Cases T‑351/18 and T‑584/18
Ukrselhosprom PCF LLC
and
Versobank AS
v
European Central Bank
Judgment of the General Court (Ninth Chamber, Extended Composition), 6 October 2021
(Economic and monetary policy – Prudential supervision of credit institutions – Specific supervisory tasks assigned to the ECB – Decision to withdraw a credit institution’s authorisation – Breach of legislation on combating money laundering and the financing of terrorism – Admissibility – Powers of the national competent authorities (NCAs) of participating Member States and of the ECB under the Single Supervisory Mechanism (SSM) – Equal treatment – Proportionality – Protection of legitimate expectations – Legal certainty – Misuse of powers – Rights of the defence – Obligation to state reasons)
1. Action for annulment – Natural or legal persons – Interest in bringing proceedings – Action brought against a decision of the European Central Bank (ECB) withdrawing a credit institution’s authorisation – Decision repealed and replaced by a decision with identical content taken in the context of the review procedure – No longer any legal interest in bringing proceedings – No need to adjudicate
(Art. 263, fourth para., TFEU; Rules of Procedure of the General Court, Art. 131)
(see paragraphs 70-72, 87-92, 95)
2. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Less significant institutions subject to direct prudential supervision by the national authorities – Decentralised implementation by those authorities of an exclusive competence of the European Central Bank (ECB) – Arrangements for assisting the ECB in the performance of its supervisory tasks – Withdrawal of authorisation from a credit institution – Failing or likely to fail declaration – Decision concerning the resolution of a credit institution – Different acts
(European Parliament and Council Regulation No 806/2014, recital 26 and Art. 18(1) and (4)(a); Council Regulation No 1024/2013, recitals 15, 28 and 37 to 40 and Arts 4(1) and 6(2) to (7); European Parliament and Council Directive 2013/36, Art. 18)
(see paragraphs 134-139, 148, 150, 152)
3. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Less significant institutions subject to direct prudential supervision by the national authorities – Verifications and assistance provided to the European Central Bank (ECB) in the preparation and implementation of any act relating to the withdrawal of authorisation – Competences of national authorities – Withdrawal of authorisation from a credit institution – Exclusive competence of the ECB
(European Parliament and Council Regulation No 806/2014, Art. 83; Council Regulation No 1024/2013, Arts 4(1)(a) and 14(5))
(see paragraphs 162-166, 171-174, 179, 180)
4. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Less significant institutions subject to direct prudential supervision by the national authorities – Establishment of the facts constituting violations of anti-money laundering and counter terrorism financing legislation – Competences of national authorities – Withdrawal of authorisation from a credit institution on the ground of violation of that legislation – Exclusive competence of the European Central Bank (ECB)
(European Parliament and Council Regulation No 806/2014, Art. 83; Council Regulation No 1024/2013, Arts 4(1)(a) and 14(5); European Parliament and Council Directives 2005/60, recitals 1 and 2, and 2013/36, Art. 67)
(see paragraphs 185-187, 190, 197)
5. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single supervisory mechanism – Prudential supervision of credit institutions – Credit institution wishing to establish a branch in another Member State – Notification procedure to the competent authority of the home Member State – Binding nature
(European Parliament and Council Directive 2013/36, recital 19 and Arts 35 to 39)
(see paragraphs 250-256)
Résumé
Versobank AS is a credit institution established in Estonia, whose main shareholder is Ukrselhosprom PCF LLC.
Versobank, as a less significant credit institution, was under the prudential supervision of Finantsinspektsioon (FSA, Estonia), acting as the national competent authority (NCA). (1) The latter was also competent in relation to, inter alia, the monitoring of compliance with rules intended to combat money laundering and the financing of terrorism (‘AML/CFT’).
From 2015 onwards, the FSA identified recurring breaches by Versobank in connection with, first, the ineffectiveness of its AML/CFT regime as regards the management of the risks stemming from its business model and, secondly, the inadequacy of the AML/CFT governance arrangements which it had in place. After carrying out an on-site inspection and sending Versobank a number of notices to comply with the legal requirements, the FSA adopted a precept requiring Versobank immediately to remedy the shortcomings identified during that inspection and requiring it to take certain steps.
Following further on-site inspections, the FSA found that Versobank had still not complied with all the obligations imposed by that precept and considered it necessary to carry out a thorough investigation. Thus, it found that there had been material and severe breaches of AML/CFT legislation.
On 8 February 2018, the European Central Bank (ECB) received from the FSA a proposal to withdraw Versobank’s license. (2) On 26 March 2018, the ECB adopted and notified to Versobank its decision to withdraw the banking license. (3)
Following a request by Ukrselhosprom PCF for review of the ECB’s decision of 26 March 2018, the Governing Council of the ECB adopted the decision of 17 July 2018, (4) which repealed and replaced the decision of 26 March.
The Court, sitting in an extended composition, considers that there is no need to adjudicate on Case T‑351/18. In addition, in Case T‑584/18, the Court dismisses the action of Ukrselhosprom PCF and Versobank in its entirety.
Findings of the Court
In the first place, the Court finds that there is no longer any need to adjudicate on the action brought in Case T‑351/18 seeking annulment of the decision of 26 March 2018.
In that regard, after recalling the scope and conduct of the procedure for the administrative review of ECB decisions, (5) the Court points out that the decision adopted following that review is retroactive to the time at which the initial decision took effect, whatever the outcome of that review. Thus, the replacement of the initial decision by an identical or amended decision at the end of the review procedure results in the definitive disappearance of the original decision from the legal order.
In the present case, the Court notes that the decision of 17 July 2018 was adopted following the administrative review of the decision of 26 March 2018 and was identical in content to that decision. Therefore, by its decision of 17 July 2018, the ECB replaced the decision of 26 March 2018 with retroactive effect to the time at which the latter took effect and did not merely abrogate that decision for the future. Consequently, Ukrselhosprom PCF and Versobank retain no interest in obtaining the annulment of the decision of 26 March 2018 and the action against that act is devoid of purpose.
In the second place, in relation to the action brought by Ukrselhosprom PCF and Versobank in Case T‑584/18, the Court confirms, first, the ECB’s competence to withdraw the authorisation of a credit institution and, more specifically, to adopt the decision of 17 July 2018. Thus, it states that a decision establishing that the resolution of a credit institution is not in the public interest, such as that adopted by the FSA in its functions as a national resolution authority, in no way prohibits the ECB from subsequently adopting a decision withdrawing authorisation. Moreover, the coexistence of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), which share the same mission of protecting the stability and safety of the European Union’s financial system, cannot be understood as precluding the possibility for the competent authority for prudential supervision, in the present case the ECB, to withdraw authorisation, in the absence of the conditions required for adopting a resolution measure, namely where the credit institution in question is not at risk of becoming unviable.
Secondly, the Court confirms the power of the ECB to adopt a decision withdrawing authorisation on the ground of infringement of AML/CFT obligations, recalling that withdrawal of authorisation is also provided for where a credit institution fails to comply with those obligations. (6) Accordingly, the Court finds that it was therefore without disregarding the division of powers between the NCAs of the participating Member States and the ECB under the SSM that the facts constituting breaches of the AML/CFT legislation were established by the FSA, whereas the legal assessment of whether those facts justified withdrawal of authorisation and the assessment of proportionality were reserved for the ECB.
Thirdly, the Court holds that the notification procedure, known as the ‘passporting’ procedure, is binding in nature. (7) Thus, it recalls that a credit institution wishing to establish a branch within the territory of another Member State shall notify the competent authorities of its home Member State. (8) Moreover, the Court states that the fact that the notification procedure is not purely a formality stems (i) from the power of the competent authority of the home Member State to refuse to communicate that information to the competent national authority of the host Member State and (ii) from the margin of discretion available to that first authority when assessing that information
Fourthly, as regards infringement of the principle of proportionality, the Court considers that, in the present case, the withdrawal of authorisation did not go beyond what was appropriate and necessary to attain the objectives of putting an end to the breaches committed by Versobank. Furthermore, the Court notes, inter alia, the options of self-liquidation and sale to another investor did not constitute alternative measures to the withdrawal of authorisation for the purposes of achieving the objectives legally pursued by the ECB.
Fifthly, the Court rejects the arguments alleging infringement of the principle of equal treatment and non-discrimination on the ground that there was no comparative analysis between the breaches alleged against Versobank and those committed by other credit institutions. According to the Court, such an analysis is not necessary in order to take action against a natural or legal person in respect of unlawful conduct.
Sixthly and last, the Court rejects the arguments alleging infringement of Ukrselhosprom PCF’s right of access to the file. First, as regards the first request for access to the file, the Court notes that the ECB did not err in not granting that request since it was not a party concerned (9) at the time that request was made. Secondly, as regards the second request for access made in the course of the review procedure, the Court notes that the Administrative Board of Review accepted that request in its capacity as an applicant for review. (10)