Ukrselhosprom PCF LLC and Versobank AS v European Central Bank.

• Jurisdiction: European Union
• ECLI: ECLI:EU:T:2021:669
• Date: 06 October 2021
• Docket Number: T-584/18,T-351/18
• Celex Number: 62018TJ0351
• Court: General Court (European Union)

JUDGMENT OF THE GENERAL COURT (Ninth Chamber, Extended Composition)

6 October 2021 (*)

(Economic and monetary policy – Prudential supervision of credit institutions – Specific supervisory tasks assigned to the ECB – Decision to withdraw a credit institution’s authorisation – Breach of legislation on combating money laundering and the financing of terrorism – Admissibility – Powers of the national competent authorities (NCAs) of participating Member States and of the ECB under the Single Supervisory Mechanism (SSM) – Equal treatment – Proportionality – Protection of legitimate expectations – Legal certainty – Misuse of powers – Rights of the defence – Obligation to state reasons)

In Cases T‑351/18 and T‑584/18,

Ukrselhosprom PCF LLC, established in Solone (Ukraine),

Versobank AS, established in Tallinn (Estonia),

represented by O. Behrends, lawyer,

applicants,

v

European Central Bank (ECB), represented by C. Hernández Saseta and G. Marafioti, acting as Agents, and by B. Schneider, lawyer,

defendant,

supported by

European Commission, represented by A. Steiblytė, D. Triantafyllou and A. Nijenhuis, acting as Agents,

intervener,

APPLICATION under Article 263 TFEU seeking annulment, first, of decision ECB_SSM_2018_EE_1 WHD_2017‑0012 of the ECB of 26 March 2018, secondly, of decision ECB_SSM_2018_EE_2 WHD_2017‑0012 of 17 July 2018, replacing decision ECB_SSM_2018_EE_1 WHD_2017‑0012, by which the ECB withdrew Versobank’s authorisation to operate as a credit institution, and, thirdly, of decision ECB/SSM/2018‑EE‑3 of 14 August 2018 on the costs relating to the review procedure,

THE GENERAL COURT (Ninth Chamber, Extended Composition),

composed of M.J. Costeira (Rapporteur), President, D. Gratsias, M. Kancheva, B. Berke and T. Perišin, Judges,

Registrar: P. Cullen, Administrator,

having regard to the written part of the procedure and further to the hearing on 25 September 2020,

gives the following

Judgment

I. Background to the dispute

1 Versobank AS, the second applicant, is a credit institution established in Estonia. Its main shareholder is Ukrselhosprom PCF LLC, the first applicant, which has an equity holding of 85.2622% in Versobank.

2 The second applicant was classified as a less significant institution for the purposes of Article 6 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; ‘the Basic SSM Regulation’).

3 As a less significant credit institution, the second applicant was placed under the prudential supervision of Finantsinspektsioon (FSA, Estonia), acting as the national competent authority (NCA), within the meaning of Article 2(2) of the Basic SSM Regulation. Moreover, the latter was also competent in relation to, inter alia, the monitoring of compliance with rules intended to combat money laundering and the financing of terrorism (‘AML/CFT’).

4 From 2015 onwards, the FSA identified recurring breaches by the second applicant in connection with, first, the ineffectiveness of its AML/CFT regime as regards the management of the risks stemming from its business model and, secondly, the inadequacy of the AML/CFT governance arrangements which it had in place.

5 The FSA carried out a number of on-site inspections. The first took place between 13 April and 12 June 2015.

6 In the light of the recurrence of the breaches identified, the FSA, after sending the second applicant a number of notices to comply with the legal requirements, adopted a precept dated 8 August 2016.

7 The precept at issue, under which the shortcomings identified during the 2015 on-site inspection were to be immediately remedied, required the second applicant to take certain steps: first, the application of existing, but not properly applied, AML/CFT policies and procedures, secondly, the application of the due diligence measures laid down in Article 13(1)(3) to (5) of the Rahapesu ja terrorismi rahastamise tõkestamise seadus (Estonian law on AML/CFT) of 19 December 2007 transposing Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ 2015 L 141, p. 73), in the version in force at the material time in the present case, thirdly, verification of the proper application of the due diligence measures laid down in Article 13(1)(3) to (5) of the Estonian law on AML/CFT, fourthly, refusal to carry out transactions if Article 27(2) of that law, in the version in force at the material time in the present case, obliged it to exercise that right and, fifthly, immediate compliance with the notification obligation laid down in Article 32 of that law, in the version in force at the material time in the present case, which imposed an obligation to report suspicions of money laundering or terrorist financing in cases where the relevant conditions were met. In addition, that precept required that applicant to submit information in writing by 9 December 2016, at the latest, regarding the manner in which it fulfilled those obligations.

8 The FSA carried out a second on-site inspection between 13 September and 11 November 2016.

9 In addition, between 5 September and 14 November 2016, a third on-site inspection was carried out by the FSA, which related to breaches identified in connection with the operation by the second applicant of an allegedly unlawful branch or subsidiary in Latvia.

10 By letter of 9 December 2016, the second applicant sent the FSA its written observations on the precept at issue.

11 By letter of 28 February 2017, the FSA notified the second applicant that it had still not complied with all of the obligations imposed by the precept at issue. On 10 April 2017, the FSA adopted, in relation to that applicant, a failing or likely to fail declaration (‘the FOLTF decision’).

12 In the light of information received from the second applicant, the FSA considered it necessary to conduct an in-depth investigation. It carried out a fourth on-site inspection between 4 and 22 September 2017. In the course of that inspection, the FSA identified material and severe breaches of the AML/CFT legislation similar to those which it had identified in two of the previous inspections, and found that that applicant’s internal control system was weak and inadequate.

13 On 8 February 2018, the ECB received a proposal from the FSA to withdraw the authorisation of the second applicant, in accordance with Article 80 of Regulation (EU) No 468/2014 of the ECB of 16 April 2014 establishing the framework for cooperation within the SSM between the ECB and NCAs and with national designated authorities (‘the SSM Framework Regulation’) (OJ 2014 L 141, p. 1).

14 In the context of the obligation to cooperate laid down in Article 80(2) of the SSM Framework Regulation, the FSA also acted, pursuant to Article 3 of the Finantskriisi ennetamise ja lahendamise seadus (Estonian Law on the prevention and resolution of financial crises) of 18 February 2015, as the national resolution authority responsible for credit institutions, through its resolution department. On 7 February 2018, the board of directors of the FSA approved its resolution department’s assessment that there was no public interest in exercising resolution powers under Article 39(1), (3) and (4) of that law, which transposes Article 32(1)(c) and 32(5) of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012 of the European Parliament and of the Council (OJ 2014 L 173, p. 190).

15 On 6 March 2018, the ECB’s Supervisory Board approved the draft decision withdrawing authorisation from the second applicant and gave it five days to submit its observations on the draft decision, pursuant to Article 31 of the SSM Framework Regulation. After the authorisation withdrawal, liquidation proceedings were opened with respect to that applicant and liquidators were appointed.

16 On 14 March 2018, the second applicant submitted its observations, which were taken into account in the final decision. After examining those observations, the ECB concluded that it was necessary to withdraw its authorisation from that applicant.

17 On the basis of Articles 4(1)(a) and 14(5) of the Basic SSM Regulation, Article 83 of the SSM Framework Regulation and Article 17 of the Krediidiasutuste seadus (Estonian Law on Credit Institutions) of 9 February 1999, transposing 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), the ECB adopted and notified to the second applicant its decision of 26 March 2018 withdrawing the latter’s authorisation (‘the decision of 26 March 2018’).

18 On 27 March 2018, the competent Estonian court adopted a decision opening the proceedings for the liquidation of the second applicant.

19 On 26 April 2018, the Administrative Board of Review of the ECB (‘the ABoR’) received an application from the first applicant for review of the decision of 26 March 2018. It held that request for review to be admissible, taking the view that that applicant was directly and individually concerned by that decision.

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