EU SHOULD TAKE US TO INTERNATIONAL COURT IF SNOWDEN ALLEGATIONS ARE VALID.

The allegations, by Edward Snowden, that the United States National Security Agency(NSA), for which he worked, spied on diplomatic missions of the European Union in Washington and New York, and even on the building where EU Summits take place in Brussels, are very serious.

They require a deliberate and sustained response, not something exaggerated, or that will last only for a one day news cycle, and later expose contradictions in the EU positions.

The truth is that fundamental values are at stake here for the EU.

The founding idea of the EU was that relations in, and between, states should be governed by rules, rather than, as previously, by raw power. States, and individuals, should be equal before the law.

The Snowden allegations, if true, reveal a grave breach on international law by an agency of the United States government.

This is not something that can emoted about in the short term, and then later  brushed aside, with a worldly wise and jaded shrug, on the basis that ”everyone is at it.”

A CLEAR BREACH OF THREE ARTICLES OF VIENNA CONVENTION

The law on this matter is crystal clear. The Vienna Convention of 1961 codifies the rules under which diplomats and embassies do their work. But the rules themselves go back, in customary international law, to the 16th century.

The 1961 Vienna Convention has been ratified by the United States. Indeed the US relied successfully on that Convention in the International Court of Justice, when its own diplomats and Embassy were interfered with by Iran in 1979.

It is in the national interest of the United States to ensure that this Convention is respected, without question, and as a matter of routine, in order to ensure protection for its own missions abroad.

 The Vienna Convention says, in article 22,

 “the premises of a(diplomatic) mission shall be inviolable”. 

”A receiving state shall not enter them, except with the consent of the Head of Mission” 

“The receiving state is under a special duty to take all appropriate steps to protect the premises of the mission from any intrusion.”

Article 24 of the Convention says the “archives and documents of the mission shall be inviolable” and Article 27 extends similar protection to it correspondence. 

The Snowden/Der Spiegel allegations suggest that listening devices were placed in the EU Mission in Washington, without consent, which would be a blatant breach of Article 22. No such consent was given in my time in Washington.

They also suggest that the NSA hacked into the computer system of the EU missions, which would be a clear breach of both article 24 and 27 of the Vienna Convention.

Reacting to these allegations, US figures, like the former head of the CIA, made no reference  at all the US obligations under international law, to the US interest in protecting diplomacy, or even to the unfairness and  bad faith involved in spying on partners with whom one is supposedly negotiating in a transparent way. Instead he sought to dismiss them, by hinting vaguely about intelligence gathering by some EU states.

But what is alleged was not a case of the US reciprocally countering supposed illegal activities by  some EU states. It was hostile and illegal activity, by the US, directed against the EU itself, and the EU does not do have either the capacity, or the authority, to carry on any reciprocal surveillance of US missions in Europe, and does not do so. The ex head of the CIA knows that perfectly well.

In any event, I do not understand the point of what the NSA was supposedly doing. The activities of the EU Missions abroad, and of the Council of Ministers in Brussels, deal with subjects on which the facts are well known, and on which negotiating options are also fairly obvious. They can be easily discovered by US officials, simply by asking. They do not involve sensitive questions concerning the security of the United States, which is supposed to be the concern of the NSA. 

There will, very occasionally, be commercially sensitive and confidential information shared with the EU Mission in Washington by European or American companies, which might be useful to its competitors.   Apart from the illegality involved, the NSA would have no legitimate reason to seek out, collect, or share that sort of commercial information.

I believe what is involved here is a case of a security bureaucracy gradually extending is role, and engaging in “mission creep” just because it can, and because nobody is stopping it. The missions of Agencies are often lazily defined, and open to multiple interpretations. That may well be the case with the NSA.

BUT TRADE AND INVESTMENT TALKS SHOULD CONTINUE

What should the EU do now?

I will start by saying what it should not do.

It should not suspend the negotiation of a possible Trade and Investment Pact with the United States. In fact, it should recognise that these allegations strengthen the EU’s hand in these negotiations, in the sense that the US now has to demonstrate its good faith.

Nor should it expect an early, full, or contrite admission from the United States of what might have happened, or make that a precondition for anything.

Instead, The EU should adopt a twin track approach

It should continue with the trade and investment negotiations, as if nothing had happened. 

But, simultaneously and separately, the EU and its member states should follow the example set by the United States itself in 1980, and take a case in regard to these allegations of breaches of the Vienna Convention, to the International Court of Justice in the Hague. This assumes that it can obtain sufficient documentary evidence of the Snowden allegations from Mr Snowden, or from Der Spiegel.  Pursuing a legal route would depoliticise the issue in the short term, and allow time for things to cool down.

Surveillance technology has advanced a great deal since 1961 when the Convention was concluded. A new judgement from the International Court in this case would be helpful. It would re-establish and modernise the norms of behaviour we would want all countries to respect in future, notably emerging powers like China. 

President Obama, who, probably more than any previous President, understands the  significance of international law, and who wants to bring countries like China fully within its strictures, should welcome such a robust reaffirmation of the Vienna Convention. 

Financial Services in Ireland

THE JOB POTENTIAL OF FINANCIAL SERVICES IN IRELAND

I am looking forward to helping the international financial services industry in Ireland make an even greater impact on job creation in this country, when I take up my role as Chairman of IFSC Ireland in September. In the meantime, I am reading and listening.

The industry already provides about 25000 jobs directly in banking, funds management and insurance, and supports many more jobs indirectly in back up services like accounting, law, and hospitality.

Wholesale financial intermediation creates about 7% of the GDP in Ireland as against 2% on average throughout the EU, and 4.5% in Britain.

About 10% of all EU funds under management , are managed here in Ireland ,a country with only 1.4% % of the EU’s GDP.

This is a highly competitive industry. Modern communications mean that these services can be provided in any number of places or time zones. They will continue to be provided in increasing quantity in Ireland but only if Ireland continues to offer a top quality financial, social and regulatory environment. This is a people based industry, so a supply of well educated and motivated young people, who want to work in Ireland ,is crucial.

A key figure in the industry, Willie Slattery, pointed out last weekend that the economic downturn has had a side effect of making Ireland more competitive because it has led to a significant reduction in relative labour , office accommodation, and other costs in the past two years. The reduction in housing costs will also have helped in attracting staff here from overseas.

I believe it is critical that Ireland have a reputation as a thorough, rigorous, and pragmatic regulator of the industry. These three characteristics complement one another. Nothing is to be gained either by laxity or rigid formalism. At the end of the day, it is all about winning and holding trust, and in that there is no divergence of interest between regulator and regulated.

RESTORING ECONOMIC GROWTH

The success of the endeavour depends very much on Europe’s success in restoring economic growth. The financial crisis affecting banks and Governments is no more than a symptom of a deeper problem. That problem is a loss in relative competitiveness of both Europe and North America vis a vis the emerging economies of China, India, Brazil and others over the past twenty years. The loss of competitiveness was accompanied by an unwillingness to face up to long term problems like the eventual cost of ageing societies, and the ephemeral nature of some of the innovations of the so called “new economy”.

The boom- driven expansion of credit was like an anaesthetic that concealed an underlying loss in competitiveness from us until 2008. Now that the anaesthetic has been withdrawn, after such a long time, the pain is acute. The human cost is all too real.

The answer to this for all European countries is, I believe, to work to increase what economists would call the total factor productivity of our economy, the productivity of the way in which we use all our resources, public and private, capital and labour, tangible and intangible. We need a new way of thinking , an enhanced orientation towards finding ways to earn a living from meeting the needs of the rest of the world.

PUTTING THE EURO BACK ON A SOUND FOOTING

As many of you will know, I am a strong believer in the European Union, the world’s only historical example of an entirely voluntary, and democratically sanctioned, pooling of sovereignty between different nations, many of whom were at war with one another in living memory. No other part of sthe world has attempted anything as ambitious, or as successful as the European Union.

I know that there is not a little concern at the difficulties of the euro and complaints that the EU’s policy makers have been slow in rectifying what may be seen as substantial omissions in the original design of European Monetary Union.

But all of this should be kept in proportion. In January 2001, the euro was worth 92 US cents. It subsequently rose as high as $1.59, thereby affecting euro zone exports as anyone living along the border with Northern Ireland can confirm. It has recently fallen back from that to a lower, and perhaps more sustainable, level. But that is a level well above where it was in 2001.

The arguments that are now taking place in the EU now about bail outs, about surveillance of national budgets, ECB bond purchases, about supposedly pro cyclical budget cutting, about moral hazard, about the need to devise a workable resolution mechanism for large but insolvent entities, and about the exact amount solidarity which member states of the euro owes one another, are all real arguments, concerning real choices ,on which there are legitimate grounds for disagreement . There is nothing wrong with the fact that there are vigorous arguments between countries about these issues at EU level, just as there are at national level. That is normal politics.

The criticism of the EU that has the greatest validity, in my view, is that it has waited for foreseeable problems to become acute before tackling them.

It is not so much the EU’s decisiveness, as its foresight, that has been open to criticism.

It was foreseeable that the combination of a single centralised monetary policy, with divergent and decentralised fiscal policies would create contradictions.

We must not make the same mistake again. We must show foresight, and intellectual rigour, in regard to the problems looming on the horizon.

THE GERMAN CONSTITUTION AND THE EURO

There is one matter affecting the euro, and the solidity of the European economy generally, on which foresight is now needed. That is a decision the German Constitutional Court might take on whether the proposed closer fiscal policy integration in the euro zone is compatible with the German Basic Law or constitution. For understandable historical reasons, German Courts take democratic norms and the sovereignty of the people very seriously.

Issues that may be at stake before the German Constitutional Court are whether

1. The increased EU surveillance of the German budget, or

2. The large new German contribution to the special vehicle being set up to help euro member states with funding difficulties,

run afoul of the German constitution or Basic Law. It is important for markets ,and for the economic stability of Europe and the world ,that the EU not be taken by surprise by any decision the German Court may take on these vital matters that are now underpinning the euro.

The Court has already addressed this sort of issue in 2009, in its judgement on the Lisbon Treaty. So we have a preview of its thinking. It emphasised its belief that the sovereign state is still the main vehicle presently available for democratic governance.

DEMOCRACY THE KEY TEST

It said then that “an increase in integration(in the EU) can be unconstitutional (in Germany)l if the level of democratic legitimation (in the EU) is not commensurate to the extent and weight of the supranational power or rule” at EU level

And it has added that, for it, the test of democratic legitimation is whether “the allocation of the highest ranking political offices” takes place by means of “competition of Government and opposition” in a free and equal election . Essentially the question it posed was ..can the people vote the EU government out of office? Even though the European Parliament is directly elected, it not believe that the EU yet passed that democratic test. And they are right, the people of the EU do not have an opportunity to vote the EU government out of office.

The Court was therefore very reluctant to agree to further EU integration, beyond that proposed in the Lisbon Treaty, without a qualitative improvement in democratic governance at EU level. Otherwise it favoured keeping power at the level of the states because it argued that the states of the EU have a more developed democratic practice than the EU does ,at the moment.

I am certain this issue of whether there is sufficient democracy at EU level will arise again in any appeal to the Court against the proposed closer integration of Germany in responsibilities to, and for, the rest of the euro. Such an appeal will take place and has the potential to destabilise financial markets unless something is done to forestall the problem.

I have long advocated a simple remedy to this problem.

ELECTING AN EU PRESIDENT DIRECTLY

The Stability and Growth Pact, governing the euro, was finalised at the Dublin Summit of 1996 during the Irish Presidency. During that same Presidency, I commissioned a study on the possible direct election of the President of the European Commission by the people of Europe in a free and equal election of the people of the EU.

I really do not believe that it would be wise for EU leaders to sit and wait to see what the German Court might say . Its jurisprudence is already published in its judgement on the Lisbon Treaty.

That judgement should now be studied carefully, and urgently, by The European Council, the Commission ,and the Eurogroup.

The European Union must further improve democracy at EU level, to an extent that would make whatever further EU integration is necessary to underpin the euro, acceptable to the German Constitutional Court. It is as simple as that.

This could, for example, be achieved by providing for a electoral competition, among all the people of the EU, for the posts of highest ranking political actors in the EU.

The European Council could decide, without changing the Lisbon Treaty, that in future it will only nominate as President of the European Commission, as President of the European Council, and/or as President of the Eurogroup, a person who has won a majority of votes in an EU wide election for that post, held on the same day as the European Parliament election.

That would create a similar level of democracy at European level to that we each enjoy at national level.

Finally, the idea of a direct EU wide direct election is not as radical as it might seem. In December 2002, the Laeken European Council specifically asked the European Convention to examine this matter, but that never happened . All the emphasis was put on increasing the powers of the European Parliament, but direct election of a President by people themselves was never seriously considered. Nor was any change in the electoral system to the European Parliament itself.

The present crisis is an opportunity ,not only to deal with long hidden fiscal problems, it is also an opportunity to make the European Union even more democratic.

Speech by John Bruton, former Taoiseach, at the Annual lunch of the Federation of International Banks in Ireland on Wednesday the 2nd June at 12.50 pm in the Westin Hotel, Dublin