Summary:

I.

The proceedings for the abstract judicial review of a statute relate to the question of whether the Land Berlin is entitled to receive, as from 2002, supplementary federal grants allocated to cover special financial needs pursuant to Article 107.2.3 of the Basic Law in conjunction with the principle of federalism for the purposes of budget consolidation.

The allocation of supplementary grants (Article 107.2.3 of the Basic Law) requires that the recipient Land is financially weak. This must be determined by assessing fiscal revenues in relation to the expenditure burden.

The Federation may provide financially weak Länder with general supplementary grants to increase their financial capacity; it may also share in special burdens of financially weak Länder by way of supplementary grants covering special financial needs.

The allocation of supplementary grants for special financial needs requires that there is an identifiable and justifiable extraordinary burden. Such extraordinary burdens may only be recognised based on particular reasons. Supplementary grants for special financial needs do not serve the purposes of financing current projects nor of alleviating financial strains which are a direct and foreseeable consequence of the political decisions of a Land.

To the extent that supplementary grants for special financial needs can, due to a Land’s severe budgetary crisis, be considered an instrument for consolidating its budget, their allocation requires in addition that the Land concerned has made sufficient efforts of its own to avert the threat of a budgetary crisis or to resolve an existing one. This requirement derives from the principle that the Federation and the other Länder only have an obligation to provide mutual assistance in exceptional circumstances.

The exceptional situation of the Länder Berlin, Brandenburg, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt und Thuringia following the German re-unification justified the allocation of supplementary grants for special financial needs; these grants were allocated to cover the exceptional burdens resulting from the huge demand for infrastructure development and to overcome the disproportionate discrepancies in municipal financial capacities.

The Land Government of Berlin asserts in its application for judicial review of a statute that the Land Berlin was entitled to supplementary grants since 2002, enabling it to consolidate its budget. It is of the opinion that the Land Berlin has a constitutional right to financial rescue vis-à-vis the other Länder since it is suffering a severe budgetary crisis. It alleges that the relevant federal statutes do not make provision for such supplementary grants and that they are thus unconstitutional.

The Federal Government and the governments of the Länder Hamburg, Mecklenburg-Western Pomerania, Lower Saxony, Rhineland-Palatinate, Saxony-Anhalt, Schleswig-Holstein and Thuringia take the view – in part for different reasons – that the application for judicial review of a statute is inadmissible. For various reasons, the Federal Government and the majority of the Länder consider the application by the Land Government of Berlin for the review of a statute to also be unfounded.

II.

The Second Senate of the Federal Constitutional Court held that the challenged federal provisions (§11.6 of the Act on Financial Equalisation between the Federation and the Länder and Article 5.11 of the Act on the Continuation of the Solidarity Pact, on the Reform of the Federal Financial Equalisation Scheme and on the Winding-up of the Fund "German Unity") are compatible with Article 107.2.3 of the Basic Law and the principle of federalism in Article 20.1 of the Basic Law to the extent that Berlin was not allocated supplementary grants for the years from 2002 for the purposes of budget consolidation.

In essence, the decision is based on the following considerations:

Financial rescue measures by the Federation in the form of supplementary grants is subject to a strict ultima ratio principle. Financial rescue is only permissible and required under constitutional law where the budgetary crisis of a Land is not just severe in relative terms, i.e. in comparison to the other Länder, but has also reached such a severe level in absolute terms, i.e. with regard to the tasks allocated to the Land under constitutional law, that it has led to a bundesstaatlicher Notstand, in the sense that the Land – as an entity tasked with state functions that it must carry out in accordance with constitutional law – is unable to avert a threat to its existence without third-party assistance. This presupposes that the Land has exhausted all alternative available to it so that federal assistance is its last remaining option.

Supplementary federal grants pursuant to Article 107.2.3 of the Basic Law are the final component in a multi-level system for distributing fiscal revenues within a federal state. The overall purpose of this distribution is to provide the Federation and the Länder with the financial means necessary for the self-reliant and autonomous fulfilment of their constitutional tasks. In this regard, supplementary grants do not, in principle, serve the purpose of alleviating financial strains that are the direct and foreseeable consequence of the political decisions made by a Land in the performance of its tasks. Self-reliance and political autonomy entail that the Länder are themselves responsible for the budgetary consequences of such decisions.

A severe budgetary crisis in both absolute and relative terms is a prerequisite for financial rescue measures; the budgetary crisis is considered severe in absolute terms where the existence of a financially weak Land is under threat, and severe in relative terms where the crisis is extreme in comparison to the other Länder.

The financial weakness of a Land as a prerequisite for supplementary grants within the meaning of Article 107.2.3 of the Basic Law is a relative criterium, which cannot be defined in absolute terms. Rather, the relation between the average financial capacities of all of the Länder and the financial capacity of the Land potentially requiring assistance is decisive. Thus, it follows that in order for supplementary federal grants to be provided for financial rescue, the conditions of a "relative" budgetary crisis (based on a comparison with the other Länder) and of an "absolute" budgetary crisis (based on the ability of the Land to fulfil the tasks assigned to it by constitutional law) must be satisfied cumulatively.

In restricting rights and obligations regarding financial rescue to emergency situations, the strict ultima ratio principle applicable to rescue grants requires, in particular, that the respective Land has exhausted all other options. In this context, the burden to establish the relevant facts and provide proof is incumbent upon the Land. Whether and what kind of alternative options would still be available can only be determined by comparing the past conduct of the Land concerned with that of other Länder.

It is currently not ascertainable that the Land Berlin is experiencing a bundesstaatlicher Notstand. It is not undergoing a severe budgetary crisis. There are definite indications based on reliable data showing that the Land Berlin's budgetary situation is simply tight and that it will in all likelyhood be able to resolve its problems on its own.