Resolution Litigation, Standing of Credit Institutions and the Iccrea Banca Judgment of the Court of Justice

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For the fans of procedural law and litigation in Luxembourg, the Grand Chamber judgment in Iccrea Banca is an important development that deserves close attention. Although it deals with the highly technical subject of bank resolution and contributions to the Single Resolution Fund, it also concerns a principled issue about jurisdiction and standing that will have a lasting impact in other articulate arrangements in which EU and national authorities cooperate closely.

In a nutshell, Iccrea Banca raises the question of jurisdiction and standing to bring an action against the decisions of EU and national authorities imposing on credit institutions a duty to make ex ante and/or extraordinary contributions to the EU and national resolution funds. The system is designed in such a way that a Directive has harmonized resolution rules in all Member States, but a Regulation governs the specific case of resolution of Eurozone credit institutions subject to ECB supervision. This Regulation provides that the resolution authority for these banks is the Single Resolution Board (the SRB), not the national resolution authorities. It is a two-tiered harmonization system in which Directives and Regulations, together with differentiated integration, take place.

When it comes to decide on the contributions to the Single Resolution Fund, the SRB applies the Commission’s methodology and determines the amount of the contribution on a case-by-case basis. It then informs the national resolution authorities and these authorities notify the credit institutions. If credit institutions fail to pay, national enforcement mechanisms come into play.

The question that arises now is quite straight-forward: if a bank wants to challenge the decision imposing the duty to contribute to the Fund, who and what should the bank challenge? Is it the SRB’s decision or the national resolution authority’s? Should the challenge be made at the General Court or in national court? Does the bank have standing to bring an action of annulment or not?

All these questions come up in a particularly sensitive subject, banking resolution, which has proved to be the source of a lot of litigation. The interests at stake are very high, shareholders can lose considerable amounts of money, contributions to the funds are very high, managers have their reputation on the line, and eventually the chances of ending in court are quite foreseeable. It is therefore important that the issues of jurisdiction and standing, which are at the very heart of EU litigation, are clear and transparent for all stakeholders with potential interests that may be eventually solved in court.

But the stakes are also high considering how “contagious” the resolution framework is. The creation of “mechanisms” in the context of the banking union is the domain of a specific area of policy. But it is also obvious that the success of this precedent will serve as a template for further and more integrated systems of policy among the EU and the Member States. The Single Resolution Mechanism and the Single Supervisory Mechanisms are relevant experiments in policy enforcement for what they may entail for future developments in European integration. The way in which judicial review works here could pave the way for judicial review in future areas of integrated policy too.

In Iccrea Banca the Grand Chamber has rendered a principled judgment explaining the terms in which resolution litigation should take place, and how the division of tasks between EU and national courts must operate.

In line with its prior decisions in Berlusconi and Trasta Komercbanka, the Court sided with efficiency and a unitary approach towards judicial review of resolution decisions. In sum, irrespective of the role played by national resolution authorities, the Court stated that the SRB is the key decision-maker when it comes to the annual ex-ante contributions, and therefore the concerned credit institutions must bring an action directly to the General Court. The national resolution authorities play the role of a mailman for these purposes, and are therefore not to be considered relevant decision-makers. The case-law on automatic non-discretional enforcement of individual EU acts applies here with all its force.

However, when it comes to the extraordinary contributions that national resolution authorities are entitled to make on their own authority, it is then clear that such decisions must be reviewed by national courts. It is in that context where national courts can make a preliminary reference of interpretation or validity to the Court of Justice. But the criterion is clear: when the decision is substantively made by the SRB, it is for the General Court to undertake judicial review. When the decision falls upon the national resolution authority, the task is for national courts.

This means that the fore will depend mostly on the degree of discretion and autonomy granted to the national resolution authority. If they have discretion, then it is a matter for national courts to decide. If they lack such discretion and the crux of the matter has been decided by the SRB, the review will fall upon the General Court. The criterion makes sense, but it might need further refinement in specific cases, particularly when there are discretional and non-discretional decisions bundled together in a complex single act made by the SRB and/or the national resolution authority.

In any case, the Court has provided a first but important glimpse into the procedural arrangements of what is serving as a template for a new and sophisticated means of EU policy enforcement. Readers are advised to follow these developments closely. Nobody knows when will they be crucial in determining the fate of a case in other fields of EU policy.

 

About the author

Daniel Sarmiento

Daniel Sarmiento is Professor of EU Law at University University Complutense of Madrid and Editor in Chief of The EU Law Live Blog.

By Daniel Sarmiento

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