Case T‑405/21
(published in extract form)
Dexia Crédit Local
v
Single Resolution Board
Judgment of the General Court (Eighth Chamber, Extended Composition) of 24 January 2024
(Economic and monetary union – Banking union – Single Resolution Mechanism for credit institutions and certain investment firms (SRM) – Single Resolution Fund (SRF) – Decision of the SRB on the calculation of the 2021 ex ante contributions – Obligation to state reasons – Equal treatment – Principle of proportionality – SRB’s margin of discretion – Plea of illegality – Legal basis of Regulation (EU) No 806/2014 – Commission’s margin of discretion)
1. Approximation of laws – Measures intended to improve the functioning of the internal market in the field of finance – Regulations on the approximation of the provisions of the Member States concerning the resolution of institutions in the banking union – Articles 5, 69 and 70 of Regulation No 806/2014 – Power of the Single Resolution Board (SRB) to set the ex ante contributions and to manage the financial means of the Single Resolution Fund (SRF) – Legal basis – Article 114 TFEU
(European Parliament and Council Regulation No 806/2014, Arts 5, 69 and 70)
(see paragraphs 35, 37, 46, 48-50, 54, 56, 58, 59)
2. Economic and monetary policy – Economic policy – Single resolution mechanism for credit institutions and certain investment firms – Ex ante contributions to the Single Resolution Fund (SRF) – Nature – No fiscal nature – Insurance-based logic seeking to ensure the stability of the financial sector as a whole – Financing by the financial sector as a whole – Contributions directly set aside solely for the financing of expenditure of that sector which is necessary for the functioning of that sector – Legal basis – Article 114(2) TFEU
(Art. 114(2) TFEU; European Parliament and Council Regulation No 806/2014, Arts 67(2) and (4), 69 and 70)
(see paragraphs 64-69, 71, 76-79)
3. Acts of the institutions – Statement of reasons – Obligation – Scope – Explanations regarding the reasons for the measure provided by the author during the proceedings before the EU judicature – Conditions – There must be no contradictions and the explanations must be consistent with those reasons
(Art. 296, second para., TFEU)
(see paragraphs 229, 230)
Résumé
Hearing an action for annulment, which it upholds, the General Court rules for the first time on the compatibility of Regulation No 806/2014 (1) with Article 114(1) and (2) and Article 352 TFEU, providing, inter alia, clarification of the concept of ‘fiscal provisions’ as regards the characteristics of ex ante contributions. In addition, it reiterates its findings concerning the scope of the obligation on the Single Resolution Board (SRB) to state reasons regarding the determination of the annual target level.
Dexia Crédit Local (‘the applicant’) is a credit institution established in France.
On 14 April 2021, the SRB adopted a decision in which it set (2) the 2021 ex ante contributions to the Single Resolution Fund (‘the SRF’) of credit institutions and certain investment firms, one of which was the applicant (‘the contested decision’). (3)
Findings of the Court
As regards the pleas alleging that the provisions of Regulation No 806/2014 are unlawful in the light of the provisions of the Treaties, which the Court rejects, the applicant contested, in particular, the legal basis – namely Article 114 TFEU – pursuant to which the provisions of that regulation at issue (4) were adopted and the decision to apply paragraph 1 of that article, whereas the ex ante contributions are fiscal in nature, and therefore fall within the concept of ‘fiscal provisions’ within the meaning of paragraph 2 of that article.
At the outset, as regards the challenge to the legal basis relied upon, the Court notes that the choice of legal basis for an EU measure must rest on objective factors that are amenable to judicial review, which include the aim and the content of that measure. Legislative acts adopted on the basis of Article 114(1) TFEU must, first, comprise measures for the approximation of the provisions laid down by law, regulation or administrative action in the Member States and, second, have as their object the establishment and functioning of the internal market. In the present case, the Court finds that the provisions of Regulation No 806/2014 at issue satisfy those two conditions.
In the first place, the Court notes that Article 114 TFEU may be used as a legal basis only where it is actually and objectively apparent from the legal act that its purpose is to improve the conditions for the establishment and functioning of the internal market. It is clear from the recitals of Regulation No 806/2014 that that regulation seeks to limit the link between the perceived fiscal position of individual Member States and the funding costs of banks and undertakings operating in those Member States, as well as to place the responsibility of financing the stabilisation of the financial system on the financial industry as a whole. Thus, Regulation No 806/2014 establishes, inter alia, uniform rules and a uniform procedure for the resolution of institutions, which should be applied by the SRB, in order to address the threats encountered. An essential element of those rules and that procedure is the SRF, which makes it possible to ensure the efficient exercise of resolution powers and to contribute to the financing of the resolution tools while ensuring their efficient application. In order to ensure sufficient financial means in the SRF, it is financed, inter alia, by the ex ante contributions paid by the institutions, the amount of which depends on the final target level and the main calculation methods laid down in Articles 69 and 70 of Regulation No 806/2014. Consequently, the payment of those contributions ensures the efficient application of the uniform rules and the uniform procedure for the resolution of institutions.
Furthermore, the EU legislature emphasised that the uniform application of the resolution regime in the participating Member States would be enhanced as a result of the tasks entrusted to the SRB, which was specifically designed to ensure a swift and effective decision-making process in resolution and should also ensure that appropriate account is taken of national financial stability, the financial stability of the Union and the internal market. In that context, that regulation provides that the SRB is to be regarded as a national resolution authority (NRA) where it performs tasks and exercises powers conferred on such an NRA. That provision thus allows the SRB to act fully as a decision-making body in the field of resolution in the banking union and, therefore, has the object of improving the functioning of the internal market.
The Court concludes that the objective of Regulation No 806/2014 is to improve the conditions for the establishment and functioning of the internal market.
In the second place, the Court notes that, by the expression ‘measures for the approximation’ in Article 114 TFEU, the authors of the FEU Treaty intended to confer on the Union legislature, depending on the general context and the specific circumstances of the matter to be harmonised, discretion as regards the most appropriate method of harmonisation for achieving the desired result. Accordingly, the EU legislature may delegate to a Union body, office or agency powers for the implementation of the harmonisation sought. In those circumstances, the Court concludes that the EU legislature was able to provide that the SRB had to be regarded as an NRA where it performed tasks and exercised powers conferred on such an NRA and could confer on it the powers to determine the amount of the ex ante contributions and to manage the financial means of the SRF. Furthermore, Articles 69 and 70 of Regulation No 806/2014 constitute an essential element of the rules and procedure for the resolution of institutions, which helps to prevent divergent national practices from creating obstacles for the exercise of fundamental freedoms or the distortion of competition in the internal market. Similarly, Article 5 of Regulation No 806/2014 contains a measure for the approximation of resolution laws, which reinforces the uniform application of the rules and the procedure for the resolution of institutions. In those circumstances, those three provisions may be regarded as provisions for the approximation of the provisions of the Member States concerning the resolution of institutions in the banking union. It states that the tasks entrusted to the SRB are closely linked to the subject matter of Regulation No 806/2014.
The Court then moves on to hold that, with regard to the choice to apply Article 114(1) TFEU, whereas the ex ante contributions are fiscal in nature and therefore come within the scope of the provisions of Article 114(2) TFEU, Articles 69 and 70 of Regulation No 806/2014 which require institutions to pay ex ante contributions and specify the methods for their calculation do not constitute ‘fiscal provisions’ within the meaning of Article 114(2) TFEU.
The Court notes that a levy paid by economic operators in a particular sector is not fiscal in nature in a situation where, in particular, it is directly allocated solely to the financing of expenditure in that sector and where that expenditure is necessary for the functioning of that sector in order, in particular, to stabilise it. That reasoning also applies in the case of ex ante contributions, which follow an insurance-based logic and which are paid by economic operators in a particular sector in order to finance exclusively expenditure of that sector.
It is true that, since Regulation No 806/2014 does not establish any automatic link between the payment of the ex ante contribution and the resolution of the institution concerned, the ex ante contributions cannot be regarded as insurance premiums which could be paid monthly and reimbursed. The fact remains that the institutions benefit in two respects from the SRF, which is financed specifically by their ex ante contributions. First, where institutions are failing or are likely to fail, their financial situation may be remedied in the context of a resolution procedure which may be initiated in respect of them. Second, all institutions benefit from their ex ante contributions through the stability of the financial system, which is ensured by the SRF.
It follows that it is from an insurance-based rather than a tax-based perspective that the SRF seeks to ensure the stability of the financial sector as a whole, with the objective of ensuring protection against its own crises for the benefit of all institutions. That insurance-based purpose is also reflected in the calculation of the ex ante contributions, given that they are not the result of applying a certain rate to a basis of assessment but rather they are the result of the setting of a final target level, and thereafter of an annual target level, which is then divided between the institutions.
As regards the plea alleging a failure to meet the obligation to state reasons regarding the determination of the annual target level, which is a plea involving a matter of public policy and which is upheld in the judgment, the Court recalls, first of all, that, in accordance with the applicable legislation, by the end of the initial period of eight years from 1 January 2016 (‘the initial period’), the available financial means of the SRF must reach the final target level, which corresponds to at least 1% of the amount of covered deposits of all of the institutions authorised in the territories of all of the participating Member States. Next, during the initial period, ex ante contributions must be spread out in time as evenly as possible until the final target level is reached. Furthermore, each year, the contributions due by all of the institutions authorised in the territories of all of the participating Member States are not to exceed 12.5% of the final target level. As regards the method for calculating ex ante contributions, the SRB is to determine their amount on the basis of the annual target level, taking into account the final target level, and on the basis of the average amount of covered deposits in the previous year, calculated quarterly, of all the institutions authorised in the territory of the participating Member States. Lastly, the SRB is to calculate the ex ante contribution for each institution on the basis of the annual target level, which must be established by reference to the final target level and in accordance with the methodology set out in Delegated Regulation 2015/63. (5)
In the present case, as is apparent from the contested decision, the SRB set the amount of the annual target level, for the 2021 contribution period, at EUR 11 287 677 212.56. In that decision, the SRB explained, in essence, that the annual target level had to be determined on the basis of (i) an analysis of the development of the covered deposits over previous years, (ii) any relevant developments in the economic situation, (iii) an analysis of the indicators relating to the phase of the business cycle and (iv) the effects that pro-cyclical contributions would have on the financial situation of the institutions. The SRB regarded it as appropriate to set a coefficient based on that analysis and on the financial means available in the SRF (‘the coefficient’) and applied that coefficient to one eighth of the average amount of covered deposits in 2020, in order to obtain the annual target level. It subsequently set out the approach taken to set the coefficient. In the light of those considerations, the SRB set the value of the coefficient at 1.35%. It then calculated the amount of the annual target level by multiplying the average amount of covered deposits in 2020 by that coefficient and dividing the result of that calculation by eight.
In that regard, although the SRB is required to provide the institutions, by means of the contested decision, with explanations concerning the method for determining the annual target level, those explanations must be consistent with the explanations provided by the SRB during the judicial proceedings concerning the method actually applied. However, that is not the case in this instance.
It is clear, in essence, from the SRB’s explanation at the hearing that it had determined the annual target level for the 2021 contribution period using a methodology based on four stages, the last two of which consisted of deducting from the final target level the financial means available within the SRF, in order to calculate the amount that remained to be received until the end of the initial period, and by dividing that amount by three.
The Court observes that no reference is made to the last two stages of that calculation in the mathematical formula which is presented in the contested decision as the basis for determining the amount of the annual target level.
Furthermore, that finding cannot be called into question by the SRB’s assertion that, in May 2021, it published the fact sheet, which contained a range of potential amounts of the final target level and, on its website, the amount of the financial means available in the SRF. Irrespective of whether the applicant was actually aware of those amounts, they were not, in themselves, such as to enable it to understand that the last two stages of the calculation had actually been applied by the SRB, it being noted, moreover, that the mathematical formula did not even mention them.
Similar inconsistencies can also be seen in the way in which the 1.35% coefficient was set, which plays a crucial role in that mathematical formula. It follows from the explanations provided by the SRB at the hearing that that coefficient was set in such a manner as to justify the result of the calculation of the amount of the annual target level, that is to say, after the SRB calculated that amount in accordance with the four stages of the methodology actually applied. That approach is not at all apparent from the contested decision.
Moreover, the range within which, according to the fact sheet, the amount of the estimated final target level was set is inconsistent with the range of the growth rate of covered deposits, which is between 4% and 7% as set out in the contested decision. The SRB stated at the hearing that, for the purpose of determining the annual target level, it had taken into account the 4% growth rate of covered deposits – which was the lowest rate in the second range – and that it had thus obtained the estimated final target level of EUR 75 thousand million – which was the highest value in the first range. It is thus apparent that there is a discrepancy between those two ranges. In those circumstances, the applicant was not in a position to determine the manner in which the SRB had used the range relating to the rate of development of those deposits in order to arrive at the calculation of the estimated final target level.
The Court finds that, as regards the determination of the annual target level, the method actually applied by the SRB, as explained at the hearing, does not correspond to the method described in the contested decision, with the result that the actual reasons in the light of which that target level was set could not be identified on the basis of the contested decision either by the institutions or by the Court. The contested decision is therefore vitiated by defective reasoning as regards the determination of the annual target level.
In view of the illegality which vitiates the contested decision, the Court annuls that decision in so far as it concerns the applicant.
Nonetheless, in the circumstances of the present case, it has decided to maintain the effects of that decision, in so far as it concerns the applicant, until the entry into force, within a reasonable period which cannot exceed six months from the date of delivery of the present judgment, of a new decision of the SRB fixing the applicant’s ex ante contribution to the SRF for the 2021 contribution period.