7.3.3 Judicial protection against decisions of authorities

Under the State aid regime for the banking sector, the judicial protection against decisions in respect of restructuring is pretty straight forward. If a beneficiary bank is unhappy with the restructuring obligations as part of the State aid approval, it can challenge the Commission's decision in the EU Courts.1

Judicial protection has become more complicated with the introduction of the resolution framework, as new authorities with decision-making powers in respect of the restructuring of a bank have been introduced as a result thereof. First, these are the authorities that have decision-making powers in respect of the decision to put the bank in resolution. These are under the SRM: (i) the ECB, in respect of the assessment whether a bank is failing or likely to fail (FOLTF), (ii) the SRB, in respect of the assessment whether the bank should be put in resolution and if so, in respect of the adoption of the resolution scheme, (iii) the national resolution authorities, in respect of the implementation of the resolution scheme, and (iv) the Commission and the Council, in respect of endorsement of the resolution scheme. When resolution takes place within the SRM, but in respect of those ‘less significant’ banks and banking groups that are not directly supervised by the ECB or are not pan-European banking groups, the national competent authorities make the FOLTF assessment and the national resolution authorities assess whether the bank should be put in resolution and, if so, adopt and implement the resolution decision (unless the resolution involves the use of the SRF).2 The national resolution authorities closely coordinate with the SRB when taking these measures. Outside the SRM, the decisions are also made by the national competent authorities and resolution authorities. In that case, there is no involvement of the SRB or the ECB. The Commission is only involved as State aid authority.

In addition, the resolution framework provides for authorities that have decision-making powers in respect of the restructuring process that follows when the bail-in tool is applied as a going concern solution. Within the SRM, the business reorganisation plan is approved by the national resolution authorities, where applicable with the endorsement of the SRB.3 Outside the SRM, the business reorganisation plan is approved by the national resolution authorities, without any involvement of the SRB.4

The resolution framework also provides for authorities that have decision-making powers in respect of ex ante restructuring. The competent authority, whether this is the national competent authority or the ECB, can direct a bank to take certain measures in case a revised recovery plan does not adequately remedy the deficiencies or potential impediments identified and a bank fails to make changes in that respect. In addition, the national resolution authority, where applicable on the instruction of the SRB, can take alternative measures to remove impediments to resolvability.

As a result of all these authorities with decision-making powers in respect of the restructuring process of a bank, the bank can be faced with numerous decisions, both from national and European decision makers. If a bank is unhappy with its restructuring process, it may therefore be necessary to start legal proceedings, both at national and European level.

At European level, this is only possible where these decisions are reviewable acts within the meaning of Article 263 TFEU.5 Recital (88) BRRD states that decisions taken by the resolution authorities should be subject to a right of appeal. In the case of ABLV Bank, the GC judged that the FOLTF assessment made by the ECB is considered to be a preparatory measure which does not change the bank’s legal status. The FOLTF assessment is considered a factual assessment conducted by the ECB as to whether the bank is failing or likely to fail, which is in no way binding but which constitutes the basis for the adoption by the SRB of resolution schemes, or decisions establishing that resolution is not in the public interest.6 As a result, the FOLTF assessment cannot be challenged – independently of any SRB decision – before the EU Courts. In the author’s view, this judgment, although it may channel legal actions, deserves a critical attitude from a judicial protection perspective. At the time of writing this dissertation, it is still to be seen whether this judgment will be upheld by the ECJ.7

In respect of the decision of the competent authority to take measures in respect of a recovery plan, the BRRD states that this decision should be subject to a right of appeal.8 In respect of the decision to impose alternative measures, the BRRD also provides that this decision should be subject to a right of appeal.9 In addition, the SRMR provides that the decision of the SRB to instruct a national resolution authority to take alternative measures is subject to review by the Appeal Panel of the SRB.10

In respect of the business reorganisation plan, the resolution framework does not provide any guidance as to the judicial protection against the decisions by the SRB and the national resolution authorities. The question is whether this SRB decision is a reviewable act. In the author’s view, this decision should be considered a reviewable act as it produces legal effects that are binding on and capable of affecting the interests of the individual bank subject to the restructuring measures included in the business reorganisation plan. It may, however, be that the endorsement of the business reorganisation plan is considered a preparatory step towards adoption of the resolution scheme. In that case it may be that the endorsement itself is not considered a reviewable act. Whether or not claims from individual banks against reviewable acts are admissible before the EU Courts depends on whether the relevant decision is addressed to them and, if not, whether they meet the requirements of Article 263(4) TFEU.

Whether or not judicial protection is available against decisions taken by national authorities depends on the national procedural formalities, albeit that the BRRD requires Member States to provide for this in certain cases.

Table 14 provides a summary of the different authorities that can take decisions and the (potential) judicial protection that is available.