The acts of bank supervisors before domestic courts: SSM

At the Paris meeting of the ILA’s Committee on International Monetary Law at the Banque de France, which I attended on-line, I presented in a panel on The acts of bank supervisors before domestic courts.

I introduced the different approaches in the banking industry in contesting decisions of the supervisory authorities: banks from some Member States regularly go to court while, in other States, none do. And I presented a number of distinct issues in the EU case law thus far.

When discussing the deferential approach of the European Court of Justice in respect of the discretion of the European Central Bank, I mentioned the overview of the issue of the justiciability of discretion that the Advocate General gave in his Opinion of 27 October 2022 in the Crédit Lyonnais case [C-389/21 P]. In its recent judgment of 4 May 2023, the CJEU held that “the General Court did not review the manifest error of assessment as was incumbent on it, in accordance with the case-law (…), but substituted its own assessment for that of the ECB in a situation, moreover, in which, that institution enjoys a broad discretion”, leading it to set aside the judgment of the EU’s court of first instance.

As an example of a case where an ECB decision has been annulled, I introduced the Corneli case [T?502/19] in which the court annulled the ECB decision to put Banca Carige into special administration. In the appeals pending [C-777/22 P], the standing of Francesca Corneli, one of the 35,000 small shareholders of Banca Carige who initiated the proceedings is also at issue.

(The lack of standing of shareholders in banking supervision cases has previously been decided in the Trasta cases [Joined Cases C?663/17 P, C?665/17 P and C?669/17].)

The peculiarity of Europe’s banking union that both EU law (the Single Rulebook) and national law are to be applied calls for a resolution of the question at which jurisdictional level any alleged defects in a preparatory proceeding before the National Competent Authority (NCA) is to be judged.

The Court has decided any such flaws should be assessed solely by CJEU in an action against the ultimate ECB decision. This results from the Berlusconi case [C-219/17].

The issue of an ECB legal act being ‘contaminated’ by an NCA preparatory act also came up in the Pilatus Bank Cases [C?750/21 P and C?256/22 P].

In her recent Opinion, Advocate General Juliane Kokott argues that alleged deficiencies in Maltese preparatory acts, not contestable before national courts, should be attributed to the ECB. This should ensure respect for fundamental procedural rights under EU law (para 75) as the ECB should apply full legal scrutiny of NCA proposals for license withdrawal with regard to proportionality and procedural rights?(para 108). Also intriguing in this case is the interpretation of the ‘good repute’ criterion for shareholders (Article 23 CRD) and the ECB’s reliance on US government info on a shareholder’s indictment for Iran- and Venezuela-related activities and the resulting reputational risks materializing in the market to deny ‘good repute’.

I mentioned a few intriguing pending proceedings, including the BAWAG [Case T-667/21] and Sberbank cases [Case T-647/21; Case T-99/22] on an Austrian measure: absorption interest for exceeding large exposures. In the latter case, the ECB had applied this measure years after it had imposed a fine for the same infringement, with the ECB originally stating publicly that this measure would not qualify as supervisory until the Court, in the ?VTB Case [C-52/17],?decided that “‘absorption’ interest provided for in Paragraph?97(1)(4) Bankwesengesetz must be classified as an administrative measure within the meaning of Article?65(1) of [the CRD]”.

At the end, I drew attention to the on-line trove of information on supervision and resolution-related litigation on the EBI’s website: The Banking Union and Union Courts: overview of cases.