Last week the Court of Justice rendered its decision in the case of Crédit mutuel Arkéa/ECB, the second appeal in a direct action against the ECB’s acts in the context of the Single Supervisory Mechanism (SSM). The case raises a rather technical issue on the scope of supervisory tasks of the ECB, in particular the exercise of supervision on a consolidated basis of institutions affiliated to a central body when that body does not have credit institution status.
Despite the technical nature of the underlying issue, the case raises a tricky matter that has haunted the SSM since its inception: the role of national law in ECB supervisory activity. As is known, the SSM Regulation introduced for the first time the power of an EU Institution to implement national law. That is the case when the supervisory authority is the ECB and the relevant applicable law is the transposition of a Directive (the capital requirements Directive, which harmonizes a considerable amount of prudential supervisory activity). Thus, the ECB would be rendering decisions in which the applicable law is national law. Those acts can be challenged before the General Court on the grounds of a breach of law. However, when it comes to points pertaining to the applicable national law, the General Court would have to interpret national law and review the ECB’s acts in light of it. And when the General Court’s decision is brought on appeal at the Court of Justice, the “points of law” on which the appeal is brought will include points of national law.
When the SSM was put into place, there were serious doubts as to the scope of the appellate jurisdiction of the Court of Justice in these cases. If the reader looks back at the case-law of the Court in the field of Community trademarks, a traditional area that contains many references to national law, the position has been quite restrictive: national law is fact, not law, and therefore cannot be reviewed on appeal. The case-law on contractual clauses, in which national law can be the applicable law in hand, is a different animal, because it deals with the interpretation of contract, not EU acts. It is the mutually agreed contract that is subject to national law, not a legally binding, unilateral and enforceable EU act issued by an Institution.
So where does that leave ECB supervisory acts that apply national law, if the case is brought on appeal?
It appears that the answer can be found in last week’s judgment of the Court of Justice in Crédit mutual Arkéa/ECB.
The case concerned a reference to national law in Article 10 of the capital requirements Regulation, which was a key element to decide if Crédit mutuel can be a supervised group or not. In particular, the ECB had to determine if the central body’s commitments are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body. If under national law that is the case, then Credit mutuel can be considered to be a supervised group. According to the ECB, that was exactly the case in light of Article L.511-30 of the code monétaire et financier.
In first instance, the General Court argued that Article L-511.30 was too ambiguous and it could not be concluded that the provision imposed a degree of committement equivalent to the one required by Article 10 of the capital requirements Regulation. Nevertheless, the General Court dismissed the application and the ECB’s decision was affirmed. However, shortly after the judgment, the French Conseil d’État rendered a decision interpreting Article L-511.30 in a way that reinforced considerably the commitments of a central body under French law and therefore confirmed that the requirements under Article 10 would be met.
And now we arrive at the appeal, in which the Court of Justice had to rule on the interpretation of French law, not only as interpreted by the ECB, but more particularly the General Court. The Commission raised the issue of the Conseil d’État’s recent judgment, and thus proposed a substitution of grounds, so that the Court of Justice dismissed the appeal but with different reasoning that took into account the correct interpretation (as now confirmed by the Conseil d’État) of Article L-511.30. Therefore, the case was clearly targeting an issue of pure interpretation of national law.
The Court of Justice agreed with the Commission and ruled that the correct interpretation had to take into account the Conseil d’État’s ruling of 2018, even if it was posterior to the General Court’s ruling. The Court argued that the parties had had a chance to submit observations on the ruling and therefore their rights had been preserved. As a result, the Court substituted the grounds of the General Court’s judgment and nevertheless dismissed the appeal (as it reached the same outcome as the General Court).
What lessons can be drawn from this judgment?
First, I think it is clear that the Court of Justice has confirmed its willingness to undergo a substantive review of ECB acts in light of national law, not as a question of fact, but as a question of law. It is true that in this case the way in which national law appeared was through a reference from EU law, it was not a case of a national provision transposing an EU directive. However, that is exactly the context in which the Court, in precedents such as Edwin, ruled that national provisions were to be considered questions of fact. Now, in the context of the SSM, the approach is much more open-minded and allows the parties to directly confront their divergent interpretations of national law on appeal, and the Court is willing to dive into the matter and take a stance.
Second, it is interesting to see that the Court of Justice goes quite far in handling national law, to the point that it is willing to interpret it in light of jurisprudential developments way after the challenged decision (and the challenged judgment on appeal) was rendered. Giving the parties the chance to submit observations at a later stage once that development takes place is sufficient for the Court.
And third, it is surprising to see how detailed the analysis undertaken by the Court of the Conseil d’État’s case-law is. This is the kind of review that the Court of Justice will do in cases concerning contractual clauses, but not in actions of annulment in which EU acts are under review. In fact, the conclusion of the Court openly refers to the interpretation of Article L-511.30 “as interpreted by the Conseil d’État”. The fact that the President of the Chamber that decided the case is a former conseiller d’État probably helped, but it is nevertheless striking (and positive, in my opinion) to see to what (broad) lengths is the Court of Justice willing to engage in making sure that national law was properly applied by the ECB.
Crédit mutuel Arkéa/ECB is a relevant precedent for the practice of SSM litigation. But it is also the confirmation that the oddity represented by the SSM, which allows an EU Institution to directly apply national law, can result in practical and positive outcomes. This result sends a message to policy-makers struggling to develop other areas of policy. The SSM model, as fragile and questionable as it looked for some at its origins, is now proving to be more robust than expected. This is an encouraging development for the EU’s economic and financial policymakers, but also for those who are searching for efficient tools in different domains, in which the SSM, after five years of experience, is proving to be a valuable reference.