Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.9.1.2:4.9.1.2 Legal proceedings before national courts

Public funding of failing banks in the European Union (LBF vol. 19) 2020/4.9.1.2

4.9.1.2 Legal proceedings before national courts

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

Pursuant to Article 85 BRRD, Member States have to provide for a right of appeal against the decision by a national resolution authority to take a crisis prevention measure, the decision to exercise any power other than a crisis management measure, and the decision to take a crisis management measure (such as the decision to put a bank in resolution). These decisions are addressed to the banks in relation to which the measures are adopted or powers are exercised. Standing before national courts depends on national law.

An example of legal proceedings before a national court against a decision of a national resolution authority can be found in the legal action that has been started by bondholders of BES against the Banco de Portugal after they were retransferred from Novo Banco (the good bank) to BES (the bad bank) thereby effectively wiping out the value of the bonds.1

In respect of the review of a decision to take a crisis management measure, Member States have to ensure that the review is expeditious and that national courts use the complex economic assessments of the facts carried out by the national resolution authority as a basis for their own assessment.

Crisis management measures taken by national resolution authorities may require complex economic assessments and a large margin of discretion. The national resolution authorities are specifically equipped with the expertise needed for making those assessments and for determining the appropriate use of the margin of discretion. Therefore, it is important to ensure that the complex economic assessments made by national resolution authorities in that context are used as a basis by national courts when reviewing the crisis management measures concerned. However, the complex nature of those assessments should not prevent national courts from examining whether the evidence relied on by the resolution authority is factually accurate, reliable and consistent, whether that evidence contains all relevant information which should be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn therefrom.2

The lodging of an appeal against a decision to take a crisis management measure does not entail any automatic suspension of the effects of the challenged decision. The decision of the national resolution authority shall be immediately enforceable and it shall give rise to a rebuttable presumption that a suspension of its enforcement would be against the public interest.3

Where it is necessary to protect the interests of third parties acting in good faith who have acquired shares, other instruments of ownership, assets, rights or liabilities of an institution under resolution by virtue of the use of resolution tools or exercise of resolution powers by a resolution authority, the annulment of a decision of a resolution authority shall not affect any subsequent administrative acts or transactions concluded by the resolution authority concerned which were based on the annulled decision. In that case, remedies for a wrongful decision or action by the resolution authorities shall be limited to compensation for the loss suffered by the applicant as a result of the decision or act.4

Recognition of national resolution measures

The cross-border effect and recognition of national measures implementing a resolution scheme, as well as the recognition of national resolution measures taken by national resolution authorities, is governed by Article 66 BRRD and the Reorganisation and Winding Up Directive. Article 66 BRRD provides that Member states shall ensure that shareholders, creditors and third parties that are affected by the transfer of shares, other instruments of ownership, assets, rights or liabilities under the law of a Member State other than the Member State of the resolution authority or of assets located in another Member State are not entitled to prevent, challenge, or set aside the transfer under any provision of law of this Member State.

This provision was discussed by the Supreme Court of England in the case that Goldman Sachs brought against Novo Banco in relation to the Oak liability before that court based on the jurisdiction clause in the facility agreement between BES and Oak Finance.5 In a judgment of 4 July 2018, the Supreme Court of England assessed that Article 66 BRRD is limited to preventing challenges of ‘transfers’. It was therefore not applicable in the case of Goldman Sachs against Novo Banco, because the Oak liability had never been transferred. However, it assessed that Article 3 of the Reorganisation and Winding Up Directive requires the recognition of the entire process of reorganization under the BRRD as a result of which an English court was bound to recognise the effect of decisions taken by the Portuguese resolution authority as a matter of Portuguese law as a result of which the Oak liability had not been transferred. Novo Banco therefore never was party to the jurisdiction clause on the basis of which the English courts had jurisdiction. 6 This is important case-law in respect of the recognition of bank resolution measures originating in another Member State.

Lastly, Member States have to ensure that, if necessary for the effective application of the resolution tools and powers, resolution authorities may request the court to apply a stay for an appropriate period of time in accordance with the objective pursued, on any judicial action or proceeding in which a bank in resolution is or becomes a party.7 In addition, Member States have to ensure that normal insolvency proceedings may not be commenced against the bank in resolution, except at the initiative of the resolution authority. A decision placing a bank into normal insolvency proceedings may only be taken with the consent of the resolution authority.8

Deze functie is alleen te gebruiken als je bent ingelogd.