Good administration for whom, by whom? The right to be heard and the right of access to files in resolution matters, by J Reichel

In all five cases on the Banco Popular resolution (T-481/17, T-510/17, T-523/17, T-570/17, and T-628/17), the applicants argued that their right to some aspect of good administration in Article 41 of the EU Charter of Fundamental Rights (CFR) had been infringed: the duty of care, the right to be heard, the right of access to files, or the right to reasoned decisions. The cases were a golden opportunity for the General Court to clarify (at least) two aspects of the principle of good administration: the sphere of application ratione personae for the two participation rights – the right to be heard and the right of access to files – and the allocation of the responsibility to uphold the principle when multiple administrative bodies collaborate in preparing a matter. Regrettably, the Court did not seize this opportunity.

A first, somewhat simplistic observation is that there is no Administrative Procedures Act in EU law. The right to good administration is guaranteed as a fundamental right in the CFR, codifying the general principle developed in the case law of the Court of Justice, and to a lesser – and often somewhat random – extent in secondary law. For example, the Single Resolution Mechanism (SRM) Regulation contains no right to be heard, and a rather limited right of access to files. Since EU institutions and agencies only rarely enact decisions in individual cases, case law on the application of the right to good administration at the EU level is scarce and encompasses a limited range of cases. Though Member States are obliged to apply the principle of good administration (but not Article 41 CFR per se) when implementing EU law, the Court of Justice has given the Member States ample space to adapt the principle to national traditions. The EU right to good administration, therefore, remains rather fuzzy in both contents and field of application.

The institutional setting of the SRM is complex. Multiple administrative bodies, at both the national and the EU level, participate in preparing a resolution: the European Central Bank, the national resolution authority, the Single Resolution Board, the Commission, and – in some cases – the Council. Matters involve complex economic assessments, where the EU institutions have quite some room for discretion. From an administrative procedural law point of view, the situation is far from ideal. Moreover, since the Court found that it should apply only a limited review to the substance of the matter, the review of the compliance with administrative procedural rights guaranteed by EU law ought to be central, in accordance with the TU München doctrine.

Good administration for whom?

One question is who may rely on the right to be heard and the right of access. The Court was not entirely clear on this matter, meaning that the answer is not as coherent as one might have expected or wished. The two rights are listed in Article 41(2) (a) and (b) CFR and are closely interconnected. Both relate to the possibility for a person to participate efficiently in an administrative proceeding before a decision is made by an authority, by being given access to information and documentation gathered during the preparation of a matter. Where the right of access to files is to be claimed by the person themself, the right to be heard is to be provided by the authority, which should offer the person the possibility to make their views on the matter known within a reasonable amount of time. In the Banco Popular cases, the applicants were considered to be entitled to a right to be heard under Article 41(2)(a) CFR, even though the right in the specific case was “subject to justified and necessary limitation meeting an objective of a general interest in accordance with Article 52(1) CFR”, (T-481/17, p. 242; T-510/17, para 436; T-523/17, para 493; T-570/17, para 387; T-628/17, para 168). The Court found a range of reasons why the applicants were not able to rely on the right of access to files, most importantly that said right applies only to those who are directly targeted by an administrative measure (T-481/17, para 329; T-510/17, para 463; T-570/17, para 503). The result in the individual case was the same: no access to either right. But why are these two parts of the principle of good administration given different spheres of application ratione personae? Is it reasonable that a person who is involved enough to have a right to appeal a decision under Article 263 TFEU and a right to be heard, cannot rely on the right of access to files?

One relevant difference may be that the SRM regulation does not include a right to be heard for anyone, whereas Article 90(4) includes a right of access to files for the targeted bank. In assessing the applicants’ right to be heard, the Court made an in-depth analysis of the relevant criteria in Article 52(1) CFR, taking into account case law from both the Court of Justice and the European Court of Human Rights regarding participation rights under the European Convention of Human Rights. The conclusion was that the granting of a right to be heard to a wide circle of persons – such as the shareholders and creditors of Banco Popular – would undermine the objectives of protecting the stability of the financial market, the continuity of the targeted bank’s critical functions, and the requirements of speed and effectiveness in the resolution procedure. The very same reasons would constitute a legitimate reason to accept the limited right of access to files in Article 90(4), thereby upholding the symmetry in the sphere of application of the two rights. Of course, it does not aid clear and consistent interpretation of the right of access to files that have been included in an Article of the SRM Regulation dealing with the general right to access documents under the Transparency Regulation. The right to access to documents is a democratic right for all union citizens, guaranteed in Article 15 Treaty of the Functioning of the European Union and Article 42 CFR, which is not connected to the preparing of an administrative matter. This seems to have confused some applicants, who refer to the two rights without clear distinction (T-481/17, para 334-35). The EU legislator ought to be more careful in how the participation rights in the principle of good administration are represented in secondary law.

Good administration by whom?

Another matter is the ambiguity regarding which body in the extensive line of entities involved that is responsible for ensuring that the right to good administration is applied. Depending on how the procedure is viewed – as one integrated procedure that the Commission finalizes or as a series of procedures where different entities play distinct roles – the possibility for a court to review the application of the right to good administration will differ. The Court is not entirely clear on this matter, discussing only the obligation to uphold the various aspects of good administration vis-à-vis the Commission. Regarding the duty of care, Article 41(1) CFR, and the duty to respect confidentiality and professional secrecy, the Court held that the alleged leak did not emanate from the Commission, wherefore the potential infringement was not relevant when assessing the legality of the Commission’s decision (T-570/17, para 182). Though there can be sound reasons for not holding one administrative body responsible for the transgressions of others, the possibility for individuals and companies to secure their right to good administration would be seriously undermined if this position were taken too far, as pointed out by Karagianni. Especially in a case like this, where the Commission defended itself from the accusation of merely having “rubber stamped” the decision of the Board, assuring that it had been closely involved in the investigation from the start (T‑510/17, para 242), the Commission can hardly wash its hands of possible infringements of the principle of good administration committed by the Board. In its earlier case law, the Court has held that in composite procedures with national authorities involved, where the final decision is enacted by an EU institution, the responsibility to ensure that good administration is upheld ultimately falls on the latter (T-346/94, para 30, T-42/96, para 86).

The more elaborate and complex the EU administrative structures get, with composite decision-making involving European and national administrative bodies, the more essential it is to ensure that administrative procedures satisfy not only the interest of efficiency, but also legal certainty, transparency, and good administration. In other words: the rule of law. This is relevant not only for financial market law but also for EU administrative law in general. Today, decisions on negative fit-for-purpose tests, administrative sanctions, taxation, and transfers of asylum seekers are made in composite procedures, without secondary law prescribing how the principle of good administration is to be satisfied. EU courts could do better in critically assessing not only the actions or inactions of individual institutions or agencies but also the functionality of the procedural set-up as such.

Posted by Jane Reichel, Professor in Administrative Law, Faculty of Law, Stockholm University

Suggested citation: J Reichel, “Good administration for whom, by whom? The right to be heard and the right of access to files in resolution matters”, available at