The shady trenchcoat and dark monacles of the EU's planned stability mechanism (ESM)

The European Union is planning a treaty to establish a new intergovernmental agreement called the European Stability Mechanism (ESM), the eurozone's permanent bailout fund. 

The ESM treaty employs the European Commission and the European Central Bank to obtain financial aid by ESM members and is expected to come into force in July, 2012.

Some critics have referred to the ‘Treaty Establishing the European Stability Mechanism [between 17 member states]’ as one of debt, as all eurozone national budgets are set to fall into the hands of this single intergovernmental organisation. 

It has also been suggested that the ESM will severely confine eurozone members’ economic sovereignty.

 In the agreement between eurozone members, the authorized capital stock of the ESM shall be €700 billion; an amount that increases automatically when another EU member state decides to join the ESM and when the ESM says so.

Almost 50 percent of the capital stock will be funded by Germany and France alone, with Germany coughing up the lion’s share of contributions.

 If the ESM needs money, its members will have a week to pay up.  Taking normal banking times into account that means even the poorest ESM member has only a few days to write a cheque.

Article 9 states: “ESM Members hereby irrevocably and unconditionally undertake to provide their contribution to the authorised capital stock...[and] pay on demand any capital call made on them...within seven days of receipt”.

The ESM Board of Governors may decide to change the authorised capital stock and amend the amounts that ESM members contribute accordingly. 

So €700 billion is only the start; the ESM can stock up the fund as much as it wants to, anytime it wants to and ESM members would have to ‘unconditionally and irrevocably’ comply with monetary demands - immediately.

A closer look at the Treaty reveals that, in each of the territories of its members, the European Stability Mechanism will have full legal personality, including the capacity to start legal proceedings and to acquire and dispose of movable and immovable property. 

Crucially, the premises, archives and all documents belonging to or held by the ESM will be inviolable and ESM property, funding and assets regardless of where and by whom they are held: 

1. Shall enjoy immunity from every form of judicial process;
2. Shall be immune from search, requisition, confiscation, expropriation or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action; 
3. Shall be free from restrictions, regulations, controls and moratoria of any nature.

Essentially, these privileges and immunities mean that the ESM can sue its members but its members cannot sue it; and that no government, legislature or democratic law will have effect on it. 

Management and staff will also enjoy the same protection in the course of their work, and documentation produced may perhaps never be seen.

 The ESM will be exempt from any requirement to be authorised or licensed as a credit institution, investment services provider or other authorised licensed or regulated entity.

In addition, the Treaty allows for the ESM to obtain recognition of its status in other territories in which it performs functions or holds assets.

Such territories could include Britain as major British banks have a combined exposure of £170 billion to Eurozone economies. Britain is currently refusing to contribute to the ESM and resisting calls to offer more money to the IMF for euro-zone use.

I am no EU expert and the facts in this article would need to be double-checked; but does any other EU entity have powers like this?