Case T‑540/22

French Republic

v

Single Resolution Board

Judgment of the General Court (Third Chamber, Extended Composition) of 10 July 2024

(Economic and monetary policy – Banking Union – Single resolution mechanism for credit institutions and certain investment firms (SRM) – Regulation (EU) No 806/2014 – Minimum requirement for own funds and eligible liabilities – Decision of the SRB not to grant a waiver – Appeal before the Appeal Panel of the SRB – Dismissal – Condition that there is no impediment to the prompt transfer of own funds – SRB’s margin of discretion – Legal certainty – Obligation to state reasons)

1. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Prudential requirements applicable to credit institutions and investment firms – Minimum requirement for own funds and eligible liabilities (MREL) – Application for waiver of an MREL imposed on entities other than the resolution entities (internal MREL) – Single Resolution Board’s (SRB) margin of discretion – Examination of other functional substitutes for the internal MREL – Condition that there is no current or foreseen material impediment to the prompt transfer of own funds or repayment of liabilities – Requirement of an additional guarantee by the SRB in order to satisfy that condition – Permissible subject to conditions

   (European Parliament and Council Regulation No 806/2014, Arts 12g(3) and 12h(1)(c))

   (see paragraphs 42, 43, 50)

2. Economic and monetary policy – Economic policy – Single resolution mechanism for credit institutions and certain investment firms – Single Resolution Board (SRB) – Appeal Panel of the SRB – Scope of review – Examination of the pleas contained in the referral to the SRB

   (European Parliament and Council Regulation No 806/2014, Art. 85(3) and (4))

   (see paragraph 73)

3. Economic and monetary policy – Economic policy – Supervision of the EU financial sector – Prudential requirements applicable to credit institutions and investment firms – Minimum requirement for own funds and eligible liabilities (MREL) – Application for waiver of an MREL – Condition that there is no current or foreseen material impediment to the prompt transfer of own funds or repayment of liabilities – Single Resolution Board’s (SRB) margin of discretion in the assessment of normative criteria – No breach of the principle of legal certainty

   (European Parliament and Council Regulation No 806/2014, Art. 12h(1)(c))

   (see paragraphs 120, 121)

Résumé

Hearing an action for annulment, which it dismisses, brought by the French Republic against a decision of the Appeal Panel of the Single Resolution Board (SRB) (‘the Appeal Panel’), ( 1 ) the General Court rules for the first time on a decision of the Appeal Panel reviewing the examination carried out by the SRB to determine whether a banking group satisfies the necessary conditions for it to be eligible for waiver of the minimum requirement for own funds. Those conditions are laid down in Article 12h of Regulation No 806/2014. ( 2 )

On 6 November 2020, a banking group had submitted, in respect of one of its subsidiaries, an application to the SRB for waiver of the minimum requirement for own funds and eligible liabilities (‘the MREL’) applied on an individual basis pursuant to Article 12g of Regulation No 806/2014. Hearing an appeal against the SRB’s decision refusing that application, ( 3 ) the appeal having been lodged by the Autorité de contrôle prudentiel et de résolution (Authority for Prudential Supervision and Resolution, France) (‘the appellant before the Appeal Panel’), the Appeal Panel dismissed that appeal by the contested decision.

Findings of the Court

In the first place, as regards the scope of Article 12h(1) of Regulation No 806/2014 (‘the provision concerned’), the Court finds, first of all, based on a literal interpretation, that Article 12h(1)(c) of that regulation does not provide for the possibility of requiring a specific guarantee in order to satisfy the condition that there is no current or foreseen material impediment to the prompt transfer of own funds or repayment of liabilities, and that nor does that provision prohibit the SRB from requiring a specific guarantee in that regard.

Next, as part of a contextual interpretation, the Court takes the view that the requirement of collateralised guarantees between the parent undertaking and its subsidiaries is provided for in Article 12g of Regulation No 806/2014 solely as a means of complying with an internal MREL, and that the condition that a guarantee is provided does not appear in Article 12h of that regulation in the context of a waiver, contrary to what was provided for by the legislature in Directive 2014/59. ( 4 ) Thus, the possibility of obtaining a waiver under the provision concerned cannot in any way be made conditional upon the requirement of a collateralised guarantee similar to that provided for in Article 12g(3) of the same regulation. An approach to the contrary would render the provision concerned wholly ineffective and would thus constitute a flagrant infringement of that provision.

However, the Court considers that it cannot be inferred from the contextual interpretation of the provision concerned that the failure to mention a guarantee in the provision relating to the examination of an application for waiver of the internal MREL ( 5 ) prevents ipso jure the SRB from imposing a requirement of that kind in the context of that examination. Thus, while the SRB is obliged to refuse a waiver application if one of the cumulative conditions laid down in the provision concerned is not satisfied, it does, nevertheless, enjoy a margin of discretion to determine under which circumstances the third of those conditions, concerning the lack of any impediment to the prompt transfer of own funds, is satisfied. Accordingly, it cannot be ruled out, having regard to that discretion, that the SRB may be justified in requiring a guarantee – which is different from that provided for in Article 12g(3) of Regulation No 806/2014 – so as to counteract any impediment to the prompt transfer of own funds.

Lastly, on the basis of a teleological interpretation of the provision concerned, the Court notes that the primary objective common to Regulation No 806/2014 and Directive 2014/59, which is pursued by the legislature by imposing the MREL on all of the institutions in a banking group, is to ensure effective resolution with a minimum detrimental impact on the real economy, the financial system and the public finances. Thus, when the SRB examines an application for waiver of the internal MREL, it falls to it to assess whether there are other arrangements which could act as functional substitutes for the internal MREL. Within the context of its discretion, there is nothing to prevent it from considering that, according to the circumstances specific to each waiver application, a guarantee is necessary in order to satisfy the condition that there is no impediment to the prompt transfer of own funds. However, it may not require a guarantee which is similar in characteristics to that provided for in Article 12g(3) of Regulation No 806/2014.

In that regard, the Court states that it is not apparent from the contested decision that the SRB required the banking group concerned to provide a guarantee corresponding to, or having characteristics similar to, that provided for in Article 12g(3) of Regulation No 806/2014, nor, a fortiori, that the Appeal Panel endorsed such an approach by the SRB.

In the second place, with regard to the examination by the Appeal Panel solely of the pleas raised before it, the Court recalls, as a preliminary point, that, under Regulation No 806/2014, ( 6 ) any natural or legal person may bring an appeal before the Appeal Panel against a decision of the SRB, that the appeal is to state the grounds upon which it is based, and that it falls to the Appeal Panel to decide upon that appeal. It follows from the foregoing that the Appeal Panel is to examine the pleas raised before it. Furthermore, the Court observes that the arguments raised by the appellant before the Appeal Panel in support of its first plea did not concern the substantive assessments made by the SRB concerning the 2014 and 2015 guarantees upon which the banking group concerned relied to argue that the condition that there is no impediment to the prompt transfer of own funds was met. The arguments in question concerned the alleged error in law committed by the SRB because it exceeded its powers by applying automatically a condition not contained in Article 12h of Regulation No 806/2014.

Therefore, the Court takes the view that it was for the Appeal Panel to verify that the assessment made by the SRB was not a disguised examination in abstracto of the 2014 and 2015 guarantees, but rather a credible examination in concreto of the situation of the banking group concerned and of those guarantees put forward in support of its waiver application, and that the limits on the SRB’s margin of discretion had thus been observed. The Court therefore dismisses the complaint that the pleas and arguments raised by the appellant before the Appeal Panel, based on the error in law allegedly committed by the SRB because it incorrectly applied the provision concerned and exceeded the limits of its powers, should have necessarily led the Appeal Panel to examine whether the SRB was justified, in the light of all the relevant evidence in the present case, in requiring a specific guarantee.

Lastly, as regards the breach of the principle of legal certainty, the Court observes, first, that Article 12h(1)(c) of Regulation No 806/2014 cannot be required to set out the various specific hypotheses in which the condition laid down in that provision is or is not satisfied, given that not all those hypotheses can be determined in advance by the legislature. It is impossible to list the examples of impediments to the prompt transfer of own funds, just as the legislature cannot be required to set out positively the measures which would ensure compliance with the condition that are no such impediments. Second, the principle of legal certainty does not preclude the authorities concerned from having some discretion in the application of the criteria determined by the legislation. In the present case, the fact that the SRB enjoys a degree of discretion as to whether there is an impediment to the prompt transfer of own funds or as regards the appropriate manner in which that condition is to be satisfied does not mean, however, that there has been a breach of the principle of legal certainty.

( 1 ) Decision No 3/2021 of the Appeal Panel of the Single Resolution Board (SRB) of 8 June 2022 dismissing the appeal lodged against Decision SRB/EES/2021/44 of 4 November 2021 determining the minimum requirement for own funds and eligible liabilities (‘the contested decision’).

( 2 ) 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), as amended by Regulation (EU) 2019/877 of the European Parliament and of the Council of 20 May 2019 (OJ 2019 L 150, p. 226).

( 3 ) Decision SRB/EES/2021/44 of the Single Resolution Board of 4 November 2021.

( 4 ) 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), as amended by Directive (EU) 2019/879 of the European Parliament and of the Council of 20 May 2019 (OJ 2019 L 150, p. 296).

( 5 ) That is to say, Article 12h(1) of Regulation No 806/2014.

( 6 ) See Article 85(3) and (4) of that regulation.