An action by Independent TD Thomas Pringle to prevent the Government ratifying the ESM continued today before Justice Mary Laffoy in the High Court.
The TD is taking the case against the Government, Ireland and the Attorney General.
The case is expected to last several days.
Thomas Pringle TD agues that the ESM Treaty, providing for a strictly conditional permanent rescue fund for the 17 member states using the euro, breaches the Irish Constitution, European Union law and the Treaties of the EU on several grounds.
In opposing the action, the defendants dispute Mr Pringle's entitlement to the declarations sought, including that the ESM Treaty violates the principles of the TFEU and that any purported ratificaiton of it is void.
Mr. Pringle's counsel, John Rogers, SC argued that the action raises matters of "enormous importance" for the State and is fundamentally concerned with the rule of law in the State and the EU.
The European Stability Mechanism Treaty of February 2012 will dilute the financial sovereignty of this State and its capacity to say yes or no in the realm of economic and monetary matters, according to the Donegal South West TD.
He further argues that the Treaty will also give officers of the State, particularly the Minister for Finance, powers beyond those conferred on him by law.
Mr Pringle claims the EMS Treaty is inextricably intertwined with the Fiscal Stability Treaty approved by the people in last month's referendum and he argues Ireland cannot formally ratify the ESM Treaty next month, as intended by the Government, without first putting that to the people in a referendum.
The Donegal TD claims the ESM Treaty breaches both the Constitution and EU Treaties on grounds including it provides for establishment of an autonomous financial institution, akin to a bank, with the power to grant financial assistance beyond circumstances permitted by the EU Treaties.
Counsel for Mr. Pringle argued that, under the ESM Treaty, there is power to call on Ireland to make a capital contribution of some €11.154 billion, a sum equal to one third of Government tax revenue last year, to the new institution and no limit to what funding may be sought in the future.
A State that might say no "will not be heard" according to Mr. Rogers as decisions on whether to grant emergency funding may also be taken by qualified majority voting with the effect the larger member states will decide.
The effect of continuing contribution requirements on States with excessive deficits will be to exacerbate their fiscal deficits, public debt and liability to the ESM, Mr Pringle contends. This would not only render them more vulnerable financially but also place them in breach of provisions of the Treaty on the Functioning of the EU (TFEU).
The breach of EU Treaties resulting from conferring EU competences on an international autonomous institution was exacerbated by the extensive discretion conferred on that institution, plus the fact it would act outside the control of the EU and be subject to very limited review by the European Court of Justice, he argues.
Under the ESM Treaty, the governors and staff of the new institution - to be based in Luxembourg - are immune from legal proceedings in relation to acts performed by them "in their official capacity", the court heard. The new body will be funded, subject to review, to the tune of €500bn.
Mr Pringle claims the ESM Treaty is inextricably interwined with the Stability Treaty approved last month and with a March 2011 European Council amendment to Article 136 of the TFEU. He claims the Yes vote in the Stability Treaty referendum is being used by the government to push through the ESM Treaty and the amendment to Article 136.
Mr Pringle claims the additional treaty changes are being done without putting them to a vote of the people and he wants the High Court to examine the legality of this.
Some of the issues raised in the case may require to be decided by the European Court of Justice, the judge was also told.
The case concerns whether the State, without reference to the people, may ratify the ESM Treaty and also approve the proposed amendment of Article 136 of the TFEU to provide for the ESM. That amendment was proposed in a European Council Decision of March 25th 2011.
Mr Pringle claims the ESM Treaty is incompatible with the Constitution and with two existing EU Treaties - the Treaty of the EU (TEU) and the TFEU. He also claims the procedure by which the European Council sought to amend Article 136 of the TFEU is incompatible with EU law and the EU Treaties.
The ESM Treaty is incompatible with the Constitution because it involves an impermissible transfer of fiscal and economic sovereignty to both the Government and the Luxembourg ESM institution, he claims.
A central issue in the case relates to the legality and constitutionality of the proposed amendment of Article 136 to provide for an ESM. Mr Rogers said that decision does not take effect, in the sense of completion of the amendment to the Treaties, until January 2013 and then only if the 27 member states agree to that.
The decision to amend Article 136 was incompatible with the EU Treaties because it allowed for a simplified revision procedure when an ordinary revision procedure should have been adopted, he said. There was "a real difference" between the two revision procedures because, under the ordinary revision procedure, a convention is called and the parliaments of the member states would be represented.
The Irish people must be consulted where amendment of the EU Treaties creates a mechanism at odds with the Treaties themselves, he argued.