Summary:

I.
The proceedings concern amendments to various tax laws, in particular the 2004 amendments to the Beer Tax Act and the Value Added Tax Act as well as the 1999 amendments to the Corporations Tax Act. Since the amended tax provisions resulted in an increased tax burden, several taxpayers challenged these provisions before the finance courts. The Federal Finance Court as well as the Baden-Württemberg Finance Court suspended the respective proceedings and both referred to the Federal Constitutional Court the question whether the amendments were compatible with constitutional law in formal terms.

II.

The Federal Constitutional Court decided that the challenged amendments to the tax provisions are unconstitutional due to flaws in the legislative procedures in the course of which they were adopted.

The decision is based on the following considerations:
The Basic Law does not govern the competences of the mediation committee (Article 77.2 of the Basic Law) or their limits explicitly. However, they can be derived from the function and position of the mediation committee in legislative procedures, which is set out in the second sentence of Article 38.1, the first sentence of Article 42.1 and in Articles 77 et seq. of the Basic Law in line with the fundamental concept of Article 20.2 of the Basic Law. Furthermore, they have already been clarified in decisions of the Federal Constitutional Court.
The mediation committee may not initiate legislation itself. It may only mediate between different legislative options previously discussed in parliament. The mediation committee is convened to negotiate a compromise between the legislative organs by reconciling the different political opinions that are relevant for a specific legislative project. It may only suggest changes on the basis of the passed draft law and the previous legislative procedure. Notably, these suggestions must remain within the scope of the aims the parliament pursues with the legislative project and the limits set by the request to convene the mediation committee. Furthermore, the committee has the task of balancing political controversies between the Bundestag and the Bundesrat, insofar as they have become discernible in the course of the legislative procedure. However, it is not the committee’s task to freely re-discuss the draft law on which Bundestag and Bundesrat disagree.
In the context of competences attributed to different legislative organs, the Bundestag has the most prominent function: federal laws are adopted by the Bundestag according to the first sentence of Article 77.1 of the Basic Law. In comparison, the Bundesrat only participates in the legislative procedure of the Federation (Article 50 of the Basic Law); it can influence legislation either by raising an objection or by denying the required approval. In formal and substantive terms, a mediation suggestion is therefore subject to the scope determined by the Bundestag.
The constitutional status rights of members of Parliament derived from the second sentence of Article 38.1 of the Basic Law not only extend to the right to vote on legislation in the Bundestag, but also the right to debate legislation. Having meaningful debates requires that members of Parliament be sufficiently informed about the subject of debate. If the mediation committee intends to address certain matters, all members of Parliament must have been informed about the relevant applications and statements throughout the legislative procedure before the draft provisions were passed; furthermore, all members of Parliament must generally have had the opportunity to discuss them, to state opinions, to present alternative options and seek a parliamentary majority for their alternative. Members of Parliament do not have this opportunity if matters to be regulated are introduced in the legislative procedure only after the final Bundestag debate.

Sittings of the Bundestag are generally public according to the first sentence of Article 42.1 of the Basic Law; this principle is an essential element of parliamentary democracy. Public debates on different lines of reasoning and negotiations of different viewpoints are essential parts of parliamentary democracy. Against that background, it would sever the constitutionally required link between the public debate in parliament and the subsequent mediation between the legislative organs if the mediation committee were able to deviate from the adopted draft law and the previous legislative procedure; moreover, this would impair the public’s possibilities of observing the legislative procedure.
In the cases at hand, the mediation committee exceeded its limits by introducing substantive elements to the draft laws that were not part of the parliamentary debate. In the case of the Corporations Tax Act, the mediation committee also exceeded the limits set out in the mediation request. The various tax provisions were thus adopted in legislative procedures that were incompatible with the Basic Law. Therefore, the provisions are formally unconstitutional. In terms of their substance, however, they are compatible with the Basic Law. Considering the requirement of reliable finance and budget planning for periods in the past, the amended provisions of the Beer Tax Act and the Value Added Tax Act were declared incompatible with the Basic Law. The amended provisions of the Corporations Tax Act were declared void pursuant to the first sentence of § 78 of the Federal Constitutional Court Act.