Case T‑667/21
BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG
v
European Central Bank
Judgment of the General Court (Third Chamber, Extended Composition) of 28 February 2024
(Economic and monetary policy – Prudential supervision of credit institutions – Second subparagraph of Article 9(1) of Regulation (EU) No 1024/2013 – Direct exercise by the ECB of a power of a competent authority under the relevant Union law – Levying absorption interest under Austrian law where Article 395 of Regulation (EU) No 575/2013 has been infringed – Competence of the ECB – Article 65(1) and Article 70 of Directive 2013/36/EU – Proportionality)
1. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Prudential supervision of credit institutions – Powers of the European Central Bank (ECB) – Supervisory and investigatory powers – Powers of the competent authorities under the relevant Union law – Determination of administrative measures – –Levying absorption interest in respect of limits applicable to large exposures having been exceeded – Included
(European Parliament and Council Regulation No 575/2013, Art. 395(1); Council Regulation No 1024/2013, Art. 9(1), second subpara.; European Parliament and Council Directive 2013/36, Arts 65(1) and 67(1) and (2))
(see paragraphs 36, 39-46)
2. National law – Interpretation – Taking into account of the interpretation adopted by the courts of the Member State at issue – Limits
(see paragraphs 57-59)
3. EU law – Direct effect – Primacy – Conflict between EU law and a national law – Obligations and powers of the national court hearing the case – Obligations and powers of the EU Courts – Non-application of the national law
(see paragraphs 60-62)
4. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Prudential supervision of credit institutions – Competent authorities’ supervisory powers and powers to impose penalties – Determining the type of administrative measure by taking into account all the circumstances – Absorption interest levied automatically where the limits applicable to large exposures are exceeded – Not permissible – Breach of the principle of proportionality
(European Parliament and Council Regulation No 575/2013, Art. 395(1); European Parliament and Council Directive 2013/36, recital 37 and Arts 4(1), 65(1) and 70)
(see paragraphs 63-79)
Résumé
By upholding the actions for annulment brought against decisions adopted by the European Central Bank (ECB) levying absorption interest on the basis of the SSM Regulation (1) and pursuant to national law, by two judgments delivered on the same day, the General Court clarifies the circumstances in which it may have recourse to an interpretation in conformity with EU law of national law transposing a directive, which departs from the interpretation of the national courts.
In addition, in the judgment in Sber v ECB (Joined Cases T‑647/21 and T‑99/22), the Court gives a ruling on the novel question of the application of the principle ne bis in idem where the ECB imposes administrative pecuniary penalties under the SSM Regulation, while in the judgment in BAWAG PSK v ECB (T‑667/21), it develops its case-law on the extent of the ECB’s competence under that regulation.
The cases concern two Austrian credit institutions subject to direct prudential supervision by the ECB.
Accordingly, in Joined Cases T‑647/21 and T‑99/22, the ECB imposed on the applicant, Sber Vermögensverwaltungs AG, an administrative pecuniary penalty under the SSM Regulation in respect of the limits to large exposures established by Regulation No 575/2013 (2) having been exceeded both on an individual and on a consolidated basis. Next, on the basis of the SSM Regulation, (3) and pursuant to point 2 of Paragraph 97(1) of the BWG, (4) the ECB decided to levy absorption interest on it in respect of the amounts concerned by such limits having been exceeded.
Following an opinion delivered by the ECB’s Administrative Board of Review finding that there were flaws in the ECB’s initial decision, the ECB, on 21 December 2021, replaced that decision with a new decision, (5) but maintained the amount of absorption interest. It stated that, in situations where an institution breaches its obligations under Regulation No 575/2013, the levying of absorption interest under the BWG fell within the exercise of a non-discretionary power by the competent authority, leaving it no discretion.
By two separate actions, the applicant requested the Court to annul both the initial decision and the decision of 21 December 2021 adopted by the ECB.
In Case T‑667/21, the applicant, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG, indirectly acquired a portfolio of residential property loans in France. That portfolio was transferred to a joint fund without legal personality, in which it acquired all the shares, thereby becoming the beneficial owner.
Following an inspection at the applicant’s premises, the ECB found that the applicant was not in possession of data enabling each of the debtors of the underlying loans to be identified and that it had disregarded the limit to large exposures provided for in Regulation No 575/2013 in respect of the portfolio. Accordingly, by decision of 2 August 2021, (6) on the basis of the same legislative provisions as mentioned in the description of the joined cases referred to above, the ECB levied absorption interest on it. The applicant disputed that decision before the Court.
By its judgments in Sber v ECB (Joined Cases T‑647/21 and T‑99/22) and in BAWAG PSK v ECB (T‑667/21), the Court annulled the ECB’s decision of 21 December 2021, which had replaced its initial decision, and the decision of 2 August 2021, respectively, on the ground that, when levying absorption interest, the ECB failed to examine the circumstances of the case.
Findings of the Court
– The application of the principle ne bis in idem
The Court considers that the levying of absorption interest by the ECB under point 2 of Paragraph 97(1) of the BWG in respect of conduct which has already been the subject of an administrative pecuniary penalty under the SSM Regulation is not contrary to the principle ne bis in idem.
In that regard, it recalls that the application of Article 50 of the Charter of Fundamental Rights of the European Union (‘the Charter’), which prohibits a duplication of proceedings and of penalties of a criminal nature for the same facts and against the same person, is not limited to proceedings and penalties which are classified as ‘criminal’ by national law. Indeed, it extends to proceedings and penalties which must be considered to have a criminal nature on the basis of the intrinsic nature of the offence and the degree of severity of the penalty which the person concerned is liable to incur.
Accordingly, the Court points out that administrative pecuniary penalties imposed under Article 18(1) of the SSM Regulation fall within the scope of Article 50 of the Charter. It observes that those penalties are clearly modelled on the fines which the European Commission may impose in the field of competition law (7) and are of an equivalent nature and severity. It results from settled case-law that the principle ne bis in idem must be observed in proceedings for the imposition of fines under competition law. That classification must therefore be applied, by analogy, to those penalties.
By contrast, the Court finds that it is apparent from the case-law of the Austrian courts that absorption interest is classified as a non-punitive prudential measure. Since neither the nature of the offence nor the degree of severity of the penalty brings them into the realm of criminal law, their application pursuant to the BWG does not fall within the scope of Article 50 of the Charter. That conclusion is, for that matter, confirmed by the judgment in VTB Bank (Austria), (8) in which, as regards absorption interest, the Court favoured classification as an ‘administrative measure’ rather than as an ‘administrative penalty’.
– The ECB’s competence to levy absorption interest
The Court states that the ECB was competent to levy absorption interest pursuant to Paragraph 97 of the BWG on the basis of the SSM Regulation.
At the outset, it states that, for the purpose of carrying out its prudential tasks, the ECB has three categories of supervisory and investigatory powers, namely those laid down in the SSM Regulation, the powers of competent authorities under relevant Union law and the power to instruct national authorities to make use of their powers in accordance with the conditions set out in national law.
In analysing whether, in the present case, the ECB had available to it the powers belonging to the second category, namely the powers of the competent authorities under relevant Union law, the Court observes that the expression ‘under Union law’ has been interpreted as including all the powers resulting from the legal framework established by a directive, which result from an obligation or a power for the Member State to legislate, as opposed to the recognition by that directive of the power which the Member States enjoy under national law to provide for stricter provisions outside the framework of the regime established by that directive. (9)
However, in the judgment in VTB Bank (Austria), (10) it was held, with regard to an earlier version of Paragraph 97 of the BWG, that the levying of absorption interest is akin to an administrative measure falling within the scope of Article 65(1) of Directive 2013/36, (11) which in the present case forms part of the relevant legal framework. The fact that they are not mentioned in a list of penalties and other administrative measures mentioned in that directive is irrelevant, since that list is not exhaustive, and that directive provides that Member States are to take all measures necessary to ensure that that directive and Regulation No 575/2013 are implemented. The General Court states that, in that judgment, the Court of Justice emphasised that prudential minimum requirements adopted by EU law should ensure maximum harmonisation and that, where the limits set out in Regulation No 575/2013 are exceeded, Member States are required to levy on credit institutions not a measure governed by national law but an administrative penalty or other administrative measure within the meaning of Article 65(1) of Directive 2013/36.
Accordingly, the fact that the levying of absorption interest is not referred to in the list in Directive 2013/36 does not prevent it from falling within the legal regime established by that directive. Consequently, the Court concludes that it is akin to a power available to the competent national authority ‘under the relevant Union law’ within the meaning of the second sentence of the second subparagraph of Article 9(1) of the SSM Regulation and which power, consequently, the ECB has.
– Interpretation of national law
The Court observes that, by relying on the interpretation of the Austrian courts that absorption interest was levied automatically in cases where the limits to large exposures are exceeded and by failing to examine the circumstances of the case, the ECB relied on a premiss which was legally incorrect, which vitiated its examination of the proportionality of the application of point 2 of Paragraph 97(1) of the BWG.
In that context, the Court recalls that, where it is called upon to review the substance of the ECB’s application of national law transposing a directive, the interpretation of national courts is sufficient to establish the scope of that national law where it results in a finding that it is compatible with the directive which it transposes. By contrast, where the interpretation of the national courts does not make it possible to ensure the compatibility of national law with a directive, compliance with the principle of the primacy of EU law means that the Court must, as must a national court, where necessary, interpret national law so far as possible in the light of the wording and the purpose of the directive transposed in order to achieve the result sought by that directive. Accordingly, the requirement to interpret national law in conformity with EU law entails the obligation for national courts to change established case-law, where necessary, if it is based on an interpretation of national law which is incompatible with the objectives of a directive.
Moreover, where it is unable to interpret national law in compliance with the requirements of EU law, the General Court, like the national court which is called upon to apply provisions of EU law, is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any national legislation, even if adopted subsequently, which is contrary to a provision of EU law with direct effect.
In the present case, the Court considers, on the basis of a literal, contextual and teleological interpretation of Article 70 of Directive 2013/36, (12) that that provision must be understood as meaning that it is for the competent national authority and, in consequence, the ECB, to determine the type of administrative measure by taking into account all the circumstances, which necessarily implies that they have a margin of discretion and precludes them from being in a position of non-discretionary competence as regards the application of absorption interest levied pursuant to point 2 of Paragraph 97(1) of the BWG.