Heuking Kühn Lüer Wojtek Welcomes Bundesrat Resolution: Implementation of Second Economic Stimulus Package Facilitated

On June 12, 2009, the Bundesrat resolved an amendment to Article 104b of the German Basic Constitutional Law. This constitutional change considerably expands the opportunities to invest funds from the second economic stimulus package. Previously, the Bundestag had approved the constitutional amendment in the scope of the second federalism reform on May 29, 2009.

"This constitutional amendment provides the legal certainty urgently required by German states and municipalities in implementing the second economic stimulus package," explains Dr. Ute Jasper, Partner at the Düsseldorf office of law firm Heuking Kühn Lüer Wojtek and Head of the Public Sector Practice Group.

According to the previous legal status, the Federation was only able to grant financial assistance to states and municipalities if it had legislative authority. This constitutional amendment grants the Federation the right to provide funds to the states in extraordinary emergency situations even outside of its legislative authorities. Funds of the German Act of Investments into the Future which refers to Article 104b German Constitutional Law, may thus also be invested in areas in which the Federation does not have legislative authority. In specific terms this means that in cases such as school renovations the focus no longer has to lie on energy retrofitting.

Since only the Basic Constitutional Law has been amended, but not the Act of Investments into the Future, the limitations of subsidy areas included in the latter will remain in force. Accordingly, investments into the wastewater network and local public transport will remain ineligible for funding from the second economic stimulus package.

"We highly welcome this constitutional amendment. The old legal status posed considerable problems to the municipalities in particular since in the case of a specific project it is oftentimes difficult to decide whether it is subject to the federal legislative authority," says Jasper.

After Bundesrat and Bundestag having approved the amendment to the German Constitutional Law, the constitutional amendment needs to be signed by the Federal President and subsequently be published in the Federal Law Gazette. Based on the current schedule, the constitutional amendment is to become effective prior to the summer recess.