Banning Statements by the Rating Agencies as a Form of ‘Seditious Libel’
Eugene Volokh comments on reports that the EU is considering legal bans on statements by rating agencies in some circumstances of countries engaged in re-negotiation of their sovereign debt. He quotes Spiegel Online regarding comments and a draft law report by the EU internal market commissioner:
In an internal draft of a reform to an EU law applying to ratings agencies obtained by the paper, Barnier proposes providing the new EU securities authority, the European Securities and Markets Authority (ESMA), with the right to “temporarily prohibit” the publication of forecasts of a country’s liquidity.
The European Commission is particularly concerned about countries that are negotiating financial aid — for example from the euro rescue backstop fund, the European Financial Stability Facility (EFSF), or the International Monetary Fund (IMF). A ban could prevent a rating from coming at an “inopportune moment” and having “negative consequences for the financial stability of a country and a possible destabilizing effect on the global economy,” the draft states….
Now, for many reasons, I think this would be a very bad policy and legal move, but I’ll discuss that another time. I wanted to flag Eugene’s comment on the nature of the legal ban involved (and also see Martin Holterman’s comments in the thread):
The analogy to seditious libel, I think, is quite close. Traditional seditious libel barred, among other things, statements that diminish the reputation of the government, whether the statements were opinion, true factual assertions, or false factual assertions; likewise here. The rule that is apparently being proposed would essentially be a seditious libel law focused on a particular set of statements about a government’s finances.
Martin offers the following quick assessment under EU human rights law (moved up from comments), with my thanks:
@Kenneth: European Human Rights law is not my area of expertise (within law, I’m more of an EU law guy), but I spent an hour looking into various more or less blanket bans on speech. What I wanted to know is whether it is ever a problem to find a fitting justification from among the permissible set:
“national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or the rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.”
What I found is that the ECtHR is quite flexible with these, and that “the protection of the rights of others” will cover just about everything, i.e. not just the rights listed in the Convention but much more broadly than that, like the right not to have one’s government and/or banking system bankrupted.
This means that the whole thing will turn on whether this intrusion is “necessary in a democratic society”, i.e. proportionate. On that count, I can’t imagine the ECtHR contradicting the EU and/or the Member States if they say this is necessary to protect the financial sanity of the system. I don’t think they have that much confidence, and I think they would regard this as an issue of commercial speech, far removed from the politics that is at the core of art. 10 protection. Add to that the difficulty the judges might have in understanding the exact nature of the problem, and I don’t see them contradicting the lawmaker on proportionality.
I put some links to case law on my blog here:http://martinned.blogspot.com/2011/10/ratings-agencies-speaking-ban.html
P.S. Note that the EU has not yet joined the ECHR, so that the procedural posture of this case would be a bit more tricky in actual fact than assumed above. As it is, the case would either arise in national court or, if that is not enough to get rid of this monstrosity, it would come before the ECtHR with one or more of the EU’s Member States as a defendant, like in the Bosphorus case.