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23rd December 2020
Banking & Finance Institutional law

Op-Ed: “Inviolability of the Union archives after police searches in the Bank of Slovenia” by Janja Hojnik

EU Law Live has already shared information about the EU Court’s judgment by its Grand Chamber in Commission v Slovenia (C-316/19) of 17 December 2020, regarding privileges and immunities of the ECB. The case comes in between two Latvian cases on a similar topic (Ilmārs Rimšēvičs, C-202/18;  and the still pending AB, CE, SIA ‘MM investīcijas’,  C-3/20) and is one of the rare cases where the EU institutions have invoked their privileges and immunities. The judgment sets an important precedent for interpreting the Union’s archives, which are protected by the principle of inviolability, while further clarifying the legal position of officials with hybrid professional roles (at the national and EU levels). At the same time the ruling raises new questions about the proper balance between the protection of Union archives and national autonomy to conduct criminal investigations, and more broadly about the nature of European constitutionalism.

 

I. Background to the case

The background to Commission v Slovenia (C-316/19) concerns Slovenian resolutions of banks made during the financial crisis, where leading economists in the country revealed that the banks have been bailed-in for at least 1.5 billion euros in excess of what was necessary. Since the banks have then been privatised, the Slovenian public, a population of only two million, demanded to know who is at fault for putting this unnecessary financial burden upon Slovenian taxpayers. The public prosecutors claimed for two and a half years that the Bank of Slovenia did not respond to their calls to submit documents that could be used as court evidence when establishing who is to blame for the controversial methodology (as it could not be verified with subsequent calculations). Under obvious media pressure to find the culprits for the controversial resolution of the banking hole, the prosecution asked the regional court in Ljubljana to issue a court order allowing police to carry out a search with the purpose of seizing the documents in the premises of the Slovenian Central Bank (Bank of Slovenia). The governor complained against this order, claiming inviolability of the archives of the ESCBs. Instead of making a reference for a preliminary ruling from the Court of Justice of the EU for an interpretation of the Union archives, the regional court in Ljubljana put forward its own interpretation, concluding that in the pre-EU banking union period the investigators only asked for documents that did not relate to the governor’s work under the auspices of the ESCB and that thus no involvement of the ECB is needed in approving access to these documents. This was affirmed by the Higher Court in Ljubljana, again without referring to the CJEU for a preliminary ruling, while Slovenian Constitutional Court declared it had nof jurisdiction to decide cases brought by the ECB.

After months of dialogue between Slovenia and the Commission, the latter brought infringement proceedings before the Court of Justice, asking the Court to balance:

    1. the rights of the ECB in ensuring that it is able to continue to fulfil its tasks under the EU treaties, by having its archives protected;
    2. the rights of national authorities in the Member States to be able to properly conduct national criminal investigations, and make seizures.

The question has high constitutional relevance for both the EU and the Member States in many respects. The EU is not just interested in having its archives protected but in the first place is interested  in making clear what constitutional status it has. As pointed out by Avbelj, privileges and immunities are, by the nature of things, a matter of international organisations and international law (see also his paper in the European Law Review). From the very beginning today’s EU has explicitly sought to separate itself from international law (where immunities and privileges are something self-evident) to develop its own constitutional legal order, filled with fundamental values enshrined in Article 2 TEU, including the principles of good governance, openness and transparency of the functioning of the Union institutions. In this respect, privileges and immunities should be understood as an exception to the requirement of the rule of law that we are all equally subject to the law and that there are no special rules for anyone, except in exceptional cases.

 

II. The Court’s ruling

In Commission v Slovenia (C-316/19) the Court of Justice has adopted a different approach, declaring inviolability of the archives of the ECB the principle rather than an exception. For the autonomy of the Member States to conduct national investigations this means a restriction that will need to be fully examined in the future and quite likely additionally clarified by the Court itself.

The core to this Grand Chamber judgment is the Court’s interpretation of the concept of ‘archives of the ECB’. According to the Court, the concept of ‘archives of the Union’ must be understood as meaning all those documents of whatever date, of whatever type and in whatever medium which have originated in or been received by the institutions, bodies, offices or agencies of the EU or by their representatives or servants in the performance of their duties, and which relate to the activities of or the performance of the tasks of those entities. As the ECB is an EU institution, the principle of the inviolability of the archives of the Union applies to its archives, pointing out that the archives of the Union cover the archives of an EU institution such as the ECB even if they are stored in places other than the buildings and premises of the EU. Hence, such documents are covered by the concept of ‘archives of the ECB’ even if they are held by the national central banks and not by the ECB itself.

This means an unexpectedly broad interpretation of the Union archives, considering that there are many hybrid institutions and officials with dual professional roles – at the EU and national levels. In addition to the governors of the national central banks, this definition includes members of the European Council and the Council of the EU, members of the Committee of Regions, numerous participants of the EU comitology process and perhaps also national judges, who are given the role to enforce EU law under Article 19 TEU and may thus send questions for a preliminary ruling to the CJEU, which are then stored in the Court’s archives. According to the CJEU, all these documents and the holders of all these documents are inviolable, as they enjoy immunities and privileges under EU law, which has vast consequences for the national justice systems.

The Court did admit that national authorities may still search and seize documents from the national central banks that do not belong to the archives of the Union, however, since the documents will in the digital era most often be on the same laptop, server or phone, the distinction between the national and EU archives is increasingly difficult to make. The Court also did not demand such a separation to be made in the future, probably because it is not practical for senior officials to have separate phones or laptops for EU and national affairs. Yet, this practical inseparability of the national and EU archives causes the principle of the inviolability of the Union archives to effectively expand to the documents that are of purely national relevance.

Another important point in the judgment concerns the burden of proof. As one may recall, the Court held in Ilmārs Rimšēvičs (C-202/18) that Latvia has not established that the relieving of Mr Rimšēvičs from office is based on the existence of sufficient indications that he has engaged in serious misconduct, although Latvian authorities relied on the secrecy of the criminal investigation before the national courts, and has thus annulled the decision in so far as it prohibited Mr Rimšēvičs from performing his duties as Governor of the Central Bank of Latvia. In the Slovenian case, the Commission has acknowledged that it did not have specific information, whether the documents seized by the Slovenian authorities fell under Union or national archives. Yet, considering that the police inter alia took the Governor’s computer and since he was called upon to carry out duties within the framework of the ESCB, the Court considered it to be established that the documents seized by the Slovenian authorities must have included documents which were part of the archives of the ECB. This was sufficient to find that by seizing such documents unilaterally, the Slovenian authorities infringed the principle of the inviolability of the archives of the ECB. The Court has therefore lowered the burden of proof for the Commission to make it easier to prove an infringement of EU law. On the other hand, considering the digitalisation of documents mentioned earlier, where EU and national documents are on a single computer or server it would be difficult for the Commission to state precise EU documents, which have been seized, in particular when the national authorities do not return the computer or server.

Consequently, it was straightforward for the Court to find Slovenian failure to comply with the obligation of sincere cooperation. Slovenian authorities have obviously acted in the full conviction that they did not infringe the ECB’s powers, as the latter, at the time of the search, did not yet have competences under the banking union and have thus completely overlooked the administrative procedure to be followed under the EU rules in order to obtain delicate documents that could potentially fall under the ECB archives.

 

Conclusion

As pointed out by Graham Butler, national authorities have to be extremely cautious in their dealings with NCBs. After the ruling that has been commented on, this potentially applies also for dealings with other national institutions that store Union archives, in national investigations. The Court’s broad interpretation of the EU’s archives considerably restricts national autonomy to conduct criminal investigations, when EU archives could be involved, albeit not in the interest of the investigation. The ECB is surely the most sensitive among all the EU institutions when its independence and inviolability of its archives are at stake (see for example this conflict or this or this one). My hope is that this judgment of the Court does not deter Slovenian or any other national prosecution authorities from conducting criminal investigations in the spheres that also include or might include EU documents, but follow the prescribed procedures of getting authorisation by the ECB or by the Court of Justice to lift their inviolability.

Most of all, it is regrettable that Slovenian courts did not ask the Court of Justice for interpretation of the EU’s archives under Article 267 TFEU. This was a textbook example of uncertainty about the correct interpretation of EU law. A significant part of the European attention regarding Slovenian investigation in the Bank of Slovenia would thus have been avoided if the district or higher court in Ljubljana had suspended the proceedings and turned to Luxembourg before approving the investigation. This could moreover be done by the Constitutional Court, which could follow the effet utile of EU law and grant the ECB the necessary remedy to protect its interests in relation to the Slovenian authorities instead of declaring its incompetence.

Hopefully this case will lead to improved awareness of Slovenian judges about the importance of the preliminary rulings procedures for proper application of EU law in Slovenia. Whether this has been so or not will soon be evident in a dispute about the powers of the Slovenian Court of Auditors to review the accounts of the Slovenian central bank, where the latter defends its autonomy contrary to the Court of Auditors’ efforts to review its accounts (see here). This is somehow similar to the tensions between the ECB and the European Court of Auditors, which have in general been solved with a recent Memorandum of Understanding, but there is still no guarantee that no conflicts between them will arise in the future (see here).

To conclude, while independence of the ECB and the NCBs are essential for EU monetary policy and banking union, it is also clear that democratic legitimacy of the ESCB needs to be improved in the post-Weiss era. In this respect it is important to note that the principle of loyal cooperation binds both EU and national institutions. National prosecution needs to adhere to the EU procedures to get access to the documents in possession of the NCBs, while the NCBs should cooperate with the former, when documents that do not require ECB clearance of inviolability are at stake. Privileges and immunities of the EU should only be used to the benefit of EU citizens and not as an unnecessary hurdle in the national criminal investigations into the financial malpractices of the banking system.

 

Janja Hojnik is EU Law Professor at University of Maribor, Faculty of Law, Slovenia, author of ‘Individuals’ right to property under international succession law: reimbursement of bank deposits after the collapse of the SFR Yugoslavia’, Hague YB of Int. Law, vol 30, 2017, ‘Technology neutral EU law: digital goods within the traditional goods/services distinction’, Int. J. of Law and IT, Oxford Journals, (2017) 25 (1): 63-84 and of ‘Tell me where you come from and I will tell you the price: Ambiguous expansion of prohibited geographical price discrimination in the EU’, CMLRev (2019).

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