September 22
2021
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26th July 2021
Banking & Finance

Analysis: “Court of Justice rules on authentication and statement of reasons for SRB decisions on ex ante SRF contributions and legality of Delegated Regulation 2015/63” by Laura Wissink

After two years of consecutive judicial procedures about the Single Resolution Board’s decision-making process on the calculation of the ex ante contributions to the Single Resolution Fund (SRF), the Court of Justice had the opportunity to rule on this matter in case Commission v Landesbank Baden-Württemberg and SRB and case SRB v Landesbank Baden-Württemberg (Joined cases C-584/20 P and C-621/20 P). Its Grand Chamber set aside the General Court’s judgment in T-411/17 (see this Analysis for more on that), but annulled the SRB decision on ex ante contributions to the SRF insofar as it concerns Landesbank Baden-Württemberg (‘the decision’) on different grounds (see this News Alert).

First, the Court of Justice ruled that the General Court, in its scrutiny of the SRB’s decision-making process, breached the principle of audi alteram partem. This principle, which is to the benefit of all parties including EU institutions such as the SRB, is also comprised of the right to be informed of matters raised by EU courts on their own motion, on which they intend to base their decision, and to discuss them.

To ensure compliance with this principle, parties must be invited to respond to a plea of a court’s own motion. The Court ruled that, although the procedure for the adoption of the decision at issue had been subject of measures of inquiry by the General Court, it could not reasonably be expected by the SRB to see this as an invitation to comment on the plea of the General Court’s own motion regarding the authentication of the decision. Furthermore, it was not considered sufficient for the SRB to have expressed itself on the matter, since the SRB should have been provided the opportunity to also submit evidence relating to the authentication of the decision. The SRB could have produced evidence relating to the conditions for the creation of the routing slip and the content and characteristics of ARES, evidence which was relevant to the assessment. The Court subsequently ruled on the matter itself and concluded, on the basis of a screenshot relating to the content of the SRB’s document management system (ARES) provided by the SRB during the procedure, that the authentication of the decision is sufficiently ensured.

The Court subsequently concluded that the General Court erred in law in its reasoning that the SRB decision at issue had to be annulled because it infringed on the obligation to state reasons and the right to effective judicial protection.

The General Court firstly erred in law when determining the scope of the SRB’s obligation to state reasons. The Court clarified that no decision of an EU institution imposing the payment of a sum of money to a private operator must necessarily include all the evidence enabling the addressee to verify the accuracy of the calculation of that amount (paragraph 105).

The Court continued discussing the possible limitations of the obligation to state reasons by the principle of the protection of business secrets. It concluded that the method chosen by the EU legislature and laid down in Directive 2014/59 and Regulation No 806/2014, the validity of which had not been challenged, implies that data that is considered business secrets – and that can thus not be included in the statement of reasons – must be used by the SRB. The Court emphasises in this respect the EU legislature’s broad discretion to make political, economic, and social choices and undertake complex assessments, such as the choice of a method of calculation. The General Court’s view regarding the information to be included in the statement of reasons would unduly reduce this broad discretion.

The Court recalls, as also referred to by the General Court, that the obligation to respect business secrets cannot be given such a wide interpretation that it would deprive the obligation to state reasons of its essence. However, it adds that it cannot be held that the substance of the obligation to state reasons is necessarily undermined, in every case, when not all information needed to verify the exact calculation of the amount of the sum of money, to be paid by a private operation, is provided. In this specific case, this means that the obligation to state reasons is met when the persons involved ‘while not being sent date which are business secrets, have the method of calculation used by the SRB and sufficient information to understand, in essence, how their individual situation was taken into account, for the purposes of calculating their ex ante contribution to the SRF, relative to the situation of all the other financial institutions concerned’ (paragraph 122).

Secondly, the General Court erred in law in its assessment that parts of Delegated Regulation 2015/63 were illegal. The Court concludes that the relevant legal framework provides for sufficient possibility for the SRB to disclose, in collective and anonymised form, sufficient information to enable institutions involved to determine whether it is worthwhile to bring an action against an SRB decision setting ex ante contributions to the SRF.

The Court of Justice nevertheless annuls the SRB decision. It concludes that the SRB has not met the aforementioned conditions to fulfil its obligation to state reasons: it only disclosed part of the relevant information that it could have provided without breaching its obligation to respect business secrets. In particular, data on the limit values of each ‘bin’ and the values of the corresponding indicators are lacking (cf. paragraph 132).

This judgment provides some much-needed clarity in the procedures and method of calculation of ex ante contributions to the SRF. This clarity is welcome given the annual recurring procedure of collecting contributions and the still many pending law cases on contributions (cf. this overview). Moreover, the confirmation of the legality of Delegated Regulation 2015/63 discharged the Commission from the challenging task to amend the method of calculation (for now). The Court found a way to interpret the SRB’s obligation to state reasons so as to ensure a sufficiently reasoned decision on contributions to the SRF by using all the space within the existing legal framework for the SRB to state reasons while still protecting business secrets. The SRB will nevertheless still have to further strengthen the reasoning of its decision to meet this standard and pass the Court’s scrutiny.

 

Laura Wissink has a background in EU banking supervision and recently completed her PhD on effective legal protection in the composite administrative procedures of the SSM.

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