Opinion of Advocate General Kokott delivered on 25 May 2023.

• Jurisdiction: European Union
• Celex Number: 62021CC0750
• ECLI: ECLI:EU:C:2023:431
• Date: 25 May 2023
• Court: Court of Justice (European Union)

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 25 May 2023 (1)

Cases C‑750/21 P and C‑256/22 P

Pilatus Bank plc

v

European Central Bank (ECB)

(Economic and monetary policy – Single supervisory mechanism – Regulation (EU) No 1024/2013 – Special supervisory tasks conferred on the ECB – Decision concerning the withdrawal of an authorisation to take up the business of a credit institution – Indictment of the main shareholder in a third country – Criterion of good repute – Perception of good repute by the market – Blocking Statute (Regulation No 2271/96) – Effective exercise of the rights of defence by a legal adviser – Attribution of preparatory acts by national authorities to the ECB – Effective judicial protection – Articles 41 and 47 of the Charter)

Table of contents

I. Introduction

II. Legal framework

A. Regulation (EU) No 1024/2013

B. Regulation (EU) No 575/2013

C. Regulation (EU) No 468/2014

D. Directive 2013/36/EU

E. Joint Guidelines of the European Supervisory Authorities for banking, insurance and securities (EBA, EIOPA and ESMA) on the prudential assessment of acquisitions and increases of qualifying holdings in the financial sector

III. Background to the dispute

A. Facts of the case

B. Order subject to appeal (Case C750/21 P)

C. The judgment under appeal (Case C256/22 P)

IV. The procedure before the Court of Justice and the forms of order sought

V. Findings

A. Effective exercise of the rights of defence in the composite administrative proceedings for withdrawal of the authorisation

1. Preliminary observations

2. Attribution of infringements of the rights of defence and the right to effective judicial protection in the composite administrative proceedings

(a) Exclusive jurisdiction of the Court of Justice

(b) Attribution of preparatory national acts to the ECB

(c) Error of law in the judgment under appeal and effective legal defence by the bank’s legal adviser

3. Interim conclusion

(a) Case C256/22 P

(b) Case C750/21 P

B. Scope of the ECB’s supervisory powers

1. First ground of appeal in Case C256/22 P: infringement of Article 14(5) of Regulation (EU) No 1024/2013

2. Second ground of appeal in Case C256/22 P: misinterpretation of the concept of good repute under Article 23 of Regulation (EU) No 1024/2013

(a) Arguments of the appellant

(b) Dismissal by the General Court

(c) Concept of good repute in Article 23(1) of Directive 2013/36

(d) Procedural and evidential requirements for proving lack of good repute and the resulting risk

(e) Significance of Blocking Statute No 2271/96

3. Third ground of appeal in Case C256/22 P: error of law of the General Court, in particular the disproportionate nature of the withdrawal of the authorisation

4. First ground of appeal in Case C750/21 P: other complaints

5. Interim conclusion and costs

(a) Case C750/21 P

(b) Case C256/22 P

VI. Conclusion

A. Case C750/21 P

B. Case C256/22 P

I. Introduction

1. The present two cases are not formally linked but involve the same parties and the same administrative procedure, which resulted in the European Central Bank (‘the ECB’) withdrawing from the appellant, Pilatus Bank plc, the authorisation to act as a credit institution (‘the authorisation’).

2. Additionally, these cases raise the same questions of principle. First, it must be clarified whether the ECB, by virtue of its superior supervisory and decision-making powers, is responsible for safeguarding the credit institution’s rights of defence by attributing serious procedural deficiencies to it during the national part of the (composite) administrative procedure. Second, it must be examined in this context whether a credit institution placed under special supervision or management by the national competent authority can fully exercise these rights of defence and its right to bring an action in relation to the (threatened) withdrawal of its authorisation through the legal adviser appointed by its Board of Directors.

3. Additionally, the two cases generally concern the scope of the ECB’s supervisory powers under the rules of the Single Supervisory Mechanism. (2) It must be examined in this regard whether and to what extent the preparatory acts of national authorities can be attributed to the ECB, whether it must review them as to their lawfulness and whether said acts, together with the ECB’s decision concluding the proceedings, are justiciable before the EU courts.

4. Case C‑256/22 P raises the additional question as to the conditions under which the authorisation to take up the business of a credit institution can be withdrawn due to the absence or lapse of the ‘good repute’ of a credit institution’s main shareholder. This is the first time that the interpretation of this indeterminate criterion is to be considered in the case-law of the Court of Justice.

II. Legal framework

A. Regulation (EU) No 1024/2013

5. Regulation No 1024/2013 states the following in recitals 16, 20 and 21:

‘(16) The safety and soundness of large credit institutions is essential to ensure the stability of the financial system. However, recent experience shows that smaller credit institutions can also pose a threat to financial stability. Therefore, the ECB should be able to exercise supervisory tasks in relation to all credit institutions authorised in, and branches established in, participating Member States.

…

(20) Prior authorisation for taking up the business of credit institutions is a key prudential technique to ensure that only operators with a sound economic basis, an organisation capable of dealing with the specific risks inherent to deposit taking and credit provision, and suitable directors carry out those activities. The ECB should therefore have the task of authorising credit institutions that are to be established in a participating Member State and should be responsible for the withdrawal of authorisations, subject to specific arrangements reflecting the role of national authorities.

(21) In addition to the conditions set out in Union law for the authorisation of credit institutions and the cases for withdrawal of such authorisations, Member States may currently provide for further conditions for authorisation and cases for withdrawal of authorisation. The ECB should therefore carry out its task with regard to authorisation of credit institutions and withdrawal of the authorisation in case of non-compliance with national law on a proposal by the relevant national competent authority, which assesses compliance with the relevant conditions laid down in national law.

6. Article 1 of Regulation No 1024/2013 provides, under the heading ‘Subject matter and scope’:

‘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.

The institutions referred to in Article 2(5) of the 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 [(3)] are excluded from the supervisory tasks conferred on ECB in accordance with Article 4 of this Regulation. The scope of the ECB’s supervisory tasks is limited to the prudential supervision of credit institutions pursuant to this Regulation. This Regulation shall not confer on the ECB any other supervisory tasks, such as tasks relating to the prudential supervision of central counterparties.

When carrying out its tasks according to this Regulation, and without prejudice to the objective to ensure the safety and soundness of credit institutions, the ECB shall have full regard to the different types, business models and sizes of credit institutions.

No action, proposal or policy of the ECB shall, directly or indirectly, discriminate against any Member State or group of Member States as a venue for the provision of banking or financial services in any currency.

This Regulation is without prejudice to the responsibilities and related powers of the competent authorities of the participating Member States to carry out supervisory tasks not conferred on the ECB by this Regulation.

This Regulation is also without prejudice to the responsibilities and related powers of the competent or designated authorities of the participating Member States to apply macroprudential tools not provided for in relevant acts of Union law.’

7. Article 2(2), (3) and (9) of Regulation No 1024/2013 provides the following definitions:

‘(2) “national competent authority” means a national competent authority designated by a participating Member State in accordance with 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 [(4)] and Directive 2013/36/EU;

(3) “credit institution” means a credit institution as defined in point 1 of Article 4(1) of Regulation (EU) No 575/2013;

…

(9) “Single supervisory mechanism” (SSM) means the system of financial supervision composed by the ECB and national competent authorities of participating Member States as described in Article 6 of this Regulation’.

8. Article 4 of Regulation No 1024/2013 defines the tasks conferred on the ECB, inter alia, as follows:

‘1. Within the framework of Article 6, the ECB shall, in accordance with paragraph 3 of this Article, be exclusively competent to carry out, for prudential supervisory purposes, the following tasks in relation to all credit institutions established in the participating Member States:

(a) to authorise credit institutions and to withdraw authorisations of credit institutions subject to Article 14;

…

3. For the purpose...