Case T‑134/21

Malacalza Investimenti Srl and Vittorio Malacalza

v

European Central Bank

Judgment of the General Court (Tenth Chamber) of 5 June 2024

(Non-contractual liability – Economic and monetary policy – Prudential supervision of credit institutions – Decisions taken by the European Central Bank (ECB) concerning Banca Carige – Articles 4 and 16 of Regulation (EU) No 1024/2013 – Sufficiently serious breach of a rule of law intended to confer rights on individuals – Legitimate expectations – Conflict of interests – Proportionality – Equal treatment – Right to property – Plea of illegality)

1. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single Supervisory Mechanism – Powers of the European Central Bank (ECB) – Scope – Statements made by members of the board of directors of a credit institution subject to the supervision of the ECB on the soundness of that institution – Allegedly misleading nature of those statements – Obligation on the ECB to correct those statements – Not included

   (Council Regulation No 1024/2013, Arts 4 and 9)

   (see paragraphs 68, 69, 70, 72, 74)

2. Non-contractual liability – Conditions – Sufficiently serious breach of a rule of law intended to confer rights on individuals – Rule of law intended to confer rights on individuals – Meaning – Decision of the European Central Bank (ECB) appointing a temporary administrator to a credit institution under its supervision – Risk of a conflict of interest – Principle of impartiality – Included

   (Council Regulation No 1024/2013, Arts 4 and 9)

   (see paragraphs 102-104)

3. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Single Supervisory Mechanism – Powers of the European Central Bank (ECB) – Prudential tasks – Early intervention measures – Appointment by the ECB of a temporary administrator within the credit institution subject to its supervision – Broad discretion of the ECB

   (Council Regulation No 1024/2013, Arts 4 and 9)

   (see paragraphs 110-112)

4. Non-contractual liability – Conditions – Sufficiently serious breach of a rule of law intended to confer rights on individuals – Rule of law intended to confer rights on individuals – Meaning – Decision of the European Central Bank (ECB) adopting an early intervention measure in relation to a credit institution subject to its supervision – Decision based on the rapid deterioration in the situation of the credit institution concerned – Protection of the stability of the financial system as an objective of public interest – Not included

   (Council Regulation No 1024/2013, Arts 4 and 9)

   (see paragraphs 121, 122, 125, 126, 129)

5. Non-contractual liability – Conditions – Sufficiently serious breach of a rule of law intended to confer rights on individuals – Rule of law intended to confer rights on individuals – Meaning – Decision of the European Central Bank (ECB) requesting that a credit institution subject to its supervision prepare a plan to negotiate its debt restructuring – Pursuit of a public interest objective – Not included

   (Council Regulation No 1024/2013, Arts 4 and 9)

   (see paragraphs 134, 136-138)

6. Plea of illegality – Scope – Measures the illegality of which may be pleaded – Measure of a general nature – Meaning – Decision of the European Central Bank (ECB) adopting an early intervention measure in relation to a credit institution subject to its supervision – Not included

   (Art. 277 TFEU)

   (see paragraphs 170, 172, 173)

Résumé

Ruling in the extended five-judge composition, the General Court dismisses the action for damages brought by Malacalza Investimenti Srl and Mr Vittorio Malacalza seeking compensation in respect of the harm which they claim to have suffered as a result of the unlawful conduct of the European Central Bank (ECB) in the exercise of its prudential supervisory function of Banca Carige (‘the bank’), an Italian credit institution, between 2014 and 2019. The Court rules on the non-contractual liability of the ECB in relation to the prudential supervision of credit institutions and provides clarification as regards, inter alia, the interpretation of the rules of law conferring rights on individuals and the assessment of the existence of a sufficiently serious infringement by the ECB of several applicable provisions.

The bank is subject to direct prudential supervision by the ECB. Malacalza Investimenti and Mr Malacalza, the applicants, are among its shareholders. Mr Malacalza was a member and vice-president of the board of directors of that bank between 2016 and 2018. On 9 December 2016, the ECB adopted an early intervention measure against the bank, requesting that it submit a strategic plan and an operational plan to reduce the issue of non-performing loans, including a clear indication of the measures to be taken and the schedule for doing so (‘the early intervention measure’). In view of the bank’s failures in its attempt to issue capital instruments in 2018 and on account of disagreements within the board of directors which led to the resignation of certain members and to the formation of a new board, the ECB, by decision of 14 September 2018, asked the bank to obtain approval from its board of directors of a new plan to restore and ensure sustainable compliance with the financial requirements by 31 December 2018 at the latest. Following the rejection of an increase in capital, by an extraordinary general meeting of the shareholders, several members of the board of directors resigned, leading to its disqualification under the statutes of the bank and the Italian Civil Code.

On 1 January 2019, the ECB decided to place the bank under temporary administration (‘the decision to place the bank under temporary administration’) pursuant to a legislative decree relating to the laws on banking and credit ( 1 ) and transposing Article 29 of Directive 2014/59 ( 2 ) (‘the Consolidated Law on Banking’). The effect of that decision was the dissolution of the board of directors and the replacement of its former members by three temporary administrators, whose task was to take the necessary steps to ensure that the bank complied with the financial requirements on a sustainable basis. That measure was extended three times in 2019. By letter of 18 September 2019, the ECB considered that the proposed capital increase was not contrary to the sound and prudent management of the bank and an extraordinary general meeting of shareholders finally approved it on 20 September 2019. After its implementation, on 31 January 2020, a new board of directors and a new supervisory board were elected, thus putting an end to the temporary administration of the bank.

Findings of the Court

As regards the ECB’s failure to correct misleading statements made on the soundness of the bank by its directors, the Court notes, in the first place, that the Consolidated Law on Banking ( 3 ) imposes on the ECB a general obligation to publish categories of information on credit institutions in the public interest. However, no obligation to react in a specific way is imposed on it directly or indirectly, when statements are made, by certain shareholders, concerning the soundness of certain institutions subject to its supervision, that are construed as misleading by other stakeholders.

Admittedly, those statements, in so far as they could have been made by the bank’s directors, could have a form of credibility capable of affecting the value of the shares and of causing harm to the applicants. However, the Court recalls that the existence of alleged financial damage is not sufficient, in itself, to give rise to non-contractual liability on the part of the European Union. Thus, unlawful conduct must be established by the applicants, who must demonstrate that a rule conferring rights on individuals has been breached in a sufficiently serious manner. That is not the case here.

In the second place, Article 53a of the Consolidated Law on Banking ( 4 ) provides that, where the situation so requires, the supervisory authority may adopt specific measures in respect of one or more banks or the banking system as a whole. In the light of its wording, the Court holds that that article is irrelevant when determining whether the ECB is under an obligation to correct such statements and rejects the first claim of unlawfulness alleged in respect of its conduct.

As regards the allegation of a breach of EU rules by the ECB in its relations with the bank’s board of directors, the Court notes, in the first place, that the conduct alleged against the ECB bears no relation to Article 4 of Regulation No 1024/2013. ( 5 ) That provision concerns the allocation of different tasks in prudential matters between the national authorities and the ECB, which is exclusively competent to carry out a certain number of them. The provision seeks to implement the objective of organising a regulatory system relating to an area of activity for the benefit of the public interest without granting, in itself, rights to individuals. In the second place, Article 16(1) and (2) of Regulation No 1024/2013 empowers the ECB to require credit institutions to take various measures at an early stage where those institutions do not comply or risk failing to comply with the prudential requirements, or present weaknesses preventing those institutions from ensuring sound management or satisfactory risk coverage. The Court considers that such a provision merely grants authorisation and does not, in itself, contain rules conferring rights on individuals, but structures the system of banking supervision in the public interest. Thus, the Court rejects the second claim of unlawfulness alleged.

As regards the ECB’s approval of an increase in capital allegedly contrary to the shareholders’ pre-emption rights provided for in the bank’s statutes, after finding that Article 56 of the Consolidated Law on Banking applies to the ECB, by virtue of Regulation No 1024/2013, the Court notes that, according to that article, the supervisory authority is to ascertain whether the amendments made to the statutes of credit institutions are compatible with the constraints arising from sound and prudent management before their entry in the companies register. That verification relates to the compatibility of the amendment to the statutes, not with the shareholders’ pre-emption rights, but with the requirement of sound and prudent management. Therefore, the objective to be taken into account is the stability of the credit institution and, more broadly, of the financial system as a whole. Consequently, the Court considers that that provision does not confer rights on individuals.

As regards the challenge to the appointment by the ECB of certain temporary administrators who had a conflict of interests, the Court notes, first of all, that the annulment by the Court of the decision to place the bank under temporary administration ( 6 ) does not prevent it from being examined in the present proceedings. Next, the Court clarifies, first, that that annulment did not occur on the basis of a conflict of interests and, second, that the action for damages constitutes an autonomous form of action subject to its own operating conditions. Lastly, it follows from the Consolidated Law on Banking ( 7 ) that temporary administrators must, inter alia, be free from conflicts of interest. That requirement falls, in general, within the scope of the principle of impartiality, which, according to the case-law, is intended to protect, first, the public interest and, second, the interest of individuals who might be adversely affected as a result of the presence of that conflict of interests. Thus, that principle creates, in relation to those individuals, a subjective right which, if it is breached in a sufficiently serious manner, is capable of incurring non-contractual liability of the European Union for any damage caused by an institution in the performance of its tasks, which therefore confers rights on individuals.

In determining whether the ECB committed a sufficiently serious infringement of that provision, the Court notes that, in order to justify the adoption of the decision to place the bank under temporary administration, the ECB did not state that that decision was justified by the existence of ‘serious irregularities’ committed ‘in the administration’ of the bank. ( 8 ) In the present case, if irregularities had been committed, only an action for damages against the former members of the administrative bodies would have been capable of allowing compensation to be paid by those persons for the damage suffered by the shareholders. In such a situation, it might have been inappropriate to appoint one of those former members as a temporary administrator. However, the situation was different in the present case, since the decision to place the bank under temporary administration was based on the ‘significant deterioration in the situation of the bank’.

Furthermore, the financial difficulties affecting the bank preceded the appointment of the two temporary administrators concerned. Moreover, the Court recalls that, in the performance of its prudential tasks, the ECB enjoys a wide discretion. On that basis, the Court considers that the ECB exercised its discretion in a reasonable manner by appointing as temporary administrators persons who were sufficiently well acquainted with the bank’s affairs to act expeditiously when faced with the crisis situation experienced by the bank. The Court adds that, admittedly, the aforementioned action for damages in respect of the former members is brought, for the duration of the temporary administration, by the temporary administrators. However, as soon as the bank’s ordinary management was resumed, in accordance with Italian law and the bank’s statutes, an action for damages could have been brought, in particular by the shareholders’ meeting, against the two administrators concerned. The Court considers that the ECB remained within reasonable bounds in exercising its discretion when appointing the persons concerned as temporary administrators, and thus concludes that no sufficiently serious breach has been established.

As regards the ECB’s adoption of the early intervention measure, the Court states, first, concerning that adoption on the basis of a mere risk of infringement of the regulatory framework, that Article 69octiesdecies of the Consolidated Law on Banking ( 9 ) applies to the ECB under Regulation No 1024/2013. In so far as that provision merely gives the supervisory authority, at the end of its assessment, the power to adopt an early intervention measure, provided that certain conditions are met, it does not confer rights on individuals. Indeed, the early intervention measure was adopted to ensure the implementation of the objective of public interest. Thus, the reason given by the ECB for adopting that measure was the risk of infringement of the requirements established by the applicable regulatory framework, and in particular in the light of the criteria laid down in that provision, which refers to the existence of a rapid deterioration in the situation of the supervised entity as one of the indications of a possible breach by that entity of the own funds requirements. In those circumstances, the Court considers that, since it pursues an objective of public interest, the provision in question is not intended to confer rights on individuals.

Second, concerning the obligation laid down in the early intervention measure to dispose of allegedly non-performing loans on less advantageous terms, after finding that Article 69noviesdecies of the Consolidated Law on Banking applied to the ECB, the Court points out that that provision merely gives the supervisory authority the power, under certain conditions, to request that credit institutions prepare or implement a plan to negotiate a debt restructuring. Accordingly, it does not in itself confer rights on individuals. Thus, in the present case, it is in order to achieve an objective of public interest that the ECB requested, in the early intervention measure, that the bank submit a strategic plan and an operational plan, without, however, requiring the bank to give up non-performing loans, let alone at defined prices during a given period. However, those plans had to be prepared and approved by the bank, which was responsible, in particular, for identifying and implementing the appropriate measures, by stating, for example, the non-performing loans that could be disposed of and the terms of the disposal. Moreover, that provision does not preclude the early intervention measure from indicating minimum targets and setting deadlines for the reduction of non-performing loans. In those circumstances, the Court considers that Article 69noviesdecies pursues an objective of public interest without being intended to confer rights on individuals.

Third, concerning compliance, within a given period, with the requirements imposed in respect of own funds, the Court recalls that Article 16 of Regulation No 1024/2013 confers powers on the ECB in the field of prudential supervision by pursuing an objective of public interest without conferring rights on individuals.

Fourth, concerning the breach of the principle of equal treatment on account of the adoption of the early intervention measure, the Court notes that, in the exercise of its prudential tasks, the ECB is to carry out technical assessments taking into account a wide range of variables, ( 10 ) which goes hand in hand with a broad discretion. To that extent, the ECB found that there had been a breach of the asset requirements, but also referred to several factors showing, in its view, the fragility of that institution. However, the applicants have not linked that particular situation to the decisions taken by the ECB in such a way as to establish the existence of a genuine difference in treatment between the bank and other Italian credit institutions.

Fifth, concerning the breach of the principle of proportionality, the Court recalls that the ECB enjoys a broad discretion in the exercise of its prudential supervision tasks. In order to justify the adoption of the early intervention measure, the ECB analysed the proportionality of the obligation which it intended to adopt with regard to loans forming part of the bank’s assets but which did not have the performance characteristics it considered necessary for compliance with the own funds requirements of EU legislation. Thus, it was entitled to take the view, in view of the risk faced by the bank, that it was appropriate and necessary to adopt the early intervention measure without there being alternatives to put a satisfactory end to the difficulties which the bank was experiencing at that time. Therefore, the Court considers that the applicants have failed to identify factors to the effect that, by adopting that measure, the ECB seriously and manifestly breached the principle of proportionality.

Lastly, concerning the plea of illegality raised by the applicants in respect of the early intervention measure, the Court recalls that such a plea applies only to acts of general application, which themselves relate to objectively determined situations and produce legal effects with respect to categories of persons envisaged in the abstract, failing which that plea will be inadmissible. That is not the case here in that the early intervention measure was addressed specifically by the ECB to the bank, imposing obligations specific to that bank. Accordingly, the Court rejects the plea of illegality as inadmissible.

( 1 ) Decreto legislativo n. 385 – Testo unico delle leggi in materia bancaria e creditizia (Legislative Decree No 385 consolidating the laws on banking and credit) of 1 September 1993 (GURI No 230 of 30 September 1993, and Ordinary Supplement to GURI No 92).

( 2 ) 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).

( 3 ) In the present case, Article 53(1)(da) and Article 67(1)(e) of the Consolidated Law on Banking, concerning the publication by the ECB of information on credit institutions in order to ensure transparency of the markets and thus their proper functioning and the stability of the financial system.

( 4 ) According to Article 53a(1)(d) of the Consolidated Law on Banking.

( 5 ) Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the ECB concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63).

( 6 ) Judgment of 12 October 2022, Corneli v ECB (T‑502/19, EU:T:2022:627).

( 7 ) Article 71(6) of the Consolidated Law on Banking.

( 8 ) Within the meaning of Article 69octiesdecies(1)(b) of the Consolidated Law on Banking, read in conjunction with Article 70 thereof.

( 9 ) In the present case, Article 69octiesdecies(1)(a).

( 10 ) Including, in particular, levels of capital and liquidity, business models, governance, risks, systemic impact and macroeconomic scenarios.