Orders nº T-2/19 of Tribunal General de la Unión Europea, October 10, 2019

• Resolution Date: October 10, 2019
• Issuing Organization: Tribunal General de la Unión Europea
• Decision Number: T-2/19

(Action for annulment - Economic and monetary policy - Single resolution mechanism for credit institutions and certain investment firms - Resolution scheme in respect of Banco Popular Español - No ex post definitive valuation of Banco Popular Español - Lack of direct concern - Inadmissibility)

In Case T-2/19,

Algebris (UK) Ltd, established in London (United Kingdom),

Anchorage Capital Group LLC, established in New York, New York (United States),

represented by T. Soames, lawyer, R. East, Solicitor, N. Chesaites and D. Mackersie, Barristers,

applicants,

v

Single Resolution Board (SRB), represented by A. Valavanidou, I. Georgiopoulos and E. Muratori, acting as Agents, and by H.-G. Kamann, F. Louis, V. Del Pozo Espinosa De Los Monteros, G. Barthet and C. Schwedler, lawyers,

defendant,

APPLICATION under Article 263 TFEU for the annulment of the ‘decision of the SRB, notified to the applicants on 18 December 2018, not to proceed with an ex post definitive valuation of Banco Popular Español, SA’,

THE GENERAL COURT (Eighth Chamber),

composed, at the time of the deliberation, of A.M. Collins, President, M. Kancheva and G. De Baere (Rapporteur), Judges,

Registrar: E. Coulon,

makes the following

Order

Background to the dispute

1 The applicants, Algebris (UK) Ltd and Anchorage Capital Group LLC, are investment fund managers who held Additional Tier 1 and Tier 2 instruments of Banco Popular Español, SA (‘Banco Popular’) before the adoption of a resolution scheme in respect of Banco Popular on the basis of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ 2014 L 225, p. 1).

The resolution of Banco Popular

2 On 7 June 2017 the Single Resolution Board (‘the SRB’ or ‘the Board’) adopted decision SRB/EES/2017/08, concerning a resolution scheme in respect of Banco Popular (‘the resolution decision’).

3 Prior to the adoption of the resolution decision, Banco Popular was valued in accordance with Article 20 of Regulation No 806/2014. That valuation includes two reports which are annexed to the resolution decision. The first valuation report (‘Valuation 1’), dated 5 June 2017, was compiled by the SRB pursuant to Article 20(5)(a) of Regulation No 806/2014 and was intended to inform the determination of whether the conditions for resolution, as defined in Article 18(1) of Regulation No 806/2014, were met. The second valuation report (‘Valuation 2’), dated 6 June 2017, was compiled by an independent expert, Deloitte, pursuant to Article 20(10) of Regulation No 806/2014. The purpose of Valuation 2 was to estimate the value of Banco Popular’s assets and liabilities, to provide an evaluation of the treatment that shareholders and creditors would have received if Banco Popular had entered into normal insolvency proceedings, and to inform the decision to be taken on the shares and instruments of ownership to be transferred and the SRB’s understanding of what constituted commercial terms for the purposes of the sale of business tool.

4 In Article 5(1) of the resolution decision, the SRB decided that:

‘The resolution tool to be applied to [Banco Popular] shall consist in the sale of business pursuant to Article 24 of [Regulation No 806/2014] for transferring shares to a purchaser. The write down and conversion of capital instruments will be exercised immediately before the application of the sale of business tool.’

5 Article 6 of the resolution decision concerns the write down of capital instruments and the sale of business tool. In Article 6(1) of that decision, the SRB indicated which measures it had decided upon pursuant to its write down power provided for in Article 21 of Regulation No 806/2014.

6 Accordingly, in Article 6(1) of the resolution decision, the SRB decided:

(a) first, to write down the nominal amount of Banco Popular’s share capital in an amount of EUR 2 098 429 046, resulting in the cancellation of 100% of Banco Popular’s share capital;

(b) subsequently, to convert all the principal amount of the Additional Tier 1 instruments issued by Banco Popular and outstanding as at the date of the resolution decision into newly issued shares of Banco Popular (‘New Shares I’);

(c) subsequently, to write down to zero the nominal amount of the ‘New Shares I’, which would result in the cancellation of 100% of those ‘New Shares I’;

(d) subsequently, to convert all the principal amount of Tier 2 instruments issued by Banco Popular and outstanding as at the date of the resolution decision into newly issued shares of Banco Popular (‘New Shares II’).

7 Article 6(3) of the resolution decision provides that those write down and conversion measures are based on Valuation 2, as supplemented and corroborated by the results of an open and transparent marketing process conducted by the Spanish resolution authority, the Fondo de Reestructuración Ordenada Bancaria (FROB, Fund for Orderly Bank Restructuring).

8 In Article 6(5) of the resolution decision, the SRB indicated that it was exercising the powers under Article 24(1)(a) of Regulation No 806/2014 concerning the sale of business tool and ordered the ‘New Shares II’ to be transferred to Banco Santander, SA, free and clear of any right or liens of any third party, in consideration for the payment of a purchase price of one euro. It is specified that the purchaser has already consented to the transfer.

9 On 7 June 2017 the European Commission adopted Decision (EU) 2017/1246 endorsing the resolution scheme for Banco Popular (OJ 2017 L 178, p. 15).

10 On the same day, FROB adopted the necessary measures to implement the resolution decision, in accordance with Article 29 of Regulation No 806/2014. Within that context, FROB approved the transfer of Banco Popular’s new shares resulting from the conversion of the Tier 2 instruments to Banco Santander.

11 On 14 June 2018 the SRB received the final report from Deloitte on the valuation, provided for in Article 20(16) and (17) of Regulation No 806/2014, intended to determine whether the shareholders and creditors affected by Banco Popular’s resolution scheme would have received better treatment if the institution had entered into normal insolvency proceedings (‘Valuation 3’).

12 On 7 August 2018 the SRB published an announcement concerning its ‘Notice … of 2 August 2018 regarding its preliminary decision on whether compensation needs to be granted to the shareholders and creditors in respect of which the resolution actions concerning Banco Popular … have been effected and the launching of the right to be heard process (SRB/EES/2018/132)’ (OJ 2018 C 277 I, p. 1). Valuation 3 was annexed to that notice.

13 In this announcement, the SRB stated that:

‘It follows from the Valuation 3 Report that there is no difference between the actual treatment of the Affected Shareholders and Creditors and the treatment they would have received had the Institution been subject to normal insolvency proceedings at the date of resolution. In view of the above, the SRB, in the Notice, decides on a preliminary basis that it is not required to pay compensation to the Affected Shareholders and Creditors pursuant to Article 76(1)(e) of Regulation (EU) No 806/2014.

In order for the SRB to be able to take its final decision on whether compensation needs to be granted, the SRB invites by the Notice the Affected Shareholders and Creditors to express interest in exercising their right to be heard regarding the above...