6. The Constitutional Court of Colombia Versus Central Bank Autonomy

Carbonari and Vargas (2009), pp. 231–234.

Const. Colombia Art. 371. Before the constitutional reform of 1991, monetary policy was conducted by a monetary council created in 1963. This council was mostly made up by government members. Inflation was high (20%) but stable. The key for the stability were several economic restrictions, such as capital controls. These arrangements were incompatible with economic liberalization. See Alesina et al. (2005), pp. 347–348.

The Colombian Constitution states that preserving the purchasing power of the currency is a duty of the Colombian state. The Bank of the Republic is the state’s “intermediary” in the performance of this function. See Const. Colombia Art. 373.

According to Const. Colombia Art. 49, “[p]ublic health and environmental protection are public services for which the State is responsible […].”

Const. Colombia Art. 48.

The Const. Colombia Art. 2 says that “essential goals of the State are to serve the community, promote the general prosperity, and guarantee the effectiveness of the principles, rights, and duties stipulated by the Constitution […]”. The authorities of the Republic are there to protect the life, honor, property, beliefs and other rights and freedoms, and to ensure the compliance of the state and particulars with social obligations.

According to the Colombian Constitution of 1886, the Supreme Court of Colombia oversaw the constitutionality of laws passed by Congress. However, it was necessary that the executive branch previously challenged the law for not being in agreement with the constitution. See Constitution of Colombia of 1886 Art. 151 (4) [Constitución de Colombia de 1886, Diario Oficial No. 6758 y 6759, August 7, 1886]: “Make the final decision on the constitutionality of legislative acts that have been challenged by the government as unconstitutional [Own Translation].”

Kugler and Rosenthal (2005), p. 76.

López Daza (2011), pp. 176–177.

Constitutional judgments about economic issues are not a novelty. They have taken place in the United States, for instance, where the Supreme Court nullified labor laws that tried to establish guarantees to workers, arguing the violation of freedom of contract. It has also occurred in Spain where the court has declared laws about social security unconstitutional for conflicting with the Spanish Constitution. See Uprimny (2006), pp. 41–44.

The difficulty of adjudicating the constitutionality of economic aspects was recently evidenced in Europe as consequence of the decision of the German Federal Court about the Outright Monetary Transactions Program (OMT) which implied that the central bank could purchase bonds issued by member states in the secondary market. The Court of Justice of the European Union decided that this central bank measure was in line with the EU Treaties. On the other hand, the German Federal Court decided that the OMT might violate the law of the EU. For more detail, see Peter Gauwelier and Others v Deutscher Bundestag. BVerfG, C-62/14. This particular case raised the issue about whether the courts of justice should limit their basis for a decision to the rationality of the measure of the central bank or fully review monetary policy. One of the arguments in favor of a full judicial review of monetary policy can be found in the idea that full judicial review is a requirement to balance central bank autonomy with democracy. The argument against it points to the constitution rank of the ECB (via the Maastricht Treaty) which limits the scope of judicial review to the word of the legal rule that grants the bank independence. A technical argument against it is that judges are not qualified to disentangle complicated economic aspects. The court’s lack of knowledge can be evident, and the court’s credibility can suffer when an expert in monetary policy matters challenges the court’s decision. For more detail on this topic, see Goldmann (2014), pp. 265–274.

Cerra Nolasco (2001), p. 171.

Uprimny (2006), pp. 40–41.

Alejandro Baquero Nariño and other v. Congreso de la República de Colombia, CCC, Sentencia C-955, 26 July 2000, quote in Spanish: “La sentencia anuncia con claridad que ha nacido en el panorama de los órganos reguladores del Estado, uno superior a todos, dotado de poderes de intervención, cuyas resoluciones incluso no experimentan las limitaciones que se pueden hacer valer ante las autoridades competentes.” Regarding the opinion of Justices Cifuentes and Naranjo, the CCC manifested that those opinions are against the rule of law, antidemocratic and disrespectful of the CCC. Their opinion threatens the building of institutions of the country according to a majority of CCC justices.

Cerra Nolasco (2001), p. 167.

Robertson (2010), p. 5.

Martinez Caballero (2000), p. 11.

Mavčič (2001), p. 11.

Robertson (2010), pp. 12–13.

Mavčič (2001), p. 11.

Catrile and Pita (2011), p. 123.

Rivero Ortega (2013), p. 55.

Mavčič (2001), p. 11.

Cerra Nolasco (2001), p. 169.

Robertson (2010), p. 10.

In this sense, the activist justices attempt to clarify legal texts or create new legal norms by complementing the constitutional text with judicial opinions.

Kmiec (2004), pp. 1463–1476.

Kugler and Rosenthal (2005), p. 90.

See my explanation in the chapter on legal certainty about limits that judges should have when deciding about the actions of public policy to not usurp the functions of technical agencies.

Peters (2016), pp. 23–26.

Roosevelt (2008), p. 12.

Roosevelt (2008), p. 12.

Escobar Martinez (2006), pp. 94–96.

Bonilla (2013), pp. 26–27.

Robertson (2010), pp. 84–85.

In common law systems, the law-making role of the courts diminishes the degree of judicial independence. The court requires a joint process of decision making, coordination and increased ways of communication. When they declare a law unconstitutional, a debate between judges and the members of the parliament responsible to fill the spaces left by the declaration of unconstitutionality is often necessary. See Dickson (2007), p. 11.

Dickson (2007), pp. 12–13.

Ruggiero (2012), pp. 27–28.

In his study, Vanberg explains that constitutional review is a game of imperfect information in which it is not possible for the Congress to know how the court is going to review legislation. At the same time, the court cannot know whether or not the Congress is going to comply with the judicial decision. The court could either be friendly with the legislators or declare the law constitutional. The court could also be hostile and nullify laws enacted by the Congress. The court could also be sure of public support and, not only declare the law unconstitutional, but also be ready to engage in an institutional conflict with the legislative branch if the Congress does not comply. On the other hand, the court cannot know if the Congress is going to comply and whether it will face electoral accountability in case of noncompliance. For electoral accountability, the functioning of the legislative branch must be transparent, and the citizens must follow up its performance. When the constitutional court enjoys public support and the performance of the Congress is transparent, the danger of electoral punishment is high, and the Congress has incentives to comply with the court’s decisions. When the court is not well-known, and the transparency of the legislative branch is not high enough, the Congress has little incentives to comply with the constitutional decision. See Vanberg (2001), p. 346 for a detailed explanation of the game.

Olano Garcia (2004), pp. 576–577.

Betlem (2002), pp. 397–398.

For more on how the Colombian administrative court has been modulating judicial decisions, see Escobar Martinez (2006), pp. 91–93.

Escobar Martinez (2006), p. 107; see also Olano Garcia (2004), p. 577.

Ruggiero (2012), pp. 16–17.

Eskridge (1991), p. 343.

Martinez Caballero (2000), p. 10; see also Bonilla (2013), p. 26.

According to Const. Colombia Art. 167, in the case in which “[a] bill has been opposed as unconstitutional. In such an event, should the Houses insist, the bill shall be sent to the Constitutional Court so that the latter, within the six (6) following days, may decide about its constitutionality. The decision of the Court obliges the President to approve the statute. If the Court declares the bill unconstitutional, it shall be filed away.”

General Rulings of the Constitutional Court of Colombia Art. 3 [Reglamento Interno de la Corte Constitucional de Colombia, Acuerdo 01, 1992].

Azcuna (1993), p. 1.

According to Const. Colombia Art. 241 (1), to safeguard the constitution the Constitutional Court may “[d]ecide on the petitions of unconstitutionality brought by citizens against measures amending the Constitution, no matter what their origin, exclusively for errors of procedure in their formation.”

Const. Colombia Art. 4.

Const. Colombia Art. 241: “The safeguarding of the integrity and supremacy of the Constitution is entrusted to the Constitutional […]”.

Cerra Nolasco (2001), pp. 169–170.

Executive Decree 2067 of 1991 Art. 49 [Decreto Ejecutivo 2067 de 1991]: “The judgments of the constitutional court cannot be appealed. Constitutional court proceedings may only be nullified before the ruling of the court. Only irregularities involving violation of the due process may be a basis for the court to nullify the process [Own Translation].”

German Arango Rojas v. Corte Constitucional de la República de Colombia, CCC, Sentencia A-195, 20 May 2009. See also Olano Garcia (2004), p. 572.

Peters (2016), p. 25.

Cerra Nolasco (2001), pp. 172–173.

Under exceptional conditions, res iudicata applies to a legal rule declared constitutional: (1) The constitutional court has to decide about the constitutionality of a legal rule that is identical to one previously declared constitutional; (2) The facts that motivate a new constitutional lawsuit are identical; (3) There are no important economic, social, cultural, political or even ideological changes that require a modification in the judicial reasoning to adapt it to the new circumstances. See María Camila Silva Mogollón v. Congreso de la República de Colombia, CCC, Sentencia C-860, 18 October 2006.

Martinez Caballero (2000), p. 13.

Roosevelt (2008), p. 3.

Olano Garcia (2004), pp. 578–579.

Martinez Caballero (2000), p. 24; see also Olano Garcia (2004), p. 577.

The conception of the social rule of law is exclusive to the Colombian legal framework. However, the Mexican Constitution of 1917 was the first to coin the term “social function of property” as the cornerstone of the economic system. See Castillo Calle (2013), p. 6.

The Brazilian Constitution of 1946 put “social justice” at the core of economic activity. See Constitution of Brazil of 1946 Art. 145 [Constituição dos Estados Unidos do Brasil, 18 September 1946]: “The economic order must be organized according to the principles of social justice, reconciling freedom of initiative with the valorization of human labor [Own Translation].”

The Chilean Constitution of 1925 did not introduce the socialization of property but guaranteed public economic goods like protecting labor markets and social welfare. See Constitution of Chile of 1925 Art. 10 [Constitución de Chile de 1925, 18 September 1925]: The value of public importance that the constitution protected was the “socialization of property” that allowed the state to intervene in economic issues to achieve a plethora of socially desirable objectives.

Const. Colombia. Art. 40: “Any citizen has the right to participate in the establishment, exercise, and control of political power. To make this decree effective the citizen may: […] (6.) Undertake public measures in defense of the Constitution and the law.”

López Daza (2011), pp. 170–175.

Palombella (2016), p. 8.

Ribeiro (2003), p. 42.

Carbonari and Vargas (2009), pp. 234–236.

Law of Education Art. 4 [Ley de Educación, Colombia Diario Oficial, 8 February 1994]: “The state, society and family must ensure quality of education and promote access to public education, and it is the responsibility of the Nation to ensure its coverage [Own Translation].”

Note that also the Law of Integral Social Security System Art. 1 [Ley de Seguridad Social Integral, Colombia Diario Oficial 41.148, 23 December 1993] states the following: “The system of integral social security has the objective of guaranteeing the people and communities rights to be able to have a life quality that is in agreement with human dignity through the protection of the contingencies that affect them [Own Translation].”

Rodriguez Garavito and Rodríguez Franco (2015), pp. 6–7.

Providing housing to the most vulnerable people is one of the main interests of the economic development plan. See Departamento Nacional de Planificación, Bases del Plan Nacional de Desarrollo, p. 28, 49.

Fique Pinto (2008), p. 76.

Executive Decree 677 of 1972 Art. 1 [Decreto Ejecutivo 677 de 1972, Diario Oficial No. 33.594, 18 May 1972] [hereinafter Colombia, Executive Decree of 18 May 1972]: “The government, through its acting agencies, will encourage savings with the purpose of channeling part of them to construction [Own Translation].” Another strategy was to provide direct housing subsidies to the poorest people in order to allow them to afford housing. See Fique Pinto (2008), p. 77.

Forero (2004), p. 36; see also Bank of the Republic (2000).

Held (2000), p. 40.

Forero (2004), p. 36.

Urrutia and Namen (2012), p. 296.

Executive Decree 1229 of 1972 Art. 3 [Decreto Ejecutivo 1229 de 1972, Diario Oficial No. 33.663, 16 August 1972]: “The Board of Savings and Housing will calculate the value of the UPAC monthly […] based on the changes in the consumer price index for employees and workers as prepared by the National Administrative Department of Statistics (DANE) for the previous quarter and inform the CAVs [Own Translation].”

Executive Decree 269 of 1974 Art. 1 [Decreto Ejecutivo 269 de 1974, Diario Oficial No. 3.072, 21 February 1974]: “The Board of Savings and Housing will calculate the value of the UPAC monthly […] based on the changes in the consumer price index for employees and workers as prepared by the National Administrative Department of Statistics (DANE) for the previous 24 months and inform the CAVs [Own Translation].”

Executive Decree 58 of 1976 Art. 1 [Decreto Ejecutivo 58 de 1976, Diario Oficial No. 34.489, 1 February 1976] [hereinafter Colombia, Executive Decree of 1 February 1976]: “The Board of Savings and Housing will calculate the value of the UPAC monthly […] based on the changes in the consumer price index for employees and workers as prepared by the National Administrative Department of Statistics (DANE) for the previous 12 months [Own Translation].” Furthermore, Art. 2 of this decree states that “without prejudice to the provisions of the preceding article, the increase of the unit of constant purchasing power (UPAC) should be have an upper-limit of 18% annually [Own Translation].”

Held (2000), p. 40.

Forero (2004), pp. 32–33.

Urrutia and Namen (2012), p. 296.

Executive Decree 1685 of 1975 Art. 1 [Decreto 1685 de 1975, Diario Oficial No. 34.402, 18 September 1975]: “Regarding the system for calculating the UPAC, the increase of its value has to be limited to a maximum of 19% annually [Own Translation].”

Colombia, Executive Decree of 1 February 1976 Art. 1: “[…] the increase of the unit of constant purchasing power (UPAC) should be maximal 18% annually [Own Translation].”

Executive Decree 2475 of 1980 Art. 1 [Decreto Ejecutivo 2475 de 1980, Diario Oficial No. 35.610, 29 September 1980].

Executive Decree 2929 of 1982 Art. 1 [Decreto Ejecutivo 1919 de 1982, Diario Oficial No. 36.115, 22 October 1982].

Mora (2010), p. 18.

In 1976, this state organism was eliminated, and all its functions passed to the Monetary Council, according to the Art. 5 of the Decree 1110 of 1976.

See website of the Banco de la Republica: http://​www.​banrep.​gov.​co/​es/​reformas.

Forero (2004), p. 34.

Colombia, Executive Decree of 18 May 1972 Art. 6: “For the purposes specified in this decree, there will be a Fund of Savings and Housing in the Bank of the Republic [Own Translation].”

Ibid., Art. 8: “The Monetary Council will authorize the Bank of the Republic to issue and allocate bonds up to an amount of 60,000,000 of pesos, in three portions of 20,000,000 pesos for the initial allocation of resources for the FAVI [Own Translation].”

Colombia, Executive Decree of 18 May 1972, Art. 7: “The resources of the Fund of Savings and Housing will come: c) from the reimbursements, interests and fees of the credit operations the [the bank] executes [Own Translation].”

Ibid., Art. 13: “The Bank of the Republic’s Fund of Savings and Housing, after getting the authorization of the Board for Savings and Housing, will be able to: a) Get internal and external loans […] [Own Translation]”.

Ibid., Art. 7: “The resources of the Fund of Savings and Housing will come from: d) part of the budget that is assigned to the Bank of the Republic and that the Bank decides to grant it in the fund [Own Translation].”

Executive Decree 1131 of 1984 Art. 1 [Decreto Ejecutivo 1131 de 1984, Diario Oficial No. 36.115, 5 June 1984]: “The Bank of the Republic will calculate monthly and report with identical frequency the value in legal tender of the UPAC to the CAVs, for each day of the following month […] calculated based on the changes in the consumer price index as is relevant for employees and workers, prepared by the National Statistics Department (DANE) for the period of the twelve (12) previous months. To that it will add 1.5% of the squared difference between the average variation in the mentioned price index and the effective weighted average of the deposit certificates up to ninety (90) days issued by commercial banks and financial corporations, calculated by the Bank of the Republic for the next month [Own Translation].”

Executive Decree 1319 of 1989 Art. 1 [Decreto Ejecutivo 1319 de 1989, Diario Oficial No. 38.869, 22 June 1989]: “[…] calculated like this: forty percent (40%) of the resulting variation in the national index of consumer prices (total weighted) prepared by the National Administrative Department of Statistics for the period of the next twelve (12) months. To that thirty-five (35%) of the average of the variable rate of DFT calculated by the Bank of the Republic for the next month are to be added [Own Translation].”

Executive Decree 1730 of 1991 Art. 2.1.2.3.7 [Decreto Ejecutivo 1730 de 1991, Diario Oficial No. 39.889, 4 July 1991] “[…] calculated as follows: forty-five percent (45%) of the resulting variation of the national consumer price index (weighted total) prepared by the National Department of Statistics DANE for the period of twelve 12 months. To this 35% of the average rate of the fixed term deposits calculated by the Bank of the Republic for the precious month will be added [Own Translation].”

BRC Act Art. 16: “The Banco de la Republica will study and adopt monetary, credit and exchange measures aimed at regulating the circulation of money, The Banco de la República will study and adopt the monetary, credit, and and, in general, the liquidity of the financial market and the normal operation of the internal and external payments of the national economy, taking care of the stability of the value of the currency. To such effect, the Board of Directors will: […] f) Set forth the methodology for determining the value of the Constant Purchasing Power Unit (UPAC) in local currency, intending that it also reflects the movements of the interest rate in the economy.”

Decision No. 26 of 1994 of the Bank of the Republic [Resolución Externa No. 26 de 1994]: “The Bank of the Republic will calculate monthly for every day of the following month and inform with the same frequency the Savings and Housing Corporations (CAVs), of the value in terms of legal tender of the UPAC, which is equivalent to seventy-four percent (74%) of the moving average of fixed term deposits rates […][Own Translation]”.

Forero (2004), p. 36.

Hofstetter et al. (2011), p. 6.

Forero (2004), p. 36.

Hofstetter et al. (2011), p. 7.

Mora (2010), p. 19.

Fique Pinto (2008), p. 73.

Decision No. 10 of 1999 of the Bank of the Republic Art. 1 [Resolución Externa No. 10 de 1999]: “The Bank of the Republic will calculate monthly for every day of the following month and will inform the Savings and Housing Corporations (CAVs) at the same frequency on the value the Unit of Constant Purchasing Power UPAC in terms of legal tender. For this purpose, the monetary correction will be equivalent to the arithmetic average of the annual inflation rate based on the consumer price index of the twelve (12) previous months [Own Translation].”

Executive Decree 1730 of 1991 Art. 2.1.2.3.7 [Decreto Ejecutivo 1730 de 1991, Diario Oficial No. 39.889, 4 July 1991].

See also, the Const. Colombia Art. 189 (25) which states that the President of the Republic must “[o]rganize the public credit […]”.

According to Const. Colombia Art. 150 (19 d), Congress must “regulate activities concerning finance […]”.

Humberto de Jesús Longas Londono v. Gobierno de la República de Colombia, CCC, Sentencia C-700, 16 September 1999.

Humberto de Jesús Longas Londono v. Gobierno de la República de Colombia, CCC, Sentencia C-700, 16 September 1999; see also Uprimny (2006), p. 46.

Executive Decree 663 of 1993 [Decreto Ejecutivo 663 de 1993, Diario Oficial No. 40.820, 5 April 1993].

Law 546 of 1999 of Colombia Art. 3 [Ley 546 de 1999, Diario Oficial 43.827, 23 December 1999] [hereinafter Law 546]: “The unit of real value UVR is a unit of account that reflects the purchasing power of the currency, based solely on the variation of the consumer price index: 1. Protect the patrimony of families represented in housing. 3. Protect the users of housing loans. [Own Translation]”.

Law 546 Art. 2: “Objectives and criteria of this law: the National government will regulate the long-term specialized housing finance system to set the necessary conditions to implement the constitutional right for decent housing in accordance with the following objectives and criteria […] [Own Translation]”.

Bank of the Republic (2000).

The UVR replaced the UPAC, which was declared unconstitutional in the constitutional decision. See Humberto de Jesús Longas Londono v. Gobierno de la República de Colombia, CCC, Sentencia C-700, 16 September 1999.

Decision No. 14 of 2000 of the Bank of the Republic Art. 1 [Resolución Externa No. 14 de 2000].

For instance, Gunar Raul Ramírez and others v. Bank of the Republic of Colombia and other, Consejo de Estado de Colombia, File N: 76001-23-31-000-2001-02078-01(26174), 2 February 2004; Myriam Valencia de Zafra v. Bank of the Republic and other, Consejo de Estado de Colombia, File N: 76001-23-31-000-2001-00804-01(28298), 13 April 2006; Hugo Yesid Suarez Sierra v. Bank of the Republic and other, Consejo de Estado de Colombia, File N: 25000-23-26-000-2001-01147-01(25614), 10 June 2004; among others.

Decision No. 13 of 2000 of the Bank of the Republic [Resolución Externa No. 13 de 2000].

Decision No. 3 of 2005 of the Bank of the Republic [Resolución Externa No. 3 de 2005].

He refers to “choque de trenes institucionales” López Daza (2011), p. 177.

Civ. Code Peru Art. 1243: “The conventional maximum loan interest rate is set by the Bank of Reserve of Peru. [Own Translation]”.

Circular letter 021-2007 of the CRBP [Circular No. 021-2007-BCRP].

Law 29,947 of Peru [Ley 29.947, Diario Oficial No. 479.481, 28 November 2012].

Colegio de Abogados de Lima Norte v. Congreso de la República del Perú, TC Peru, Sentencia Exp. No. 011-2013, 27 August 2014.