2.5.6 Critical remarks with respect to the ESMA regulation

The regulation neither specifies which law applies when ESMA adopts an individual decision addressed to a market participant nor provides how ESMA can enforce these decisions. Neither the ESMA regulation nor the explanatory memorandum provides an answer to the question of whether ESMA can adopt and enforce its individual decisions addressed to financial market participants operating in the Member States on the basis of the proposed regulation or on the basis of the national legislation that provides the national competent authority the power to take and enforce decisions imposing obligations on financial market participants. In order to ensure that ESMA would have the power to address financial market participants in an emergency situation, the European Parliament Committee on Economie and Monetary Affairs in its first report1 on the Commission Proposal Regulation ESMA to the European Parliament proposed adding the following amendment:

Unfortunately, this proposed amendment was not adopted by the European Parliament and the Council. It should have guaranteed an adequate legal basis, given the fact that the provisions of the ESMA regulation are directly applicable, for ESMA's power to enforce its decisions addressed to financial market participants in the national courts.

Furthermore, the ESMA regulation does not specify which (administrative or procedural) law is applicable when ESMA adopts an individual decision regarding a market participant and which (administrative or procedural) law has to be applied in the enforcement proceedings before the national courts. In principle, regulations such as the ESMA regulation have direct legal effect with respect to all individuals concerned. However, the provisions in the ESMA regulation restrict ESMA's power to adopt decision relating to financial market participants on requirements laid down in, for example, the Prospectus Directive that are directly applicable. Even though the provision to provide information that is necessary to enable investors to make an informed investment decision might be directly applicable,3 ESMA has to make use of the powers granted to the national competent authorities by national legislation because the ESMA regulation does not provide for an administrative procedure. It is plausible that national administrative laws and legal principles apply to the individual decisions taken by ESMA with respect to financial market participants.

The ESMA regulation does not provide for rules on the conduct of ESMA proceedings.4 The ESMA regulation does not provide for extensive judicial safeguards in the administrative procedure arising between the financial market participant and ESMA when ESMA takes a decision addressed to this financial market participant. Article 39 of the regulation merely prescribes that ESMA has to inform the market participant of its intention to adopt a decision and set a time limit within which the financial market participant may express its views on the matters.5 Furthermore, the decisions of ESMA have to state the reason on which they are based and inform the addressees of the legai remedies available.6 The market participant has the right to appeal against decision of ESMA.7 If the appeal is admissible, the independent Board of Appeal will examine whether the appeal is well founded; ESMA will be bound by the decision of the Board of Appeal.8 The individual market participant has a right to bring an action against the decision of the Board of Appeal before the European Court of Justice.9