Case T‑107/17
Frank Steinhoff and Others
v
European Central Bank
Judgment of the Court (Third Chamber), 23 May 2019
(Non-contractual liability — Economic and monetary policy — ECB — National central banks — Restructuring of the Greek public debt — Involvement of the private sector — Collective action clauses — Mandatory exchange of Greek bonds — Private creditors — Opinion of the ECB — Sufficiently serious breach of a rule of law conferring rights on individuals — Principle of pacta sunt servanda — Article 17(1) and (2) of the Charter of Fundamental Rights — Article 63(1) TFEU — Article 124 TFEU)
1. Actions for damages — Time limit for instituting proceedings — Limitation period of five years — Instituting proceedings on the eve of the expiry of the time limit — Admissibility — Subsequent regularisation of the application — Irrelevant
(Arts 263, fourth subpara. and 340, second subpara., TFEU; Statute of the Court of Justice, Art. 46; Rules of Procedure of the General Court, Art. 76)
(see paragraphs 30-33)
2. Judicial proceedings — Production of evidence — Production of evidence expressed in a language other than the language of the case — Requirement to provide a translation into the language of the case — Infringement — Consequences
(Rules of Procedure of the General Court, Art. 46(2))
(see paragraphs 35-37)
3. Actions for damages — Subject matter — Application for compensation for the damage caused by the European Central Bank — Jurisdiction of the EU judicature — Imputation, by the Bank, of the damage to the conduct of a Member State — Irrelevant
(Arts 268 and 340 TFEU)
(see paragraphs 42-46)
4. Actions for damages — Autonomous form of action — Difference compared to an action for annulment
(Arts 263 and 268 TFEU)
(see paragraph 51)
5. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of EU law — Criteria for assessment
(Art. 340, second subpara., TFEU)
(see paragraphs 52-54)
6. Actions for damages — Subject matter — Application for compensation for the damage caused by a non-binding political act — Admissibility
(Arts 263 and 340, second subpara., TFEU)
(see paragraphs 55-57)
7. Economic and monetary policy — Monetary policy — Implementation — Opinion addressed to national authorities by the European Central Bank (ECB) on draft national legislation in its fields of competence — Binding nature — Absence — Discretion of the ECB when adopting opinions
(Art. 127(4) TFEU; Council Decision 98/415, recital 3 and Arts 2 and 4)
(see paragraphs 71, 72)
8. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of a rule of law conferring rights on individuals — Rule of law conferring rights on individuals — Concept — Principle of pacta sunt servanda — Not included
(Art. 340, second subpara., TFEU)
(see paragraphs 77, 78)
9. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of EU law — Failure on the part of the ECB to draw attention in an opinion addressed to a Member State to a breach of the principle of pacta sunt servanda caused by the adoption of a law amending the terms applicable to securities for the purpose of restructuring the national public debt — Not included
(Art. 340, second subpara., TFEU)
(see paragraphs 79-85)
10. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of a rule of law conferring rights on individuals — Rule of law conferring rights on individuals — Concept — Right to property — Included
(Art. 340, second subpara., TFEU; European Union Charter of Fundamental Rights, Art. 17(1))
(see paragraphs 96, 97)
11. EU law — Principles — Fundamental rights — Right to property — Restrictions — Lawfulness — Conditions
(European Union Charter of Fundamental Rights, Arts 17(1) and 52(1))
(see paragraphs 99, 100)
12. Economic and monetary policy — Monetary policy — Implementation — Opinion addressed to national authorities by the European Central Bank (ECB) on draft national legislation in its fields of competence — Adoption by a Member State of a law limiting the value of certain bonds in order to protect the national economy and the euro area against the risk of that Member State’s bankruptcy — Disproportionate restriction of the right to property — Absence
(Art. 127(4) TFEU; European Union Charter of Fundamental Rights, Art. 17(1); Council Decision 98/415)
(see paragraphs 105, 108-116)
13. Free movement of capital — Restrictions on the movement of capital — National legislation limiting the value of bonds issued or guaranteed by the Member State concerned — Justification based on the need to protect the national economy and the euro area against the risk of that Member State’s bankruptcy — Lawfulness
(Art. 63 TFEU)
(see paragraphs 119, 120, 122-124)
14. Judicial proceedings — Treatment of cases before the General Court — Protection given to parties against misuse of pleadings and other procedural documents — Reconciliation with the principle of unfettered adduction of evidence — Use of procedural documents adduced in other legal proceedings — Lawfulness — Submission of procedural documents with pages missing — Production of the missing pages in the reply — Infringement of the rights of the defence of the defendant — Absence
(Rules of Procedure of the General Court, Art. 85)
(see paragraphs 129-131)
15. Economic and monetary policy — Economic policy — Prohibition of measures granting privileged access to financial institutions, unless justified on prudential grounds — National legislation limiting the value of bonds issued or guaranteed by the Member State concerned — Justification based on the need to protect the national economy and the euro area against the risk of that Member State’s bankruptcy — Lawfulness
(Art. 124 TFEU; Council Regulation No 3604/93, Art. 2)
(see paragraphs 136-138)
16. Non-contractual liability — Conditions — Unlawfulness — Sufficiently serious breach of a rule of law conferring rights on individuals — Rule of law conferring rights on individuals — Concept — Prohibition of measures granting privileged access to financial institutions, unless justified on prudential grounds — Not included
(Arts 124 and 340, second subpara., TFEU)
(see paragraphs 139, 140)
17. Non-contractual liability — Conditions — Unlawfulness — Damage — Causal link — One of the conditions not satisfied — Claim for compensation dismissed in its entirety
(Art. 340, second subpara., TFEU)
(see paragraphs 143, 144)
Résumé
In the judgment in Steinhoff and Others v ECB (T‑107/17), delivered on 23 May 2019, the Court dismissed an action for damages seeking restitution of the loss allegedly suffered by private creditors, following the adoption of the Opinion of the European Central Bank (ECB) on the terms of securities issued or guaranteed by the Greek State. (1)
On 2 February 2012, the Hellenic Republic submitted to the ECB, pursuant to Article 127(4) TFEU, read in conjunction with Article 282(5) TFEU, a request for an opinion on draft Greek Law No 4050/2012 introducing rules amending the terms applicable to marketable securities issued or guaranteed by the Greek State under agreements with their holders for the purpose of restructuring the Greek public debt, based, in particular, on the application of collective action clauses (‘CACs’). Since the ECB delivered a positive opinion on the draft law, it was adopted, on 23 February 2012, by the Greek Parliament.
Under the CACs mechanism, the proposed amendments to the bonds concerned would become legally binding on all holders of bonds governed by Greek law issued before 31 December 2011, as identified in the act of the Ministerial Council approving private sector involvement (‘PSI’) invitations, if the amendments were approved by a quorum of bondholders representing at least two thirds of the face value of those bonds. Since the quorum and the majority required for the planned bond exchange to go ahead were reached, all holders of Greek bonds, including those who opposed the exchange, had their bonds exchanged pursuant to Law No 4050/2012, with the result that the value of those bonds fell. The applicants, as holders of Greek bonds, participated in the restructuring of the Greek public debt in accordance with the PSI and the CACs implemented pursuant to Law No 4050/2012, having refused the offer to exchange their bonds.
By their action, the applicants called into question the liability of the ECB for the loss they allegedly suffered due to the fact that the ECB failed, in its opinion, to draw the attention of the Hellenic Republic to the unlawful nature of the proposed restructuring of the Greek public debt by a mandatory exchange of bonds.
With regard to the non-contractual liability of the ECB, the Court noted, in the first place, that the ECB’s opinions are not binding on national authorities. Indeed, according to recital 3 and Article 4 of Decision 98/415, (2) national authorities are required only to take those opinions into account and they do not prejudice the responsibility of those authorities for the matters which are the subject of the draft legislative provisions concerned. It follows that in order to comply with the obligation to consult the ECB, the ECB must be able to make its views known effectively to the national authorities, but it cannot compel those authorities to abide by them. In the second place, the Court stated that the ECB enjoys a broad discretion when adopting its opinions. The broad discretion enjoyed by the ECB means that its non-contractual liability may be incurred only if it manifestly and gravely disregards the limits on that discretion. Consequently, only a sufficiently serious breach of a rule of law which confers rights on individuals is capable of establishing the non-contractual liability of the ECB.
In that context, the Court held that the applicants were incorrect to claim that the ECB committed a wrongful act capable of triggering its non-contractual liability by failing to draw attention in the contested opinion to the breach of the principle of pacta sunt servanda allegedly caused by the adoption of Law No 4050/2012 in respect of them. The applicants’ subscription to the disputed bonds which were issued and guaranteed by the Hellenic Republic created a contractual relationship between them and the Hellenic Republic. That contractual relationship is not governed by the principle of pacta sunt servanda under Article 26 of the Vienna Convention on the Law of Treaties. (3) Pursuant to Article 1 thereof, the Convention applies only to treaties between States. Consequently, Article 26 of the Vienna Convention on the Law of Treaties is not a rule of law conferring rights on the applicants.
In addition, the Court observed that the opinions of the ECB are not addressed to individuals, nor do they have as their main purpose contractual relations between an individual and a Member State following the issuance of bonds by that Member State. Under Article 2 of Decision 98/415, the addressees of the ECB’s opinions are the authorities of the Member States which are required to consult the ECB, not individuals. Consequently, where, as in the present case, the ECB is consulted by the Hellenic Republic regarding draft legislative provisions concerning national banks and the rules applicable to financial institutions in so far as they materially influence the stability of such institutions and the financial markets, it is not required to take a view on whether that Member State has complied with the general principle of contract law, pacta sunt servanda, vis-à-vis holders of State bonds. Thus, the ECB’s power to issue opinions does not confer on the applicants a right to have the ECB draw attention to a breach of a contractual right they enjoy vis-à-vis the Hellenic Republic following the subscription by them to Greek bonds issued and guaranteed by that Member State.
Subsequently, the Court considered that limiting the value of the disputed bonds of the applicants was not a disproportionate measure in relation to the aim of protecting the Hellenic Republic’s economy and the euro area against the risk of that Member State’s bankruptcy and the collapse of the economy. The applicants were therefore wrong to claim that the measures at issue infringed the right to property enshrined in Article 17(1) of the Charter of Fundamental Rights of the European Union.
Next, the Court held that there was no infringement of the free movement of capital enshrined in Article 63(1) TFEU, by finding that, in the present case, the measures implemented by Law No 4050/2012 were justified by overriding reasons in the public interest, in so far as the circumstances that led to that law were genuinely exceptional since, without restructuring, at least a selective default in the short term by the Hellenic Republic was a credible prospect. Likewise, the measures at issue were intended to ensure the stability of the banking system of the euro area as a whole. Furthermore, the applicants have not shown that those measures were disproportionate. They served to restore the stability of the banking system of the euro area as a whole and it has not been demonstrated that they went beyond what was necessary for that purpose. In particular, the involvement of private creditors in the exchange of Greek bonds on a voluntary basis only, as the applicants advocated, would not have ensured the success of that exchange. Without the assurance that private creditors would be treated equally, very few of those creditors would have accepted the exchange in view of the moral hazard it entailed, namely that they would bear the consequences of risks taken by creditors who were not participating in the exchange of Greek bonds.
Lastly, the Court considered that the applicants were wrong to invoke the existence of unlawfulness rendering the ECB liable towards them based on the ECB’s failure to draw attention to a breach of Article 124 TFEU. Article 124 TFEU prohibits any measure, not based on prudential considerations, granting Member States, among others, privileged access to financial institutions so as to encourage the former to follow a sound budgetary policy, not allowing monetary financing of public deficits or privileged access by public authorities to the financial markets to lead to excessively high levels of debt or excessive Member State deficits. The aim of Law No 4050/2012 was not to increase the level of debt of the Hellenic Republic, but rather to reduce it, due to its excessively high nature, by devaluing the bonds held by the applicants. In addition, Draft Law No 4050/2012 contributed to preserving both Greek public finances and the stability of the financial system in the euro area. In any event, Article 124 TFEU is not designed to protect the applicants and does not confer rights on them.