ORDER OF THE GENERAL COURT (Ninth Chamber)
24 September 2021 (*)
(Economic and monetary policy – Prudential supervision of credit institutions – Withdrawal of licence – Tasks conferred on the ECB – Action manifestly lacking any foundation in law)
In Case T‑139/19,
Pilatus Bank plc, established in Ta’Xbiex (Malta), represented by O. Behrends, lawyer,
applicant,
v
European Central Bank (ECB), represented by A. Karpf, E. Yoo and M. Puidokas, acting as Agents,
defendant,
ACTION pursuant to Article 263 TFEU for annulment of the ECB’s decision of 21 December 2018 declaring to the applicant that it was no longer competent to ensure its direct prudential supervision and to take measures concerning it,
THE GENERAL COURT (Ninth Chamber),
composed of M.J. Costeira (Rapporteur), President, D. Gratsias and M. Kancheva, Judges,
Registrar: E. Coulon,
makes the following
Order
I. Background to the dispute
1 The applicant, Pilatus Bank plc, is a credit institution established under Maltese law. It was the subject of administrative proceedings for withdrawal of its authorisation as a credit institution initiated by the Maltese Financial Services Authority.
2 On 22 March 2018, when those proceedings were initiated, the Maltese Financial Services Authority appointed a ‘competent person’, within the meaning of Maltese law (‘the competent person’), to whom it transferred most of the powers of the applicant and its Board of Directors.
3 Under Maltese law, as interpreted in the judgment of the Court of Appeal (Malta) of 5 November 2018 in Case No 6/2017 (Heikki Niemelä and Others v Maltese financial Services Authority), the appointment of the competent person does not deprive the applicant’s Board of Directors of the power to represent the applicant in legal proceedings and, to that end, to instruct a lawyer.
4 In that regard, the applicant stated, in its correspondence with the European Central Bank (ECB), that the competent person had informed the lawyer instructed by the applicant’s Board of Directors, in essence, that it would not authorise the payment of lawyers’ fees out of the funds of the bank which it is responsible for administering.
5 The applicant also stated, again in the context of its correspondence with the ECB, that it had asked the Maltese Financial Services Authority to instruct the competent person to authorise the use of the bank’s funds for the payment of that lawyer’s fees but had not obtained a reply.
6 By decision of 2 November 2018, the ECB withdrew the applicant’s authorisation as a credit institution on the basis of Article 4(1)(a) and Article 14(5) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63).
7 Against that background, the applicant asked the ECB, by two emails of 13 November and 20 December 2018, to ensure direct prudential supervision under Regulation No 1024/2013 and to order the competent person to authorise payment by the bank of the abovementioned lawyer’s fees.
8 In an email of 21 December 2018 (‘the contested email’) the ECB replied as follows:
‘We refer to your email sent to the ECB on 13 November 2018 in which you request the ECB to take over direct supervision of [the applicant] and to comment on “the events of Friday 2 November 2018” as well as to your email of 20 December 2018 in which you reiterate your request for the take-over of the direct supervision of [the applicant] by the ECB. Please note, however, that the ECB’s supervisory tasks under [Regulation No 1024/2013] are limited to credit institutions (see [the first paragraph of] Article 1 … of the said Regulation). Given that the authorisation of [the applicant] as a credit institution has been withdrawn with effect of 5 November 2018, the ECB is no longer competent to take any measures in respect of [the applicant].’
II. Procedure and forms of order sought
9 On 4 March 2019, the applicant brought an action for annulment of the contested email.
10 By separate document lodged at the Court Registry on 20 May 2019, the ECB raised a plea of inadmissibility in relation to the action under Article 130(1) of the Rules of Procedure of the General Court.
11 By document lodged at the Court Registry on 5 August 2019, the applicant submitted its observations on the plea of inadmissibility.
12 By order of the Court of 21 November 2019, the decision on the plea of inadmissibility was reserved for the final judgment and the costs were reserved.
13 The ECB lodged its defence on 11 February 2020.
14 The applicant lodged its reply on 3 August 2020 and the ECB lodged its rejoinder on 9 October 2020.
15 By decision of the President of the General Court of 23 August 2021, the present case was assigned to a new Judge-Rapporteur, sitting in the Ninth Chamber.
16 By decision of the President of the Chamber of 23 August 2021, a new associate judge was designated to complete the formation of the Chamber.
17 The applicant claims that the Court should:
– reject the plea of inadmissibility;
– annul the contested email;
– order the ECB to pay the costs.
18 The ECB contends that the Court should:
– declare the application for annulment inadmissible;
– in the alternative, declare the action unfounded;
– order the applicant to pay the costs.
III. Law
19 Under Article 126 of the Rules of Procedure, where an action is manifestly inadmissible or manifestly lacking any foundation in law, the Court may decide to give a ruling by reasoned order without taking further steps in the proceedings.
20 In the present case, the Court considers that it has sufficient information available to it from the material in the file and decides, pursuant to that article, to give a decision without taking further steps in the proceedings.
A. Admissibility
21 The ECB submits that the contested email is not an act producing binding legal effects capable of affecting the applicant’s legal situation since what the applicant requested, which is referred to in that email, was manifestly outside the competence of the ECB.
22 The applicant claims that the contested email, by which the ECB refused its request for direct supervision, is a challengeable act, since a positive decision in that regard would have been a challengeable act.
23 In that regard, it must be borne in mind that the Court is entitled to assess, according to the circumstances of each case, whether the proper administration of justice justifies the dismissal of an action on the merits without first ruling on the plea of inadmissibility raised by the defendant (see, to that effect, judgment of 26 February 2002, Council v Boehringer, C‑23/00 P, EU:C:2002:118, paragraph 52).
24 In the present case, it is necessary to begin by examining the pleas in law put forward by the applicant on matters of substance, without first ruling on the plea of inadmissibility raised by the ECB, given that the action is, for the reasons set out below, manifestly lacking any foundation in law.
B. Substance
25 In support of its action for annulment of the contested email, the applicant puts forward nine pleas in law.
26 The first plea alleges that the ECB committed an error of law in declaring that it was not competent to take over direct prudential supervision of the applicant and to order the competent person to authorise payment of the fees of the lawyer instructed by the applicant’s Board of Directors. The second plea alleges infringement by the ECB of its obligation to take over the prudential supervision of the applicant. The third plea alleges infringement of the applicant’s right to an effective remedy and failure to observe the principle of equality of arms. The fourth plea alleges failure to observe the principle of the protection of legitimate expectations and the principle of legal certainty. The fifth plea alleges failure to observe the principle of proportionality. The sixth plea alleges a misuse of power. The seventh plea alleges infringement of the obligation to state reasons. The eighth plea alleges infringement of the right to be heard. The ninth plea alleges a failure to comply with the principle nemo auditor.
1. The first plea in law, alleging that the ECB committed an error of law in declaring that it was not competent to take over direct prudential supervision of the applicant and to order the competent person to authorise payment of the fees of the lawyer instructed by its Board of Directors
27 According to the applicant, the ECB committed an error of law in holding that it lacked competence on the ground that the applicant was no longer a credit institution as a result of the withdrawal of its authorisation.
28 That assessment, according to the applicant, is inconsistent with the definition of a credit institution within the meaning of Article 2(3) of Regulation No 1024/2013 and point 1 of Article 4(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1), from which it follows that the concept of credit institution does not require authorisation.
29 The applicant also submits that that assessment is inconsistent with the possibility of the ECB participating in the present proceedings and with a number of provisions of Regulation No 1024/2013 under which the ECB retains competence in respect of entities without authorisation, in particular the provisions which allow the review of a withdraw decision by the Administrative Board of Review and those which allow the granting of authorisation.
30 Furthermore, it submits that, since the decision to withdraw authorisation was the subject of a legal challenge, which is the main reason the applicant’s representation should be restored, the ECB should be regarded as retaining its competence pending the final decision in the action for annulment of that decision.
31 In its reply, the applicant once again disputes the ECB’s interpretation according to which it is not competent to exercise prudential supervision of a credit institution whose authorisation has been withdrawn. In its reply, the applicant submits, in essence, that a credit institution whose authorisation has been withdrawn remains ‘conceptually’ a credit institution.
32 The ECB disputes those arguments.
33 It should be noted from the outset that, in the contested email, the ECB declined competence to grant the applicant’s request on the basis of the first paragraph of Article 1 of Regulation No 1024/2013.
34 That provision states that ‘this Regulation confers on the ECB specific tasks concerning policies relating to the prudential supervision of credit institutions, with a view to contributing to the safety and soundness of credit institutions and the stability of the financial system within the Union and each Member State, with full regard and duty of care for the unity and integrity of the internal market based on equal treatment of credit institutions with a view to preventing regulatory arbitrage’.
35 In accordance with point 3 of Article 2 of Regulation No 1024/2013, a ‘credit institution’ means a ‘credit institution as defined in point 1 of Article 4(1) of Regulation … No 575/2013’.
36 The latter provision defines a ‘credit institution’ as ‘an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account’.
37 In that context, first, according to Article 4 of Regulation No 1024/2013, the ECB is competent to carry out, for prudential supervision purposes, the tasks set out in that article in relation to all credit institutions established in the participating Member States within the meaning of point 1 of Article 2of that regulation (‘credit institutions’).
38 It follows from those provisions that the ECB is competent to carry out prudential supervision tasks with regard to all undertakings established in participating Member States the business of which is to take deposits or other repayable funds from the public and to grant credits for their own account.
39 The ECB’s competence to carry out prudential supervision tasks is therefore defined, rationae personae, as referring to credit institutions and, rationae materiae, as referring to the activity of an undertaking taking deposits or other repayable funds from the public and granting credits for its own account.
40 Second, according to Article 14(1) of Regulation No 1024/2013, taking up the business of a credit institution requires authorisation which, in accordance with point 42 of Article 4(1) of Regulation No 575/2013, grants the right to carry out the business concerned. Furthermore, under Article 9(1) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338), ‘Member States shall prohibit persons or undertakings that are not credit institutions from carrying out the business of taking deposits or other repayable funds from the public’.
41 It follows that, if that authorisation is withdrawn in accordance with Article 14(5) of Regulation No 1024/2013, the undertaking that formerly held that authorisation may no longer be regarded as an ‘undertaking the business of which is to take deposits or other repayable funds from the public’ (see paragraph 34 above) and is therefore no longer a ‘credit institution’ within the meaning of point 3 of Article 2 of Regulation No 1024/2013 (see paragraph 33 above). The ECB cannot, therefore, exercise, with regard to such an entity, any of the tasks listed in Article 4(1) of Regulation No 1024/2013, since, according to that same provision, those tasks are to be carried out only in relation to ‘credit institutions’ within the meaning of that regulation.
42 In the present case, the applicant sent the request, to which the ECB replied by means of the contested email, on 13 November and 20 December 2018, that is to say, after the decision of 2 November 2018 withdrawing the applicant’s authorisation had taken effect.
43 The ECB was therefore manifestly lacking in competence to ensure direct prudential supervision of the applicant when the latter asked it to do so.
44 As a result, the ECB was right to state, in the contested email, that it could not perform, vis-à-vis the applicant, the tasks entrusted to it under Article 4 of Regulation No 1024/2013.
45 Furthermore, the arguments based on the ECB’s power to grant authorisation to operate as a credit institution or to review the decision to withdraw such authorisation are irrelevant, since the applicant’s requests did not seek to obtain a new authorisation or to review the decision to withdraw authorisation.
46 As regards the argument that the ECB should retain competence to carry out prudential supervision tasks with regard to a credit institution whose authorisation has been withdrawn where that withdrawal is the subject of an action pending before the EU judicature, it is sufficient to point out that, according to settled case-law, measures of the EU institutions are in principle presumed to be lawful and accordingly produce legal effects until such time as they are withdrawn, annulled in an action for annulment or declared invalid following a reference for a preliminary ruling or a plea of illegality (see judgment of 6 October 2015, Schrems, C‑362/14, EU:C:2015:650, paragraph 52 and the case-law cited).
47 In the present case, the effects of the decision to withdraw the applicant’s authorisation had not been suspended in the context of an application for interim measures.
48 It follows that that decision produced all of its legal effects.
49 As a result, that argument does not call into question the ECB’s manifest lack of competence to exercise direct prudential supervision of the applicant.
50 The ECB did not therefore commit an error of law in declaring in the contested email that it lacked competence to ensure direct prudential supervision of the applicant and to adopt measures concerning it.
51 As a result, the first plea in law is manifestly lacking any foundation in law.
2. The other pleas in law
52 Since the ECB was clearly lacking in competence to act on the applicant’s requests, it cannot be held to have infringed an alleged obligation to assume responsibility for the prudential supervision of the applicant, its right to an effective remedy or its right to be heard and to equality of arms, the principles of the protection of legitimate expectations and legal certainty, the principle of proportionality and the principle nemo auditur (see, to that effect and by analogy, order of 12 March 2021, PNB Banka v ECB, T‑50/20, under appeal, EU:T:2021:141, paragraphs 60 to 73, 74 to 82 (not published) and 86 to 90 (not published)).
53 Nor can it be claimed that it misused its powers by declaring that it did not have competence to grant requests in respect of which it did not in fact have competence.
54 The second, third, fourth, fifth, sixth, eighth and ninth pleas in law are therefore manifestly lacking any foundation in law.
55 As regards infringement of the obligation to state reasons, it is sufficient to note that, by responding to the applicant that it refused its requests on the ground that it did not have the competence to grant those requests, the ECB stated the reasons for its decision to the requisite legal standard (see, to that effect and by analogy, order of 12 March 2021, PNB Banka v ECB, T‑50/20, under appeal, EU:T:2021:141, paragraphs 83 to 85 (not published)).
56 The seventh plea is therefore also manifestly lacking any foundation in law.
57 It follows from all the foregoing considerations that all of the applicant’s pleas in law must be rejected and, consequently, the action must be dismissed in its entirety as manifestly lacking any foundation in law.
IV. Costs
58 Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the ECB.
On those grounds,
THE GENERAL COURT (Ninth Chamber)
hereby orders:
1. The action is dismissed.
2. Pilatus Bank plc shall bear its own costs and pay those incurred by the European Central Bank (ECB).
Luxembourg, 24 September 2021.