Case C‑504/19

Banco de Portugal and Others

v

VR

(Request for a preliminary ruling from the Tribunal Supremo)

Judgment of the Court (Third Chamber), 29 April 2021

(Reference for a preliminary ruling – Banking supervision – Reorganisation and winding up of credit institutions – Directive 2001/24/EC – Reorganisation measure adopted by an administrative authority in the home Member State of a credit institution – Transfer of rights, assets or liabilities to a ‘bridge institution’ – Transfer back to the credit institution subject to the reorganisation measure – Article 3(2) – Lex concursus – Effect of a reorganisation measure in other Member States – Mutual recognition – Article 32 – Effects of a reorganisation measure on a pending lawsuit – Exception to the application of the lex concursus – Article 47, first paragraph of the Charter of Fundamental Rights of the European Union – Effective judicial protection – Principle of legal certainty)

1. Freedom of establishment – Freedom to provide services – Credit institutions – Reorganisation and winding up of credit institutions – Directive 2001/24 – Pending lawsuits – Effects of a reorganisation measure on a pending lawsuit – Exception to the application of the lex concursus – Cumulative conditions for its application – Scope

   (European Parliament and Council Directive 2001/24, recitals 23 and 30 and Arts 2, 3(2) and 32)

   (see paragraphs 35-39, 41-43, 46-49)

2. Freedom of establishment – Freedom to provide services – Credit institutions – Reorganisation and winding up of credit institutions – Directive 2001/24 – Measure for the reorganisation of a credit institution adopted in the home Member State – Transfer of a liability to a second credit institution – Transfer back of that liability to the first credit institution – Recognition, in a pending lawsuit in another Member State, of the effects of that transfer back with retroactive effect – Second credit institution no longer subject to legal proceedings for the purpose of those proceedings – Not permissible

   (Charter of Fundamental rights of the European Union, Art. 47, first para.; European Parliament and Council Directive 2001/24, Arts 3(2) and 32)

   (see paragraphs 49, 50, 54, 63, 66, operative part)

3. EU law – Principles – Legal certainty – Rules which may entail financial consequences

   (see paragraphs 51, 52)

4. Fundamental rights – Right to effective judicial protection – Right to an effective remedy – Scope

   (Charter of Fundamental rights of the European Union, Art. 47, first para.; European Parliament and Council Directive 2001/24)

   (see paragraphs 55, 57, 63)

Résumé

The unconditional recognition of a retroactive measure for the reorganisation of a credit institution is contrary to EU law if it means that clients can no longer bring legal proceedings against the ‘bridge bank’ to which the liabilities in question had previously been transferred

In 2008, VR, a natural person, concluded a contract with Banco Espírito Santo, Sucursal en España (‘BES Spain’), the Spanish branch of the Portuguese bank Banco Espírito Santo (‘BES’), by which she purchased preferential shares in an Icelandic credit institution. In view of the serious financial difficulties faced by BES, by a decision adopted in August 2014, Banco de Portugal decided to create a ‘bridge bank’, called Novo Banco SA, to which the assets, liabilities and other off-balance sheet items of BES were transferred. However, certain liabilities were excluded from the transfer to Novo Banco. Following that transfer, Novo Banco SA, Sucursal en España (‘Novo Banco Spain’) maintained the commercial relationship which VR had established with BES Spain.

On 4 February 2015, VR brought an action before the Juzgado de Primera Instancia de Vitoria (Court of First Instance, Vitoria, Spain) against Novo Banco Spain seeking, primarily, a declaration that the contract was null and void or, in the alternative, its termination. Novo Banco Spain claimed that it could not be sued because, pursuant to the decision of August 2014, the alleged liability was a liability that had not been transferred to it.

As the Court of First Instance Vitoria upheld VR’s application, Novo Banco Spain brought an appeal before the Audiencia Provincial de Álava (Provincial Court, Álava, Spain). In the course of the proceedings, it lodged two decisions adopted by Banco de Portugal on 29 December 2015. Those decisions modified the August 2014 decision, stating inter alia that ‘as of today, the following liabilities of BES have not been transferred to Novo Banco: … any liability subject to one of the procedures described in Annex I’, which included the action brought by VR. In addition, they provided that, to the extent that assets, liabilities or off-balance sheet items should have remained part of BES’ assets and liabilities but had, in fact, been transferred to Novo Banco, they were transferred back from Novo Banco to BES, with effect from 3 August 2014.

As the Provincial Court of Álava dismissed Novo Banco Spain’s appeal, Novo Banco Spain brought an action before the referring court, the Tribunal Supremo (Supreme Court, Spain). Novo Banco Spain takes the view that, under Directive 2001/24 on the reorganisation and winding up of credit institutions, ( 1 ) the decisions of 29 December 2015 are effective in all Member States without any further formalities. The Supreme Court, taking the view that those decisions modified the decision of August 2014 with retroactive effect, referred the matter to the Court of Justice in order to ascertain whether such substantive changes should be recognised in the ongoing judicial proceedings.

Findings of the Court

The Court observes that, under Article 3(2) of Directive 2001/24, reorganisation measures are, in principle, applied in accordance with the law of the home Member State and are to take effect in accordance with the legislation of that State throughout the European Union without further formalities. However, as an exception to that principle, Article 32 of Directive 2001/24 provides that effects of reorganisation measures on a pending lawsuit concerning an asset or a right of which the credit institution has been divested are governed solely by the law of the Member State in which the lawsuit is pending.

In the first place, the Court points out that the application of Article 32 requires three cumulative conditions to be fulfilled, all of which are satisfied in the dispute in the main proceedings. First, there must be reorganisation measures within the meaning of Article 2 of Directive 2001/24, which is applicable in the present case, since the decisions of 29 December 2015 are intended to preserve or restore the financial situation of a credit institution.

Secondly, there must be a pending lawsuit, a concept which covers only proceedings on the substance of the case. In the present case, first, the main proceedings must be regarded as substantive proceedings and, second, the decisions of 29 December 2015 were adopted at a time when the proceedings initiated by VR on 4 February 2015 were already pending.

Thirdly, the pending lawsuit must concern ‘an asset or a right of which the credit institution has been divested’. In view of the disparities between the language versions of Article 32 of Directive 2001/24, the Court examines the purpose of that provision and holds that it is intended to make the effects of reorganisation measures or winding-up proceedings on pending proceedings subject to the law of the Member State in which those proceedings are pending. In the light of such a purpose, it would not be logical to exclude the effects produced by reorganisation measures on a pending lawsuit from the application of that law, where that action concerns potential liabilities, which, by means of such reorganisation measures have been transferred to another entity. Thus, Article 32 must apply to one or more of the credit institution’s assets and liabilities which are subject to reorganisation measures, as is the case with the potential liability at issue in the main proceedings.

In the second place, as regards the extent of the effects of the reorganisation measures governed by the law of the Member State in which the lawsuit is pending, the Court observes that the law of that Member State governs all the effects which such measures may have on such proceedings, whether procedural or on the merits.

Therefore, it follows from Article 3(2) and Article 32 of Directive 2001/24 that the effects, both procedural and substantive, of a reorganisation measure on a pending lawsuit on the merits are limited to those determined by the law of the Member State in which that lawsuit is pending.

Furthermore, the Court points out, first, that the recognition, in the main proceedings, of the effects of the decisions of 29 December 2015, in so far as it is capable of calling into question the judicial decisions already taken in favour of VR, would be incompatible with the general principle of legal certainty. Secondly, to recognise reorganisation measures taken by the competent authority of the home Member State after an action has been brought in another Member State which have the effect of modifying the relevant legal framework for the resolution of the dispute which gave rise to that action with retroactive effect, and which could lead the court before which the action has been brought to dismiss it, would constitute a limitation on the right to an effective remedy, within the meaning of the first paragraph of Article 47 of the Charter of Fundamental Rights of the European Union.

The Court concludes that Article 3(2) and Article 32 of Directive 2001/24, read in the light of the principle of legal certainty and the first paragraph of Article 47 of the Charter of Fundamental Rights, preclude recognition, without any further conditions, in ongoing legal proceedings on the merits of the effects of a reorganisation measure, such as the decisions of 29 December 2015, where such recognition has the result that the credit institution to which the liabilities had been transferred by the first reorganisation measure can no longer be sued for the purposes of those proceedings, thereby calling in to question the judgments already delivered in favour of the applicant who is the subject of those proceedings.

( 1 ) Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding-up of credit institutions (OJ 2001 L 125, p. 15).