Judicial protection banks under the single rulebook/single supervisory mechanism

Preface VII
List of Abbreviations XXV

Chapter 1 Introduction 1
1.1 Research question 2
1.2 Relevance of the research question 3
1.3 Research methodology 4
1.4 Structure of the dissertation 4
1.5 Limitations 6
1.6 Setting the scene: The Europeanisation of the regulation and supervision of banks 7
1.7 The Europeanisation of judicial protection 10

PART I: The organisation of judicial review in the European Union 15
Chapter 2 The right to effective judicial protection 17
2.1 Judicial review in the EU: a shared responsibility 19
2.2 Direct actions 21
2.2.1 Only ‘reviewable acts’ are susceptible to an action for annulment 23
2.2.2 Standing criteria for an action for annulment 25
2.2.2.1 Legal interest in proceedings 26
2.2.2.2 Direct concern 27
2.2.2.3 Individual concern 32
2.2.2.4 Standing to challenge a ‘regulatory act’ 36
2.2.2.4.1 The regulatory act must be of direct concern 38
2.2.2.4.2 The regulatory act may not entail implementing measures 38
2.2.3 Consequences of annulment 42
2.3 Indirect actions 43
2.3.1 The objection of illegality 45
2.3.1.1 Access to an objection of illegality 45
2.3.1.2 Scope of the objection of illegality 48
2.3.1.3 Consequences of an objection of illegality 48
2.3.2 The preliminary ruling procedure 49
2.3.2.1 Preliminary question on the interpretation of Union law 51
2.3.2.2 Preliminary question on the validity of Union law 53
2.3.2.2.1 Parallels between the action for annulment and preliminary questions of validity 56
2.3.2.2.2 Concurrence of an action for annulment and a preliminary question on validity 57
2.3.2.2.3 Consequences of a preliminary ruling on validity 58

PART II: Judicial review of the Single Rulebook 59
Chapter 3 Introducing the Single Rulebook 61
3.1 The genesis of the Single Rulebook 63
3.2 The four levels of the Single Rulebook 65
3.3 Reform of the regulatory procedure after the De Larosiè re report 66
3.4 The interrelation between EU banking regulation and other fields of law 67
3.5 Plan of Part II 69

Chapter 4 Composition and legal effects of ‘level 1’ acts 71
4.1 The legal effects of the Capital Requirements Regulation 73
4.2 The legal effects of the Capital Requirements Directive 77
4.2.1 Indirect legal effect of a directive 80
4.2.2 The upwards direct effect of a directive 83
4.2.2.1 Can a bank rely directly on a directive against the ECB? 87
4.2.3 Downward direct effect of a directive 89
4.2.3.1 Downwards effect of a directive echoing another Union rule 90
4.2.3.2 Downwards effect of a directive concerning state-owned banks 91
4.2.3.3 Direct ‘activation’ of a directive by reference in a regulation 94
4.2.4 How can Union authorities address non- or incorrect implementation of a directive? 97
4.3 Further harmonisation of the Not-So-Single Rulebook? 101
4.3.1 The scope of application of Article 114 TFEU 104
4.3.2 Interaction between legal basis 105

Chapter 5 Judicial protection against legislative ‘level 1’ acts 109
5.1 The interpretation of the locus standi criteria: A drama in three acts 112
5.1.1 From the ECSC Treaty to the EEC Treaty: Fruits and vegetables 113
5.1.2 Act 1: The criticism of AG Jacobs 115
5.1.3 Act 2: The revolt of the Court of First Instance 117
5.1.4 Act 3: The Court of Justice strikes back 119
5.1.5 The limited relief of the Lisbon Treaty 122
5.2 Arguments for restricted standing vis-à-vis legislative acts 125
5.2.1 Democratic rule and judicial oversight: alternatives or complements? 126
5.2.2 Is the restrictive interpretation of the standing requirements refl ected in the national legal orders? 130
5.2.3 The fear of overloading the Union courts 131
5.3 Indirect access to the judiciary: an unsatisfying alternative 133
5.3.1 Problems with the objection of illegality as a means to provide judicial protection 135
5.3.1.1 An objection of illegality is not an independent action 136
5.3.1.2 An objection of illegality does not lead to the annulment of the general act 137
5.3.2 Problems with the preliminary ruling procedure as a means to provide judicial protection 139
5.3.2.1 Caught between procedural autonomy and Union requirements 142
5.3.2.2 Access to the national courts in the absence of an implementing act? 146
5.3.2.3 Lack of enforcement of the availability of indirect access 152
5.3.2.4 Inherent weaknesses to the preliminary ruling procedure 154
5.3.3 Indirect routes of review are not an adequate alternative to a direct action 157
5.3.3.1 Access to an indirect action requires an implementing act 157
5.3.3.2 Weaknesses of indirect actions in comparison to a direct action 159
5.4 Suggestions to strengthen judicial protection against level 1 acts 160

Chapter 6 Composition and legal effects of ‘level 2’ acts 167
6.1 The legal architecture for executive rule-making in the EU 168
6.1.1 Rule-making by the Commission: delegated and implementing powers 169
6.1.2 Rule-making by agencies: the Meroni limitations 175
6.1.3 Control over rule-making by the Commission 179
6.1.3.1 The exercise of implementing powers remains subject to Comitology 179
6.1.3.2 The exercise of delegated powers: Comitology through the backdoor 180
6.1.4 Involving the ESAs in Commission rule-making: the rise of binding technical standards 181
6.1.4.1 The ESAs introduce an intergovernmental aspect to the adoption of level 2 acts 182
6.1.4.2 The two fl avours of binding technical standards: RTS and ITS 185
6.1.4.3 The distinction between binding technical standards and delegated or implementing acts 186
6.1.4.4 The adaption procedure of binding technical standards 189
6.1.4.5 Is the procedure Meroni proof? 193
6.1.4.6 Legal effects of draft technical standards 195
6.2 The regulatory powers of the ECB in the context of banking supervision 198
6.2.1 The ECB’s rule-making powers 200
6.2.1.1 The ECB’s competence to adopt regulations 200
6.2.1.2 The ECB’s competence to adopt guidelines 206
6.2.2 ECB non-binding rule-making 207

Chapter 7 Judicial protection against administrative ‘level 2’ acts 211
7.1 Could a private applicant challenge level 2 acts as regulatory acts under 263 TFEU? 212
7.1.1 Is a level 2 act a regulatory act? 212
7.1.2 Does a level 2 act entail implementing measures? 213
7.3 Grounds of review 214
7.3.1 Procedural grounds of review: participation rights 216
7.3.2 Substantive grounds 219

Chapter 8 Composition and legal effects of ‘level 3’ acts 223
8.1 Non-binding ‘level 3’ acts as a species of soft law 225
8.2 The importance of non-binding acts to regulate the banking sector 227
8.2.1 Non-binding acts of the EBA 229
8.2.2 Non-binding acts of the ECB 231
8.3 The distinction between binding and non-binding acts 233
8.3.1 Binding legal effects inherent to the legal form of an act 234
8.3.2 Binding legal effects arising from the substance of an act 235
8.4 Non-binding acts may nevertheless produce legal effects 239
8.4.1 An illustration: The legal effects of the ECB’s Non-Performing Loan Guidance 242
8.4.2 The diffi cult distinction between new obligations and the interpretation of existing norms 244
8.5 Mechanisms exacerbating the legal effects of non-binding acts 247
8.5.1 The perception of non-binding acts as voicing requirements of EU law 249
8.5.2 Legal effects by guiding the judiciary 252
8.5.2.1 National courts must take non-binding acts into consideration 253
8.5.2.2 Specialised review panels take non-binding acts into consideration 255
8.5.2.3 The Union court’s exclusive jurisdiction to interpret EU law 257
8.5.3 Legal effects by limiting administrative discretion 259
8.5.4 Legal effects of non-binding acts for authorities other than the act’s author 263
8.5.4.1 Does the obligation of sincere cooperation apply in relation to non-binding Union acts? 263
8.5.4.2 The legal effects of non-binding acts of the ECB addressed to the NCAs 267
8.5.4.3 The legal effects of non-binding acts of the EBA addressed to the NCAs 269
8.5.4.4 The legal effects of non-binding acts of the EBA addressed to the ECB 273
8.6 Legal basis and procedural requirements for non-binding acts 273
8.6.1 The application of the principle of conferral to non-binding acts 274
8.6.1.1 The principle of institutional balance as an element of the principle of conferral 276
8.6.1.2 The legal foundation of non-binding acts 278
8.6.1.2.1 Implied powers to adopt non-binding acts 279
8.6.1.2.2 Explicit powers to adopt non-binding acts 279
8.6.1.3 Procedural requirements to the adoption of non-binding acts 282

Chapter 9 Judicial protection against ‘level 3’ acts 285
9.1 Direct judicial review before the EU courts 286
9.1.1 The concept of a reviewable act 286
9.1.2 The scope of a reviewable act: From legal effects to binding legal effects 289
9.2 Indirect judicial review before the EU courts 291
9.2.1 Non-binding acts may be susceptible to an objection of illegality 292
9.2.2 Are non-binding acts susceptible to a preliminary ruling on validity? 294
9.2.2.1 Friesland Coberco: the root of all confusion? 295
9.2.2.2 Gauweiler: A validity question hidden inside an interpretation question 297
9.2.2.3 Kotnik: A preliminary ruling on the validity of non-binding ‘Banking Communications’ 299
9.2.2.4 Belgium v Commission: recommendations are susceptible to a preliminary ruling on validity 300
9.2.2.5 Conclusion: non-binding acts are susceptible to a preliminary ruling on interpretation and validity 301
9.3 Suggestion to strengthen judicial protection against level 3 acts 303
9.3.1 Expanding the scope of reviewable acts 307
9.3.2 How about the reviewability of recommendations and opinions? 310
9.4 Would an individual enjoy standing to challenge a non-binding act? 311

Chapter 10 The role of specialised review panels in the Single Rulebook 313
10.1 Board of Appeal of the European Supervisory Agencies 313
10.1.1 Which ESA acts are susceptible to appeal before the Board of Appeal? 314
10.1.2 Standing requirements before the Board of Appeal 317

Chapter 11 Drawing the lines together: judicial control over the Single Rulebook 319
11.1 Judicial review of level 1 acts 319
11.2 Judicial review of level 2 acts 321
11.3 Judicial review of level 3 acts 322
11.4 Suggestions to strengthen judicial protection in the Single Rulebook 324
11.4.1 Relaxing the interpretation of ‘individual concern’ 324
11.4.2 Open norms should be detailed in level 2 acts 326
11.4.3 Legal effect as the determinative factor for a ‘reviewable act’ under Article 263 TFEU 327

PART III: Judicial protection of banks in the Single Supervisory Mechanism 329
Chapter 12 Introducing the Single Supervisory Mechanism and judicial protection in a composite legal order 331
12.1 Administrative architectures in the EU 332
12.1.1 The traditional system of executive federalism 333
12.1.2 The rise of composite procedures 333
12.1.3 The administrative structures provided by the SSM 334
12.1.4 The application of national law by the ECB 336
12.2 The strict separation between EU and national courts 337
12.2.1 Blurring jurisdictions may pose a challenge to the Union’s system of judicial protection 340
12.3 Plan of Part III 342

Chapter 13 The Single Supervisory Mechanism as part of the European Banking Union 345
13.1 First pillar: the Single Supervisory Mechanism (SSM) 346
13.2 Second pillar: the Single Resolution Mechanism (SRM) 346
13.3 Third pillar: the European Deposit Insurance Scheme (EDIS) 348
13.4 Triggers for the creation of the SSM 348
13.5 The legal basis for the SSM 353
13.5.1 Does Article 127(6) TFEU provide a suitable legal basis for the SSM? 355
13.6 Scope of the SSM 359
13.6.1 Supervised entities under the SSM 359
13.6.1.1 The definition of a credit institution 360
13.6.1.2 Consolidated supervision 364
13.6.1.3 Entities excluded from the SSM 368
13.6.2 The geographical scope of the SSM 368
13.7 The tasks conferred to the ECB 370
13.7.1 The ECB’s microprudential tasks 370
13.7.2 The ECB’s macroprudential tasks 371
13.7.3 Scope of the task conferred on the ECB 372
13.7.4 Division of responsibilities between the ECB and the NCAs 376
13.7.5 Decentralised implementation by the NCAs 379
13.8 Carrying out the supervisory tasks: rules, powers, and governance 384
13.8.1 The applicable substantive rules 384
13.8.2 The powers of the ECB to execute its tasks 386
13.8.3 ECB powers (I) provided directly by the SSM Regulation 386
13.8.3.1 General supervisory powers of the ECB 387
13.8.3.1.1 Pillar 1 requirements 388
13.8.3.1.2 Pillar 2 requirements 389
13.8.3.1.3 Early intervention measures 390
13.8.3.2 Investigatory powers 391
13.8.3.2.1 Information request 391
13.8.3.2.2 General investigation 392
13.8.3.2.3 On-site inspections 392
13.8.3.3 Administrative penalties 393
13.8.3.3.1 Breach of directly applicable Union law 393
13.8.3.3.2 Breach of ECB regulations or decisions 395
13.8.3.3.3 The scope of review of administrative penalties under the SSM 396
13.8.3.4 The Common Procedures 398
13.8.4 ECB powers (II) as ‘competent authority’ under EU law 399
13.8.4.1 Powers must be necessary to carry out the supervisory tasks 400
13.8.4.2 The national power must be closely connected to Union law 402
13.8.4.3 The ECB’s take on the powers available to it as ‘competent authority’ 403
13.8.5 ECB powers (III) of instruction 405
13.8.6 Procedural requirements for the adoption of a supervisory decision 406
13.8.6.1 Right to be heard 407
13.8.6.2 Right to have access to the fi le 408
13.8.6.3 The requirement to state reasons 409
13.8.6.4 Time limits for supervisory decisions 410
13.8.7 The ECB’s governance structures 410
13.8.7.1 The Supervisory Board and the non-objection procedure 412
13.8.7.2 Joint supervisory teams 413
13.8.7.3 The Administrative Board of Review 414

Chapter 14 Judicial protection in top-down proceedings: ECB instructions 417
14.1 The function of instructing acts 419
14.1.1 ECB general instruction 420
14.1.2 ECB guidelines 421
14.1.3 Instructions to make use of powers 421
14.1.4 Instructing acts to NCAs in close cooperation 422
14.1.5 Instructing the NCA to impose a penalty 423
14.1.6 Non-binding steering acts 425
14.2 The possibilities for a bank to directly challenge an ECB instructing act 427
14.2.1 Are instructing acts susceptible to direct review? 428
14.2.2 Standing to challenge an instruction act 432
14.2.2.1 Standing to challenge an instructing act as a ‘regulatory act’? 433
14.2.2.2 Is an instructing act of individual concern to a bank? 436
14.2.2.3 Is an instructing act of direct concern to a bank 439
14.2.3 Time limits to bring an action under Article 263 TFEU 442
14.2.4 Interim conclusion on a bank’s possibilities to directly challenge an ECB instructing act 444
14.3 The possibilities for a bank to indirectly challenge an ECB instructing act 445
14.3.1 A separate review of the EU stage of the administrative chain by the Union courts 446
14.3.2 The drawbacks of indirect judicial review 449
14.4 The relationship between direct and indirect actions: alternatives or complementary? 450
14.4.1 The Deggendorg guillotine: A preliminary reference cannot circumvent the time limits for an annulment action 450
14.4.2 The implications of Deggendorf to challenge an ECB instructing act indirectly 457
14.4.2.1 A bank must be ‘fully aware’ of an instructing act 458
14.4.2.2 It must be clear beyond doubt that a banks enjoys standing to institute a direct action 458
14.4.3 The application of Deggendorf in Iccrea Banca 460
14.4.4 The implications of Iccrea Banca for access to justice via a preliminary ruling 463
14.4.4.1 From ‘fully aware’ to ‘aware of the existence’ of a Union act 463
14.4.4.2 From a subjective to an objective view on ‘standing beyond doubt’ 464
14.5 Suggestions to strengthen judicial review in top-down composite procedures 466
14.5.1 The importance of indirect routes to prevent denials of justice 467
14.5.2 Increasing the transparency of instruction procedures 469

Chapter 15 Judicial protection and the application of national law by the ECB 471
15.1 The role of national law before the Union courts: a question of fact or a question of law? 474
15.2 National law as a question of fact 478
15.1.1 National law as a question of fact in a preliminary ruling procedure 478
15.1.2 National law as a question of fact in an infringement procedure 480
15.1.3 Interim conclusion: national law as a question of fact? 482
15.3 National law as a question of law 483
15.3.1 Jurisdiction to apply national law under an arbitration clause: Article 272 TFEU 483
15.3.2 Application of national law due to a reference in EU law: the Trade Mark Regulation 484
15.3.3 The jurisdiction of the Court of Justice in appeal 488
15.3.4 Interim conclusion: national law may function as a question of law before the Union courts 490
15.4 The Court’s current approach to the review of ECB decision based on national law 491
15.4.1 National law as “rule of law relating to the application” of the Treaties? 492
15.4.2 Interpretation and application of national law by the Union courts 494
15.5 Suggestions to strengthen judicial review where a Union authority applies national law 497
15.5.1 Stage 1: Providing the Union courts with information 498
15.5.2 Stage 2: Asking the national judges to provide an interpretation 500
15.5.3 Stage 3: The Union courts should not apply national law contrary to EU law 503

Chapter 16 Judicial protection in bottom-up procedures: the Common Procedures 507
16.1 Administrative decision-making in the Common Procedures 509
16.1.1 Procedure for the assessment of a qualifying holding 510
16.1.1.1 National level: Assessment by the NCA 511
16.1.1.2 Union level: Assessment by the ECB 514
16.1.2 Procedure for the granting of a banking authorisation 515
16.1.2.1 National level: Assessment by the NCA 515
16.1.2.2 Union level: Assessment by the ECB 517
16.1.3 Procedure for the withdrawal of a banking authorisation 518
16.2 Reviewability of the draft decision of an NCA 519
16.2.1 The reviewability of intermediate acts in the Union legal order 520
16.2.2 The illegality attached to an intermediate act can be relied on in support of an action against the final decision 522
16.2.3 Is the national draft decision susceptible to review before a national court? 525
16.2.4 Berlusconi: national courts may not receive actions against an NCA draft decision 527
16.3 Judicial review of the fi nal decision before the Union courts 530
16.3.1 Standing before the Union courts 530
16.3.2 Judicial scrutiny over the national stage of the procedure 531
16.3.2.1 The concept of imputability 533
16.3.2.2 Imputing errors of the NCA to the ECB 536
16.3.3 The organisation of procedural safeguards in the Common Procedures 538
16.3.3.1 The organisation of the right to be heard in the legal framework of the SSM 540
16.3.3.2 Requirements on the right to be heard in composite procedures 542
16.3.3.3 Duty to give reasons as provided in the legal framework of the SSM 545
16.3.3.4 Duty to give reasons in composite procedures under EU law 545
16.3.3.5 Interim conclusion: imputation of procedural safeguards 548
16.3.4 Limitations on the possibility to impute errors to the ECB 549
16.3.4.1 Requirement 1: The national obligation must have an EU counterpart 550
16.3.4.2 Requirement 2: The EU authority must enjoy discretion 553
16.3.5 The ripple effects of national discretions 555
16.3.5.1 Money laundering 557
16.3.5.2 Conduct of business 558
16.3.6 The difficult delineation between preparatory acts and acts with independent legal effects 559
16.3.7 No jurisdiction to review national acts: a gap in judicial protection? 563
16.4 Suggestions to strengthen review in bottom-up composite procedures 566
16.4.1 Option 1: Broad application of the concept of imputation 567
16.4.2 Option 2: Lawfulness review of national acts by the Union courts 570
16.4.3 Option 3: An inverse preliminary ruling procedure 573
16.4.4 Conclusions 575

Chapter 17 Drawing the lines together: judicial review in intertwined jurisdictions 577
17.1 Reviewable acts in composite procedures 578
17.2 The inclusion of intermediate acts in the review of the final act 581
17.3 Suggestions to strengthen judicial review in the composite procedures of the SSM 584
17.3.1 Facilitate access to justice by communicating available judicial review 584
17.3.2 The hypothetical availability of a direct action should not bar an indirect action 586
17.3.3 Intertwined jurisdictions require increased judicial cooperation 588
17.3.3.1 Judicial cooperation where the Union courts must apply national law 588
17.3.3.2 Judicial cooperation where the Union courts must rule on the validity of national acts 589

PART IV: Conclusions and suggestions 593
Chapter 18 Conclusions and suggestions 595
18.1 Judicial protection in the European Union 596
18.2 Judicial review of the Single Rulebook: the difficulties identified 597
18.2.1 Legal effects and judicial review of legislative ‘level 1’ acts 598
18.2.2 Legal effects and judicial review of administrative ‘level 2’ acts 599
18.2.3 Legal effects and judicial review of non-binding ‘level 3’ acts 600
18.3 Suggestions to strengthen judicial control over the Single Rulebook 602
18.3.1 Suggestion 1: Relaxing the interpretation of ‘individual concern’ 602
18.3.2 Suggestion 2: Detail open norms in level 2 acts 604
18.3.3 Suggestion 3: Legal effect as the determinative factor for a ‘reviewable act’ 605
18.4 Judicial review of supervisory acts in the SSM: the diffi culties identified 606
18.4.1 Legal effects and judicial review of ECB instructing acts 607
18.4.2 Judicial review of ECB decisions based on national law 609
18.4.3 Legal effects and judicial review of acts adopted in the Common Procedures 609
18.5 Suggestions to strengthen judicial control in the Single Supervisory Mechanism 611
18.5.1 Suggestion 1: Increase the transparency of intertwined administrative procedures 612
18.5.2 Suggestion 2: Direct and indirect procedures should be complements, not alternatives 613
18.5.3 Suggestion 3: Increasing judicial cooperation 615
18.6 Final words 617

Summary 619
Samenvatting 633
Index of cases cited 649
Subject index 691
Bibliography 695
Curriculum vitae 741