commuting to Lux) which would mean that the ESM was subsidizing those economies at the expense of Ireland or Italy or where ever else the staff come from, which strikes me as more unfair.

This way the ESM tax goes back into the pot and is shared equally by all ESM Member Countries.

Without all the various tax exemptions the ESM would be one huge subsidy for Luxembourg (which is tiny and doesn't need the cash) since that is where the ESM is based and likely, under normal circumstances, to pay most of its taxes. I for one have no wish to see Irish taxpayers subsidize our AAA Luxembourg brethren.

But even if the ESM levied a 20% tax on income of €100k which would ordinarily be taxable at say 45% in the home State, then the ESM will reduce the salary by the difference. It's the reverse of tax equalization and happens all the time, ESM employees will be in the same net position as if they were working where ever else.

Big AK1

It seems a liitle strange that while all of our eyes are focused on the Fiscal Treaty, the ESM is humming along quitely without a huge amount of highlighting from the press et al.
Dunno about anyone else, but it certaily seems strange to set up a new fund with 700 Billion in the kitty, appoint a board of governors, a board of directors, a managing director, staff; and make all of the above immune from any judicial processes. They all have immunity unless it is waived (by someone in their same organisation)! You can bet that a lot of the banskters that got us into this mess in the first place will be employed within the structure of the ESM (for their expertise of course). Now we are to trust them with more billions, give them immunity and expect them to do the right thing...?

Questions:
If all of the ESM members are contributing to a what I would guess would be a holding fund in reserve, why would the ESM possibly need to borrow from other capital markets, etc?
(Article 21 of the ESM -
The ESM shall be empowered to borrow on the capital markets from banks, financial institutions or other persons or institutions for the performance of its purpose.)

Is the ESM simply going to be allowed to gamble with the fund money on the open market, stocks, etc; in order to get a profitable return for for itself?

AK

beeftotheheels

Big AK1 wrote: »

Dunno about anyone else, but it certaily seems strange to set up a new fund with 700 Billion in the kitty, appoint a board of governors, a board of directors, a managing director, staff; and make all of the above immune from any judicial processes. They all have immunity unless it is waived (by someone in their same organisation)!

They have immunity in so far as they are doing their jobs. As do IMF staff. Because if they had to run the risk of being arrested and charged with hurting the people of Greece every time they tried to enter the country to check how things are going they could not do their jobs.

If they're not doing their jobs, then they're not immune. So if they're speeding trying to catch a flight home they can be arrested and charged with a driving offence. If they get drunk and start a brawl they can be charged with that.

Big AK1 wrote: »

You can bet that a lot of the banskters that got us into this mess in the first place will be employed within the structure of the ESM (for their expertise of course). Now we are to trust them with more billions, give them immunity and expect them to do the right thing...?

How many bankers have been charged with anything in relation to the implosion of the property bubble? Not all that many. And part of the reason behind that is that making a mistake does not constitute an offence. Making a colossal mistake (with the benefit of hindsight) is not criminal. So, not being criminal, being immune from prosecution doesn't really give them any great benefit.

So, despite the fact that the ESM will likely not hire huge numbers of investment bankers, modelling itself as it does on the IMF and therefore much more likely to be staffed by risk averse technocrats, there is limited scope for those technocrats to be able to benefit personally from any immunity since any personal benefit would likely involve criminal activity (this not being a bank, with stock options or bonuses) outside the scope of their roles.

Seriously, the IMF has been set up this way for decades and has not turned out to be a hotbed of financial risk taking or of abuses of power.

Big AK1 wrote: »

If all of the ESM members are contributing to a what I would guess would be a holding fund in reserve, why would the ESM possibly need to borrow from other capital markets, etc?

Because, if the ESM has 100bn of cash, and the perceived backing of all the EZ member States, the markets might be prepared to lend it another say 200bn at rates of say 3%.

This then means that it has 300bn of cash, which it can lend to say Narnia (a fictional country who has signed up) at 2.5% without making a loss.

Tha ability to borrow at cheaper rates than Italy or Spain can borrow at could be used to increase the fire power of the fund, more so if we ever get around to allowing the ECB to lend to it.

Big AK1 wrote: »

Is the ESM simply going to be allowed to gamble with the fund money on the open market, stocks, etc; in order to get a profitable return for for itself?

No, see above.

But even if the fund did somehow make a return for itself (which is unlikely given the IMF example, and would be very small given the rates it lends at to borrowing countries) that return would reduce the amount the Members had to put in to fund the next crisis. The Fund belongs to its Members, it can't personally decide to blow any profits it made on champagne and caviar.

Stop looking for conspiracies here.

antoobrien

Big AK1 wrote: »

Questions:
If all of the ESM members are contributing to a what I would guess would be a holding fund in reserve, why would the ESM possibly need to borrow from other capital markets, etc?
(Article 21 of the ESM -
The ESM shall be empowered to borrow on the capital markets from banks, financial institutions or other persons or institutions for the performance of its purpose.)

Is the ESM simply going to be allowed to gamble with the fund money on the open market, stocks, etc; in order to get a profitable return for for itself?
[/SIZE]
AK

I'm not going to bother dealing with the conspiracy theory, read the OP for the answer to that stuff.

This

The ESM shall be empowered to borrow on the capital markets from banks, financial institutions or other persons or institutions for the performance of its purpose

does NOT mean

the ESM simply going to be allowed to gamble

I think we should institute a ban on posters equating investment to gambling without justifying their claims.

Is it Gambling - only if you use the "Pinstickers Guide To Investment" or don't do proper due diligence. Is there a risk, yes, of course there is, this is the reason why certain investments pay out higher returns - because they are seen as being riskier in the advent of "unfavorable circumstances"

Big AK1

beeftotheheels wrote: »

They have immunity in so far as they are doing their jobs. As do IMF staff. Because if they had to run the risk of being arrested and charged with hurting the people of Greece every time they tried to enter the country to check how things are going they could not do their jobs.

If they're not doing their jobs, then they're not immune. So if they're speeding trying to catch a flight home they can be arrested and charged with a driving offence. If they get drunk and start a brawl they can be charged with that.

How many bankers have been charged with anything in relation to the implosion of the property bubble? Not all that many. And part of the reason behind that is that making a mistake does not constitute an offence. Making a colossal mistake (with the benefit of hindsight) is not criminal. So, not being criminal, being immune from prosecution doesn't really give them any great benefit.

So, despite the fact that the ESM will likely not hire huge numbers of investment bankers, modelling itself as it does on the IMF and therefore much more likely to be staffed by risk averse technocrats, there is limited scope for those technocrats to be able to benefit personally from any immunity since any personal benefit would likely involve criminal activity (this not being a bank, with stock options or bonuses) outside the scope of their roles.

Seriously, the IMF has been set up this way for decades and has not turned out to be a hotbed of financial risk taking or of abuses of power.

Because, if the ESM has 100bn of cash, and the perceived backing of all the EZ member States, the markets might be prepared to lend it another say 200bn at rates of say 3%.

This then means that it has 300bn of cash, which it can lend to say Narnia (a fictional country who has signed up) at 2.5% without making a loss.

Tha ability to borrow at cheaper rates than Italy or Spain can borrow at could be used to increase the fire power of the fund, more so if we ever get around to allowing the ECB to lend to it.



No, see above.

But even if the fund did somehow make a return for itself (which is unlikely given the IMF example, and would be very small given the rates it lends at to borrowing countries) that return would reduce the amount the Members had to put in to fund the next crisis. The Fund belongs to its Members, it can't personally decide to blow any profits it made on champagne and caviar.

Stop looking for conspiracies here.

I'm still not convinced (probably 'cos my trust in the political & monetary system has wained); but nicely argued Beeftotheheels

Dad11

for this reason alone I am voting no. I am not comfortable with anymore institutions having immunity and being all powerful. Another unelected body with power over a diff jurisdiction. It just does not sit very well with me. On that point alone it's a non-runner for me. Also French and German banks needs to take a hit on the bank debt. This debt is not owned by the irish people! Our Gov needs to show some backbone!

beeftotheheels

Dad11 wrote: »

for this reason alone I am voting no. I am not comfortable with anymore institutions having immunity and being all powerful. Another unelected body with power over a diff jurisdiction. It just does not sit very well with me. On that point alone it's a non-runner for me. Also French and German banks needs to take a hit on the bank debt. This debt is not owned by the irish people! Our Gov needs to show some backbone!

Would you be happy with the following scenario?

Say in 10 years time we've put €11bn in the ESM and are not borrowing from it. The ESM lends money (including our some of €11bn) to [the next] Greece.

Every time the ESM staff try to go to Greece to check on how Greece are progressing they get arrested by angry Greek police man, get refused entry by angry Greek customs officials, so they can't actually tell if Greece is complying with the terms of their bailout or not.

Greece then passes an Act of Parliament which purports to seize all ESM assets (including a chunk of our €11bn) in their country.

Would you be happy with this? I sure as hell wouldn't.

The ESM is accountable, to its members. A Court has oversight. The Court of Justice. All the immunity does is prevent one rogue State, likely a borrower, from interfering with the operations of the ESM. It doesn't make the ESM unaccountable to the democratically elected Governments of the ESM Member States. Art 37 makes this very clear.

But hey, why let little things like facts get in the way of a justification for a No vote on a completely different treaty, a No vote which does nothing to protect our €11bn in the ESM ,but deprives us of the right to borrow other people's money from that fund?!

meglome

Dad11 wrote: »

for this reason alone I am voting no. I am not comfortable with anymore institutions having immunity and being all powerful.

Did you read any of the above.

Dad11 wrote: »

On that point alone it's a non-runner for me.

So when you read above and see they are not immune as you seem to think they are, will that be a Yes vote? Or as is more typical you'll just move the goalpost.

Dad11 wrote: »

Also French and German banks needs to take a hit on the bank debt. This debt is not owned by the irish people! Our Gov needs to show some backbone!

Em why would the German and French banks take a hit on our debt? Ahh I assume you mean the myth that they loaned us the money but no one has ever given any proof for.

And I hate to tell you this the last government made all the debt our debt. So unless you have a time machine?

PopeBuckfastXVI

Dad11 wrote: »

for this reason alone I am voting no. I am not comfortable with anymore institutions having immunity and being all powerful. Another unelected body with power over a diff jurisdiction. It just does not sit very well with me. On that point alone it's a non-runner for me. Also French and German banks needs to take a hit on the bank debt. This debt is not owned by the irish people! Our Gov needs to show some backbone!

You're not voting on the existence of the ESM, or even our membership of it. You are voting to allow Ireland to access the fund if need be. ESM membership is in a different treaty that's not being put to referendum. Sorry if you are already aware of this, but there's been some muddying of the waters on this by vested interests.

Why should only French & German banks voluntarily eat some of our banks debt? But not UK banks? American banks? Australian banks?

Ignoring the legal side of things, what's the moral justification for foisting our banks debt onto French and German banks? Which specific banks would you have take over our banks debt? Why?

Dad11

meglome wrote: »

Did you read any of the above.



So when you read above and see they are not immune as you seem to think they are, will that be a Yes vote? Or as is more typical you'll just move the goalpost.

They are immune. I have read the text. It's very clear!




Em why would the German and French banks take a hit on our debt? Ahh I assume you mean the myth that they loaned us the money but no one has ever given any proof for.

Banks borrow or issue promise's to pay other banks etc this is how the money system works. German and French banks lent/invested in irish banks. They have to share some of the Burden.

And I hate to tell you this the last government made all the debt our debt. So unless you have a time machine?

The last Government did not have a mandate to do this!

PopeBuckfastXVI

Dad11 wrote: »

The last Government did not have a mandate to do this!

No indeed, but they unfortunately did it anyway, and I suggest you never forget what Fianna Fail did to this country.

Nothing to do with this treaty mind you...

beeftotheheels

Dad11 wrote: »

The last Government did not have a mandate to do this!

You mean besides the mandate the Irish people gave them by electing them in 2007?

I didn't vote for them, I never voted FF in my life and was aghast when we re-elected Bertie at a time when it was blindingly obvious that he was not above "taking a dig-out from a few mates in the property sector, I don't like their decision and I think they made huge mistakes, but they did have a mandate.

View

PopeBuckfastXVI wrote: »

No indeed, but they unfortunately did it anyway, and I suggest you never forget what Fianna Fail did to this country.

Nothing to do with this treaty mind you...

Actually the Oireachtas has a permanent mandate to do whatever it likes within the constitutional constraints that it is subject to.

Scofflaw

beeftotheheels wrote: »

You mean besides the mandate the Irish people gave them by electing them in 2007?

I didn't vote for them, I never voted FF in my life and was aghast when we re-elected Bertie at a time when it was blindingly obvious that he was not above "taking a dig-out from a few mates in the property sector, I don't like their decision and I think they made huge mistakes, but they did have a mandate.

There's an idea that crops up regularly, that the government only has a mandate to do what it has explicitly said it would do prior to election.

I'm not sure how that's even vaguely supposed to work - presumably whenever anything happens during the following five years that wasn't foreseen at the time of the election, we have another general election?

cordially,
Scofflaw

PopeBuckfastXVI

View wrote: »

Actually the Oireachtas has a permanent mandate to do whatever it likes within the constitutional constraints that it is subject to.

Yes, that's legally true, begrudgingly.

Anyway, second point about never forgetting who did it stands, and it's still nothing to do with this treaty.

meglome

Dad11 wrote: »

The last Government did not have a mandate to do this!

As the others have said we might not like what they did, most of us don't, but they did have a mandate to do it unfortunately.