PNB Banka v ECB (Appeal - Economic and monetary policy - Prudential supervision of credit institutions - Judgment) [2022] EUECJ C-326/21P (15 September 2022)

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(Appeal – Economic and monetary policy – Prudential supervision of credit institutions – Insolvency proceedings – Refusal by the European Central Bank (ECB) to grant the request of the board of directors of a credit institution seeking an order instructing the insolvency administrator of that institution to grant the lawyer authorised by that board access to the premises, information, staff and resources of that institution – Competence of the author of the measure – Article 263 TFEU – Measure open to an annulment action – Inadmissibility)

APPEAL under Article 56 of the Statute of the Court of Justice of the European Union, brought on 25 May 2021,

PNB Banka AS, established in Riga (Latvia), represented by O. Behrends, Rechtsanwalt,

European Central Bank (ECB), represented by F. Bonnard, V. Hümpfner and E. Koupepidou, acting as Agents,

Republic of Latvia, represented by J. Davidoviča, I. Hūna and K. Pommere, acting as Agents,

composed of I. Jarukaitis, President of the Chamber, D. Gratsias (Rapporteur) and Z. Csehi, Judges,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

1 By its appeal, PNB Banka AS asks the Court to set aside the order of the General Court of the European Union of 12 March 2021, PNB Banka v ECB (T‑50/20, EU:T:2021:141; ‘the order under appeal’), by which the General Court dismissed its action for annulment of the refusal of the European Central Bank (ECB) to order the appellant’s insolvency administrator to grant the lawyer authorised by the appellant’s board of directors access to its premises, to the information which it holds and to its staff and its resources, as set out in a letter of 19 November 2019 sent by the ECB to that lawyer (‘letter of 19 November 2019’).

2 Article 4(1)(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 amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1) defines ‘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’.

3 Article 1, entitled ‘Subject matter and scope’, 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) provides in paragraph 1 thereof:

‘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.’

1. “participating Member State” means a Member State whose currency is the euro …;

3. “credit institution” means a credit institution as defined in point 1 of Article 4(1) of Regulation [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.’

5 Article 4 of that regulation, entitled ‘Tasks conferred on the ECB’, provides:

‘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;

(e) to ensure compliance with the acts referred to in the first subparagraph of Article 4(3), which impose requirements on credit institutions to have in place robust governance arrangements, including the fit and proper requirements for the persons responsible for the management of credit institutions, risk management processes, internal control mechanisms, remuneration policies and practices and effective internal capital adequacy assessment processes, including Internal Ratings Based models;

3. For the purpose of carrying out the tasks conferred on it by this Regulation, and with the objective of ensuring high standards of supervision, the ECB shall apply all relevant Union law, and where this Union law is composed of Directives, the national legislation transposing those Directives. Where the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the ECB shall apply also the national legislation exercising those options.

To that effect, the ECB shall adopt guidelines and recommendations, and take decisions subject to and in compliance with the relevant Union law and in particular any legislative and non-legislative act, including those referred to in Articles 290 and 291 TFEU. It shall in particular be subject to binding regulatory and implementing technical standards developed by [the European Supervisory Authority (European Banking Authority) (EBA)] and adopted by the Commission in accordance with Article 10 to 15 of Regulation (EU) No 1093/2010 [of the European Parliament and of the Council of 24 November 2010, establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/78/EC (OJ L 331, p. 12)], to Article 16 of that Regulation, and to the provisions of that Regulation on the European supervisory handbook developed by EBA in accordance with that Regulation. The ECB may also adopt regulations only to the extent necessary to organise or specify the arrangements for the carrying out of the tasks conferred on it by this Regulation.

6 Article 6 of that regulation, entitled ‘Cooperation within the SSM’, is worded as follows:

‘1. The ECB shall carry out its tasks within a single supervisory mechanism composed of the ECB and national competent authorities. The ECB shall be responsible for the effective and consistent functioning of the SSM.

4. In relation to the tasks defined in Article 4 except for points (a) and (c) of paragraph 1 thereof, the ECB shall have the responsibilities set out in paragraph 5 of this Article and the national competent authorities shall have the responsibilities set out in paragraph 6 of this Article, within the framework and subject to the procedures referred to in paragraph 7 of this Article, for the supervision of the following credit institutions, financial holding companies or mixed financial holding companies, or branches, which are established in participating Member States, of credit institutions established in non-participating Member States:

– those that are less significant on a consolidated basis, at the highest level of consolidation within the participating Member States, or individually in the specific case of branches, which are established in participating Member States, of credit institutions established in non-participating Member States. …

With respect to the first subparagraph above, a credit institution or financial holding company or mixed financial holding company shall not be considered less significant, unless justified by particular circumstances to be specified in the methodology, if any of the following conditions is met:

(ii) the ratio of its total assets over the [gross domestic product (GDP)] of the participating Member State of establishment exceeds 20%, unless the total value of its assets is below EUR 5 billion;

(iii) following a notification by its national competent authority that it considers such an institution of significant relevance with regard to the domestic economy, the ECB takes a decision confirming such significance following a comprehensive assessment by the ECB, including a balance-sheet assessment, of that credit institution.

The ECB may also, on its own initiative, consider an institution to be of significant relevance where it has established banking subsidiaries in more than one participating Member States and its cross-border assets or liabilities represent a significant part of its total assets or liabilities subject to the conditions laid down in the methodology.

Notwithstanding the previous subparagraphs, the ECB shall carry out the tasks conferred on it by this Regulation in respect of the three most significant credit institutions in each of the participating Member States, unless justified by particular circumstances.

7 Article 9 of Regulation No 1024/2013, entitled ‘Supervisory and investigatory powers’, provides in paragraph 1 thereof:

‘For the exclusive purpose of carrying out the tasks conferred on it by [Article 4], the ECB shall be considered, as appropriate, the competent authority or the designated authority in the participating Member States as established by the relevant Union law.

For the same exclusive purpose, the ECB shall have all the powers and obligations set out in this Regulation. It shall also have all the powers and obligations, which competent and designated authorities shall have under the relevant Union law, unless otherwise provided for by this Regulation. …

To the extent necessary to carry out the tasks conferred on it by this Regulation, the ECB may require, by way of instructions, those national authorities to make use of their powers, under and in accordance with the conditions set out in national law, where this Regulation does not confer such powers on the ECB. Those national authorities shall fully inform the ECB about the exercise of those powers.’

8 Article 22(1) of Regulation (EU) No 468/2014 of the European Central Bank of 16 April 2014 establishing the framework for cooperation within the Single Supervisory Mechanism between the European Central Bank and national competent authorities and with national designated authorities (‘the SSM Framework Regulation’) (OJ 2014 L 141, p. 1) states:

‘To the extent necessary to carry out the tasks conferred on it by [Regulation No 1024/2013], the ECB may require, by way of instructions, the [national competent authorities or the national designated authorities] or both to make use of their powers, under and in accordance with the conditions set out in national law and as provided for in Article 9 of the [Regulation No 1024/2013], where [Regulation No 1024/2013] does not confer such powers on the ECB.’

9 Article 1 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), entitled ‘Subject matter’, provides:

‘This Regulation establishes uniform rules and a uniform procedure for the resolution of the entities referred to in Article 2 that are established in the participating Member States referred to in Article 4.

Those uniform rules and that uniform procedure shall be applied by the Single Resolution Board established in accordance with Article 42 (the ‘Board’), together with the Council and the Commission and the national resolution authorities within the framework of the single resolution mechanism (‘SRM’) established by this Regulation. The SRM shall be supported by a Single Resolution Fund …

10 According to Article 2(a) thereof, Regulation No 806/2014 applies to credit institutions established in a participating Member State. In that regard, Article 4(1) of that regulation provides that participating Member States, within the meaning of Article 2 of Regulation No 1024/2013, are to be considered to be participating Member States for the purposes of Regulation No 806/2014.

11 Article 18 of Regulation No 806/2014, entitled ‘Resolution procedure’, provides in paragraph 1 thereof:

‘The Board shall adopt a resolution scheme pursuant to paragraph 6 in relation to entities and groups referred to in Article 7(2), and to the entities and groups referred to in Article 7(4)(b) and (5) where the conditions for the application of those paragraphs are met, only when it assesses, in its executive session, on receiving a communication pursuant to the fourth subparagraph, or on its own initiative, that the following conditions are met:

(b) having regard to timing and other relevant circumstances, there is no reasonable prospect that any alternative private sector measures, including measures by an IPS, or supervisory action, including early intervention measures or the write-down or conversion of relevant capital instruments …, taken in respect of the entity, would prevent its failure within a reasonable timeframe;

An assessment of the condition referred to in point (a) of the first subparagraph shall be made by the ECB, after consulting the Board. …

Where the ECB assesses that the condition referred to in point (a) of the first subparagraph is met in relation to an entity or group referred to in the first subparagraph, it shall communicate that assessment without delay to the Commission and to the Board.

12 Article 67 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) provides in paragraphs 1 and 2 thereof:

(d) an institution fails to have in place governance arrangements required by the competent authorities in accordance with the national provisions transposing Article 74;

2. Member States shall ensure that in the cases referred to in paragraph 1, the administrative penalties and other administrative measures that can be applied include at least the following:

(b) an order requiring the natural or legal person responsible to cease the conduct and to desist from a repetition of that conduct;

13 In accordance with Article 74(1) of that directive, ‘Institutions shall have robust governance arrangements, which include a clear organisational structure with well-defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks they are or might be exposed to, adequate internal control mechanisms, including sound administration and accounting procedures, and remuneration policies and practices that are consistent with and promote sound and effective risk management.’

14 Article 132¹(3) of the Kredītiestāžu likums (Law on Credit Institutions) of 5 October 1995 (Latvijas Vēstnesis, 1995, No 163) is worded as follows:

’In accordance with the competence laid down in this Law, the [Finanšu un kapitāla tirgus komisija (Financial and Capital Markets Commission, Latvia)] is entitled to supervise the activities of the insolvency administrator and his or her compliance with the restrictions laid down in this Law. To that end, the authorised representative of the Financial and Capital Markets Commission has the right to acquaint himself or herself with all of the documents of a credit institution related to that credit institution, and to receive, from the insolvency administrator, explanations and any other necessary information relating to the insolvency proceedings in respect of the credit institution.’

15 The background to the dispute is set out in paragraphs 1 to 9 of the order under appeal and, for the purposes of the present proceedings, may be summarised as follows.

16 By decision of 1 March 2019, the ECB considered the appellant, PNB Banka, a credit institution governed by Latvian law, to be of significant relevance within the meaning of point (iii) of the second subparagraph of Article 6(4) of Regulation No 1024/2013. Therefore, the appellant was placed, on that basis, under the direct supervision of the ECB, within the framework of the SSM.

17 On 15 August 2019, the ECB concluded that the appellant was deemed to be failing or likely to fail within the meaning of Article 18(1)(a) of Regulation No 806/2014. On the same day, the Board decided not to adopt a resolution scheme within the meaning of Article 18(1) of that regulation in relation to the appellant.

18 On 22 August 2019, the Financial and Capital Markets Commission (‘the FCMC’) lodged an application to have the appellant declared insolvent. By decision of the Rīgas pilsētas Vidzemes priekšpilsētas tiesa (Riga City Court, Vidzeme District, Latvia) of 12 September 2019, the appellant was declared insolvent. An insolvency administrator was appointed at the same time. That court then transferred to that administrator all of the appellant’s powers and all of those of its board of directors. In addition, that court rejected a request from the appellant’s board of directors to retain its rights to represent the appellant in the action, in particular, against the ECB’s assessment that the appellant was failing or likely to fail and against the Board’s decision not to adopt a resolution scheme in relation to it.

19 On 12 September 2019, the FCMC requested that the ECB withdraw the appellant’s authorisation as a credit institution. On 28 October 2019, the ECB sent the draft decision relating to the withdrawal of the authorisation to the appellant’s insolvency administrator.

20 Following the delivery of the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923), the ECB called on the appellant’s board of directors to adopt a position on that draft decision.

21 It is apparent from correspondence between the lawyer authorised by the appellant’s board of directors and the insolvency administrator that the latter would not authorise the payment of lawyers’ fees out of the appellant’s resources which he is responsible for administering and that he would refuse to allow access to the appellant’s premises, its information and staff.

22 By letter of 18 November 2019, the lawyer authorised by the appellant’s board of directors requested the ECB, inter alia, to instruct the insolvency administrator to grant him access to the appellant’s premises, information, members of staff and resources (‘the requested instruction’).

23 By letter of 19 November 2019, the ECB refused to grant that request on the ground that the requested instruction fell outside its scope of competence.

24 By application lodged at the Registry of the General Court on 29 January 2020, the appellant brought an action for the annulment of the letter of 19 November 2019.

25 By separate document lodged at the Court Registry on 16 April 2020, the ECB lodged a plea of inadmissibility against the action under Article 130(1) of the Rules of Procedure of the General Court. At the Court’s request, the appellant submitted its observations on that plea of inadmissibility, in which it claimed, in substance, that the ECB had the requisite competence to give the requested instruction.

26 As is apparent from paragraphs 17, 23, 24 and 90 of the order under appeal, the General Court, pursuant to Article 126 of its Rules of Procedure, dismissed the action as manifestly lacking any foundation in law, without first ruling on the plea of inadmissibility raised by the ECB, taking the view that the proper administration of justice justified proceeding in that way.

27 The General Court devoted paragraphs 33 to 72 of the order under appeal to the examination of the first plea in law, alleging an error on the part of the ECB in that it declared that it did not have competence to give the requested instruction. In paragraph 34 of the order under appeal, the General Court found that the appellant based that plea, in essence, on Article 4(1)(e) of Regulation No 1024/2013, on Articles 67 and 74 of Directive 2013/36 and on Article 132¹(3) of the Law on Credit Institutions.

28 The General Court therefore examined, in the first place, in paragraphs 37 to 51 of the order under appeal, the relevant provisions of Regulation No 1024/2013 and found, in paragraph 52 of that order, that it was evident that neither the wording of the relevant provisions of Regulation No 1024/2014, their purpose, as reflected in particular in the legal basis of that regulation in the FEU Treaty, nor their context supported the conclusion that examination of the request by the appellant’s board of directors for the ECB to give the requested instruction came within the scope of the ECB’s competence.

29 In the second place, in paragraphs 53 to 59 of the order under appeal, the General Court analysed Articles 67 and 74 of Directive 2013/36 and concluded, in paragraph 60 of that order, that the requested instruction cannot be regarded as coming within the scope of the prudential supervision laid down by those provisions and seeking in particular to limit excessive risk-taking by the credit institution in question.

30 In the third place, in paragraphs 61 to 64 of the order under appeal, the General Court examined the appellant’s arguments based on the Law on Credit Institutions. In that regard, it noted that it did not follow from Article 132¹(3) of that law, read in the light of the relevant provisions of Regulation No 1024/2013 and of Directive 2013/36, that it was for the ECB to give the requested instruction. The General Court added that insolvency proceedings fall within the competence of the national authorities in the absence, in particular, of provisions conferring such a competence on the ECB.

31 Therefore, the General Court found, in paragraph 66 of the order under appeal, that it was evident that neither Regulation No 1024/2013, Directive 2013/36, nor Latvian law confers competence on the ECB to give the requested instruction.

32 After examining and rejecting, first, in paragraphs 67 to 72 of the order under appeal, the appellant’s arguments based on the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923) and, second, in paragraphs 74 to 89 of that order, the other four pleas in law relied on by the appellant in support of its action, the General Court decided, in paragraph 90 of that order, that the appellant’s action had to be dismissed as being manifestly unfounded.

– in so far as the Court is not in a position to take a decision on the merits, refer the case back to the General Court; and

– dismiss the appeal as inadmissible or, in the alternative, as unfounded; and

35 The Republic of Latvia, which was granted leave to intervene in the proceedings in support of the forms of order sought by the ECB by decision of the President of the Court of 23 November 2021, did not lodge a statement in intervention within the prescribed period.

36 In support of its appeal, the appellant puts forward 12 grounds of appeal, alleging (i) that the case-law cited in paragraph 71 of the order under appeal is not applicable to the present case; (ii) infringement of the principle that judicial review of an EU act cannot be dependent on the Member States; (iii) infringement of Article 263 TFEU; (iv) infringement of the principle that a remedy is not effective if it is merely theoretical and illusory; (v) infringement of Article 51 of the Charter of Fundamental Rights of the European Union (‘the Charter’); (vi) the overly narrow interpretation of the ECB’s powers in the field of prudential supervision; (vii) an error of law as regards the analysis to be carried out under Article 47 of the Charter; (viii) erroneous distinction between prudential supervision and insolvency law; (ix) an error of law made by the General Court, in that it assumed that the ECB lacked the requisite competence to give the requested instruction; (x) an error of law concerning the effect of the withdrawal of the appellant’s banking authorisation on the competence of the ECB; (xi) that the General Court erred in finding that the ECB had complied with the requirements arising from the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923); and (xii) that the General Court erroneously rejected the appellant’s third, fourth and fifth pleas in law alleging, infringement of the right to be heard, infringement of the obligation to state reasons and of the maxim nemo auditur propriam turpitudinem allegans, respectively.

37 For its part, the ECB contends, principally, that the appeal is inadmissible or, in the alternative, unfounded.

38 It should be recalled that, as is apparent from paragraph 3 of the order under appeal, on 12 September 2019, PNB Banka was declared insolvent by decision of the competent Latvian court, which transferred to an insolvency administrator all the powers of PNB Banka and its board of directors.

39 In that regard, it should be noted that, in the case of a credit institution constituted in the form of a legal person governed by the law of a Member State, such as PNB Banka, where there are no EU rules in the matter, it is under that law that it is necessary to determine which bodies of that legal person are entitled to take the decision to bring an action before a court of the European Union and to instruct a lawyer for that purpose; however, it must be pointed out that the autonomy enjoyed by the Member States in that regard is restricted by their obligation, in particular, to ensure compliance with the right to an effective remedy and to a fair hearing enshrined in Article 47 of the Charter (see, to that effect, judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others, C‑663/17 P, C‑665/17 P et C‑669/17 P, EU:C:2019:923, paragraphs 58 and 59).

40 Accordingly, in the present case, since all the powers of PNB Banka and of its board of directors were transferred, pursuant to the relevant provisions of Latvian law, to its insolvency administrator, it is, in principle, for that insolvency administrator to take the decision to bring an action before a court of the European Union on behalf of PNB Banka and to instruct a lawyer for that purpose, unless recognition of the exclusive jurisdiction of the insolvency administrator in that area is liable to breach PNB Banka’s right to effective judicial protection, enshrined in Article 47 of the Charter.

41 It should be borne in mind that, as is apparent from paragraphs 4 to 7 of the order under appeal, the ECB called on the lawyer authorised by PNB Banka’s board of directors to comment on the draft decision to withdraw PNB Banka’s authorisation. That lawyer sent the ECB a letter in which he asked it to give the requested instruction to PNB Banka’s insolvency administrator. The letter of 19 November 2019 was sent by the ECB to that lawyer in response to his letter.

42 It follows that, even if the letter of 19 November 2019 constitutes a measure against which an action for annulment may be brought under the fourth paragraph of Article 263 TFEU, it is PNB Banka’s board of directors, as the addressee of that measure, which has standing to bring such an action.

43 For that reason, it must be held that, in the present case, the appellant is PNB Banka, represented by its board of directors. That conclusion is, however, without prejudice to the question whether the acts of PNB Banka’s board of directors bind that legal person. That question, which it is not necessary to answer for the purposes of the present proceedings, is governed by Latvian law, subject to the limitation set out in paragraph 39 of this judgment.

44 The ECB contends that the present appeal is inadmissible on the ground, first, that the appellant does not have a legitimate interest in challenging the order under appeal, since, in the meantime, on 17 February 2020, its authorisation as a credit institution was withdrawn and, consequently, even if that order were to be set aside, the ECB would not have the competence to give the requested instruction to the appellant’s insolvency administrator. Second, the appeal does not satisfy the requirements arising from the first paragraph of Article 21 of the Statute of the Court of Justice of the European Union and Article 168(1)(d) of the Rules of Procedure of the Court of Justice, since the appellant’s arguments are obscure and incomprehensible.

45 That line of argument cannot succeed. First, if it were to be considered, as the appellant submits, that the requested instruction did indeed fall within the competence of the ECB, the appellant would retain a legitimate interest in obtaining the annulment of a decision refusing to give that instruction, since such a refusal could call into question compliance with its right to be heard before the adoption of the decision withdrawing its banking authorisation and, consequently, the legality of that decision. Second, the arguments put forward by the appellant in support of its appeal, while giving rise to certain comprehension difficulties, cannot be regarded, as a whole, as being so obscure that the appeal must be declared inadmissible.

46 It is necessary to examine, at the outset, the sixth to ninth grounds of appeal, which concern the reasoning of the order under appeal in support of the conclusion, set out in paragraph 66 of the order under appeal, that no provision of EU or Latvian law conferred competence on the ECB to give the requested instruction.

The sixth plea in law, alleging the overly narrow interpretation of the ECB’s powers in the field of prudential supervision

47 The appellant complains that the General Court relied on too narrow an interpretation of the ECB’s powers in the field of prudential supervision. As is apparent from paragraph 58 of the order under appeal, the General Court accepted that the ECB has competence to ensure compliance with the requirements relating to the governance of a credit institution, which promotes effective checks and balances within such an institution and the elimination of conflicts of interest. However, the General Court wrongly considered that the adoption of the measures necessary to remedy a conflict of interest such as that identified in the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923) does not fall within the scope of that competence.

48 By contrast, the appellant considers that the requested instruction undoubtedly contributes to the safety and soundness of a credit institution, since it is crucial that any potential actions brought by such an institution can be pursued and examined without being distorted by a conflict of interest.

50 The sixth ground of appeal relates, in essence, to the pleas set out in paragraphs 53 to 59 of the order under appeal, which led the General Court to the conclusion, set out in paragraph 60 of that order, that the requested instruction cannot be regarded as coming within the scope of the prudential supervision laid down by Articles 67 and 74 of Directive 2013/36.

51 As the General Court observed in paragraph 58 of the order under appeal, the purpose of Article 74(1) of Directive 2013/36 relates to the governance of a credit institution and to the establishment of sound and effective risk management within such an institution.

52 It is true that, as the General Court found in substance in paragraph 58 of the order under appeal, in accordance with Article 4(1)(e) and (3) of Regulation No 1024/2013, the ECB is the competent authority to ensure compliance with Article 74(1) of Directive 2013/36 with regard to a credit institution subject to its direct supervision, such as the appellant.

53 In that context, as the General Court observed in paragraph 59 of that order, under the national legislation implementing Article 67(2)(b) of Directive 2013/36, read in conjunction with paragraph (1)(d) of that article, the ECB may, inter alia, address to a credit institution which has failed to put in place the governance arrangements required by the national provisions transposing Article 74 of that directive an injunction ordering that institution to cease that conduct and to desist from a repetition of that conduct.

54 However, the General Court did not err in law in holding, in paragraph 58 of the order under appeal, that the abovementioned provisions did not confer on the ECB competence to give to a credit institution an instruction such as that requested.

55 The powers conferred on the ECB by those provisions seek to ensure that a credit institution has in place corporate governance arrangements such as those referred to in Article 74(1) of Directive 2013/36. By contrast, they do not allow the ECB to issue to the governance bodies of such an institution ad hoc instructions as to which decision they must take in relation to a specific request.

56 As regards the appellant’s argument that the General Court found that the adoption of the measures necessary to remedy a conflict of interest such as that identified in the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923) did not fall within the competence of the ECB, it must be held that that argument is based on a manifestly incorrect reading of the order under appeal, since the part of that order covered by the sixth ground of appeal mentions neither that judgment nor a conflict of interest.

57 In any event, while the appellant seeks to argue that its insolvency administrator – who was called on to respond to the requests, referred to in paragraph 21 of the present judgment, of the lawyer authorised by its board of directors – was in a situation of a conflict of interest similar to that at issue in the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923, paragraph 74), it must be noted that, assuming that there was such a conflict, it does not mean that the ECB had the requisite competence to intervene and to issue the requested instruction to that insolvency administrator.

58 No other lesson can be drawn from the judgment of 5 November 2019, ECB and Others v Trasta Komercbanka and Others (C‑663/17 P, C‑665/17 P and C‑669/17 P, EU:C:2019:923). That judgment concerns the obligation of a court of the European Union not to take account of the revocation of the authority conferred on a party’s representative where that revocation infringes that party’s right to effective judicial protection. Its lessons cannot have the effect of conferring on the ECB a competence which it does not have under the provisions applicable to it.

59 It follows from all the foregoing considerations that the sixth ground of appeal is unfounded and must be rejected.

The seventh ground of appeal, alleging an error of law as regards the analysis to be carried out under Article 47 of the Charter and the eighth ground, alleging an incorrect distinction between prudential supervision and insolvency law

60 By the seventh ground of appeal, the appellant complains that the General Court failed to take account of the fact that any review carried out in relation to the right to effective judicial protection, enshrined in Article 47 of the Charter, must be based on an assessment of the way in which the EU institution concerned actually exercises its powers and, accordingly, the General Court’s analysis could not be limited to the power of the ECB to issue binding instructions.

61 According to the appellant, there is no contradiction between carrying out an administrative function on behalf of a Member State – in the present case, that of insolvency administrator – and being functionally involved in the exercise of powers of an EU institution. The ‘prudential supervisory role of the insolvency administrator [of a credit institution]’ is reflected in the rules of national law, namely Article 132¹(3) of the Law on Credit Institutions, referred to in paragraph 61 of the order under appeal. As the General Court held in paragraph 63 of that order, that law was intended to transpose Directive 2013/36 into Latvian law.

62 The appellant concludes from this that the Court based its decision on the premiss that the ECB may exercise the powers conferred by that law and that, consequently, the ECB was authorised to issue instructions to the appellant’s insolvency administrator. Notwithstanding, according to the appellant, the General Court wrongly held that the ECB could not give the requested instruction to that administrator, on the ground that that instruction did not contribute to the stability of the appellant and, more generally, to that of the banking sector.

63 The appellant adds that, in any event, the ECB was entitled, in accordance with the third subparagraph of Article 9(1) of Regulation No 1024/2013 and Article 22(1) of Regulation No 468/2014, to ask the FCMC to give the requested instruction to the appellant’s insolvency administrator.

64 By the eighth ground of appeal, the appellant submits that the General Court erred by confusing insolvency law and the provisions relating to the prudential supervision of a credit institution. The order under appeal is based on the consideration that any act of the insolvency administrator of a credit institution necessarily concerns an insolvency matter, falling in the area of competence of the national authorities and courts. That consideration is inferred from the fact, mentioned in paragraph 39 of the order under appeal, that the insolvency administrator is appointed in accordance with national law. The appointment, under national law, of a new person to take charge of a banking institution, which may occur for various reasons, in no way affects the ECB’s prudential supervisory powers, as is shown by the fact that the ECB continued to supervise the appellant after the appointment of the insolvency administrator and continued to give him instructions, both informal and formal.

65 It follows that insolvency law, applied by the national courts having jurisdiction in this area, is not the appropriate framework for resolving problems arising in a case such as the present case. Procedural and substantive insolvency law provides no solution to the problems raised in the present case and an insolvency court is not in a position to deal with them.

66 Thus, the grounds set out in the part of the order under appeal containing paragraph 65 thereof, although relevant in a situation where the appellant’s creditors lodge a complaint with the ECB against its insolvency administrator, are irrelevant in the present case, in which the ECB was approached in relation to a prudential supervisory issue relating to the right to effective judicial protection, enshrined in Article 47 of the Charter. The present case thus concerns ‘solely and exclusively the need to ensure an effective remedy against the ECB’s decisions, i.e. a matter for which the ECB and the Court of Justice of the European Union are responsible’.

68 In so far as both the seventh and eighth grounds of appeal relate to the same part of the order under appeal, they should be examined together.

69 It is apparent from paragraphs 62 and 63 of that order that the General Court considered that, under Article 4(3) of Regulation No 1024/2013, the ECB could apply, in respect of a credit institution subject to its direct supervision, the provisions of the Law on Credit Institutions, which is one of the national legislative instruments designed to transpose Directive 2013/36 into Latvian law.

70 The General Court nevertheless held, in paragraph 64 of that order, that it did not follow from Article 132¹(3) of that law that it was for the ECB to give the requested instruction to the appellant’s insolvency administrator.

71 It must be observed, in that regard, that, in the case of an interpretation of national law by the General Court, the Court of Justice has jurisdiction, on appeal, only to determine whether that law was distorted, and the distortion must be obvious from the documents on its file (judgment of 21 December 2016, Commission v Hansestadt Lübeck, C‑524/14 P, EU:C:2016:971, paragraph 20 and the case-law cited).

72 In this respect, where a party alleges distortion of the evidence by the General Court, it should be borne in mind that, under the second subparagraph of Article 256(1) TFEU, the first paragraph of Article 51 of the Statute of the Court of Justice and Article 168(1)(d) of the Rules of Procedure of the Court of Justice, it must indicate precisely the evidence alleged to have been distorted by the General Court and show the errors of appraisal which, in its view, led to that distortion (judgment of 4 July 2013, Commission v Aalberts Industries, C‑287/11 P, EU:C:2013:445, paragraph 50 and the case-law cited).

73 Although the appellant maintains that the considerations set out in paragraph 64 of the order under appeal are incorrect, it does not demonstrate, in compliance with the conditions set out in the preceding paragraph, that that error resulted from a distortion, by the General Court, of Article 132¹(3) of the Law on Credit Institutions. Accordingly, that part of its argument must be rejected as inadmissible.

74 The appellant’s argument that, under the third subparagraph of Article 9(1) of Regulation No 1024/2013 and Article 22(1) of Regulation No 468/2014, the ECB could have required the FCMC to give the requested instruction to the appellant’s insolvency administrator, cannot succeed either.

75 Regardless of the fact that, by the letter mentioned in paragraph 22 of the present judgment, the appellant asked the ECB to itself give the requested instruction, without involving the FCMC, it must be noted that, in any event, it is apparent from the provisions referred to in the preceding paragraph that the ECB may require the FCMC to use its powers where that is necessary to ensure the successful completion of the duties and tasks incumbent on it under Regulation No 1024/2013.

76 As is apparent from paragraphs 51 to 55 above, the requested instruction had no connection with the tasks entrusted to the ECB, as listed in Article 4 of that regulation.

77 As regards the appellant’s argument that, in the present case, the General Court erred by confusing insolvency law and the provisions relating to the prudential supervision of a credit institution, it must be recalled that, in paragraph 64 of the order under appeal, the General Court stated that insolvency proceedings fall within the competence of the national authorities in cases where, in particular, there are no provisions conferring such a competence on the ECB.

78 In addition, in paragraph 65 of that order, the General Court added that the appellant’s assertion that its board of directors is prevented from discharging its duties by reason of the insolvency administrator’s refusal to restore access to its premises and resources was not capable of calling into question the considerations set out in paragraph 64 of that order, regard being had, first, to the ECB’s lack of competence in that regard and, second, to the nature and purpose of the insolvency proceedings underway against the appellant.

79 Even if the General Court failed to take account of the fact that the ECB remained competent for the prudential supervision of a credit institution declared insolvent whilst it retained its authorisation, such an omission cannot call into question the finding, set out in paragraph 64 of the order under appeal and recalled in paragraph 65 thereof, that Article 132¹(3) of the Law on Credit Institutions did not confer on the ECB the requisite competence to give the requested instruction.

80 It follows from all the foregoing considerations that the seventh and eighth grounds of appeal must be rejected as being inadmissible in part, and unfounded in part.

The ninth ground of appeal, alleging an error of law on the part of the General Court, in that it assumed that the ECB lacked the requisite competence to give the requested instruction

81 The appellant claims that the General Court wrongly assumed that the ECB lacked the requisite competence to give the requested instruction to the appellant’s insolvency administrator. However, the General Court used the term ‘competence’ in a misleading and incorrect manner. The General Court did not consider that, by refusing to give the requested instruction, the ECB took a decision which did not fall within its competence. It is immaterial, in that regard, that, vis-à-vis the appellant’s insolvency administrator, those instructions take the form of a binding order or guidance; moreover, that administrator asked for ECB guidance in letters to the appellant’s lawyer, copies of which were sent to that institution.

82 The appellant submits that the core issues which the General Court examines in the context of the analysis of the question of the ECB’s ‘competence’, namely whether an instruction such as the requested instruction contributed to the viability and soundness of the bank concerned and to the stability of the banking system, relate not to the existence, as such, of the ECB’s competence in the matter, but to the exercise of a discretion by the ECB, even if, according to the appellant, the ECB has no discretion in a situation such as that in the present case. Even if the ECB were to have such a discretion, that would not mean that the requested instruction did not fall within the ECB’s scope of competence.

83 The appellant infers from this that the ground on which the General Court based its dismissal of its action was not that the ECB lacked competence to give the requested instruction but that it was justified in refusing the appellant’s request because, according to the General Court, granting that request did not contribute to the soundness and viability of the appellant and to the stability of the banking system. However, the ECB did not provide a statement of reasons capable of justifying that conclusion. According to the appellant, the analysis of the ECB’s actual competence carried out in the order under appeal confirms that the ECB was competent to give the requested instruction. The General Court avoided making that conclusion, relying on the erroneous argument that that instruction did not contribute to the attainment of the objectives of prudential supervision.

85 It is apparent from the order under appeal that, after an analysis of the relevant provisions of Regulation No 1024/2013 and Directive 2013/36, the General Court correctly concluded, on the basis of a detailed reasoning, in paragraphs 52 and 60 of that order respectively, that those provisions did not confer on the ECB the competence to give the requested instruction to the appellant’s insolvency administrator.

86 Moreover, on the basis of its definitive assessment of the relevant provisions of Latvian law, the General Court held, in paragraph 66 of the order under appeal, that that national law also did not confer such competence on the ECB.

87 It is therefore on the basis of a misreading of the order under appeal that the appellant asserts, in support of the ninth ground of appeal, that the General Court considered that the ECB, while having competence in the matter, had, in that regard, a discretion which it decided not to exercise.

88 Consequently, the ninth ground of appeal, based on a misreading of the order under appeal, cannot succeed and must be rejected as unfounded.

89 It is apparent from the response to the sixth to ninth grounds of appeal that the General Court did not err in law in concluding, in paragraph 66 of the order under appeal, that the ECB lacked competence to give the requested instruction to the appellant’s insolvency administrator.

90 That finding of the General Court, based on matters of fact and of law on which the parties had an opportunity to submit comments, was sufficient in itself to justify the dismissal of the appellant’s action by the General Court.

91 It should nevertheless be noted that the General Court did not conclude from that finding that the letter of 19 November 2019 did not constitute an actionable measure and, in so doing, erred in law.

92 In that regard, it should be borne in mind that, according to the case-law of the Court, every letter sent by an institution of the Union in response to a request from its addressee does not nevertheless constitute an actionable measure pursuant to the fourth paragraph of Article 263 TFEU (see, to that effect, order of 28 June 2011, Verein Deutsche Sprache v Council, C‑93/11 P, not published, EU:C:2011:429, paragraph 28, and judgment of 26 October 2017, Global Steel Wire and Others v Commission, C‑454/16 P to C‑456/16 P and C‑458/16 P, not published, EU:C:2017:818, paragraph 30).

93 In particular, if the EU institution concerned is not in a position to grant a request addressed to it, since there is no provision enabling it to adopt a decision such as that sought by the author of the request, the letter by which, as a courtesy, that author is informed of that impossibility cannot be treated in the same way as the communication of a decision for the purposes of Article 263 TFEU (order of 17 March 2009, Ayyanarsamy v Commission and Germany, C‑251/08 P, not published, EU:C:2009:161, paragraph 16 and the case-law cited).

94 Since, as the General Court rightly held, in paragraph 66 of the order, the ECB lacked competence to give the requested instruction, the letter of 19 November 2019 did not constitute a measure against which an action for annulment may be brought under Article 263 TFEU, with the result that the appellant’s action against that letter was inadmissible.

95 The error of law made by the General Court, since it relates to the admissibility of the action for annulment brought before the General Court, constitutes a question of public policy which the Court of Justice, hearing an appeal, is required to raise of its own motion (see, to that effect, judgment of 29 November 2007, Stadtwerke Schwäbisch Hall and Others v Commission, C‑176/06 P, not published, EU:C:2007:730, paragraph 18, and order of 15 February 2012, Internationaler Hilfsfonds v Commission, C‑208/11 P, not published, EU:C:2012:76, paragraph 34).

96 That error cannot, however, result in the order under appeal being set aside, since the operative part of that order dismissing the action against the letter of 19 November 2019 remains well founded as regards the legal ground based on the unchallengeable nature of that order, which should be substituted for the ground, based on the unfounded nature of that action, upheld by the General Court (see, by analogy, order of 15 February 2012, Internationaler Hilfsfonds v Commission, C‑208/11 P, not published, EU:C:2012:76, paragraph 35).

97 In those circumstances, the first to fifth grounds of appeal and the 10th to 12th grounds of appeal, if well founded, cannot, in any event, lead to the order under appeal being set aside. They must therefore be rejected as ineffective.

98 In the light of all of the foregoing considerations, the appeal must be dismissed.

99 Under Article 184(2) of the Rules of Procedure of the Court of Justice, where the appeal is unfounded, the Court is to make a decision as to costs.

100 In accordance with Article 138(1) of those rules, which apply to the procedure on appeal by virtue of Article 184(1) thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings.

101 Since the appellant has been unsuccessful and the ECB has applied for costs, the appellant must, in addition to bearing its own costs, pay those incurred by the ECB.

2. Orders PNB Banka AS to bear its own costs and to pay those incurred by the European Central Bank (ECB).

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> PNB Banka v ECB (Appeal - Economic and monetary policy - Prudential supervision of credit institutions - Judgment) [2022] EUECJ C-326/21P (15 September 2022) URL: http://www.bailii.org/eu/cases/EUECJ/2022/C32621P.html Cite as: EU:C:2022:693, ECLI:EU:C:2022:693, [2022] EUECJ C-326/21P

Court of Justice of the European Communities (including Court of First Instance Decisions)