European Union (Approval of Treaty Amendment Decision) Act 2012 2012-13

The Bill was announced in the Queen's speech of 9 May 2012, following an amendment made to the Treaty on the Functioning of the European Union (TFEU) by the European Council. It was introduced to the House of Lords on 10 May 2012 and will apply to England and Wales, Scotland and Northern Ireland.

The Bill aims to approve the European Council Decision (2011/199/EU) to introduce a stability mechanism for EU member states whose currency is the Euro.

At the December 2010 European Council, EU leaders agreed to create the stability mechanism and, following approval from both Houses of Parliament in March 2011, the decision was finally adopted by the European Council on 25 March 2011. The decision allowed for the following new paragraph to be added to Article 136 of the TFEU:

"3. The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality."

Under section 3 of the European Union Act 2011, treaty changes such as this must be approved by an Act of Parliament before they can be ratified by the UK, and this Bill intends to secure that approval. As the treaty change relates to a provision that only applies to eurozone member states, the government considers that the decision does not fall under section 4 of the European Union Act 2011, and so a referndum is not required.

The European Stability Mechanism (ESM) will constitute a fund contributed to only by eurozone members that may be used to ensure the stability of the eurozone as a whole. It will therefore remove the UK's liability for any future eurozone bailouts. The ESM will replace both the European Financial Stability Facility and the European Financial Stabilisation Mechanism.

The ESM itself will be launched when it has been ratified by member states representing 90% of the capital commitments, which is expected to be in July 2012.