The Banking Union, incl. the SRM framework, has been highly criticised by economists, politicians and legal experts for being considered flawed, incomplete and institutionally complex. This criticism is expected since the Banking Union is one of the most drastic redistributions of competences from the national to the EU level in recent decades. This criticism led to uncertainty as to the functioning of the entire Banking Union, creating distrust among investors and hurting the banking sector.
This is the last blog post of a series on the General Court’s five pilot cases of June 1st, 2022. The cases concerned the first-ever banking resolution conducted by EU actors in which the EU Court dismissed these annulment actions in their entirety. The seven preceding blog posts were dedicated to the analysis of the recent case law from the General Court of the European Union, i.e. cases T-481/17, T-510/17, T-523/17, T-570/17 and T-628/17 (out of almost 100 (!) cases initially lodged against Banco Popular’s 2017 resolution 2017). Banco Popular was a so-called ‘significant’ Eurozone bank. Its collapse was considered to undermine financial stability in the Eurozone. Consequently, it had to be resolved at the EU level under the Single Resolution Mechanism (SRM) instead of going into liquidation under Spanish insolvency proceedings.
This concluding post highlights the most relevant findings of the seven eminent contributors sharing their analysis of these cases. To do so, six main findings will be distilled which are all linked to the SRM’s complex administrative procedure involving several authorities posing challenges to the stability of the Banking Union, to EU administrative law and the EU constitutional order as a whole. The overarching conclusion flowing from the analysis of these cases is that while the General Court has strengthened the role and credibility of the SRM ‘s and SRB’s framework as well as confirming the functioning of the Banking Union as a whole, it has been protective of the SRB, wanting to safeguard the effectiveness of its operations. Additionally, the General Court’s judgments are a welcome development in terms of legal certainty and access to justice for other analogous acts by EU agencies and bodies, confirming the significant role of Article 47(1) of the Charter in the development of EU administrative and constitutional law. Regrettably, these judgments on the one hand, still leave many crucial issues unresolved or only further added to the existing confusion, and on the other hand, are a reinforcement of the ‘agentification’ trend which is contributing to the EU’s perceived democratic deficit.
2. Judicial Review of an SRB Decision? A Matter of Producing External Legal Effects and the Substance of the Act Interpreted in Light of the Right to Effective Judicial Protection in EU Law
After Banco Popular’s resolution, considerable doubt existed against which decision (the agency’s or the Commission’s decision) an action for annulment could be brought before the CJEU under Article 263 TFEU. This was exemplified by the fact that in the almost 100 cases lodged, some applicants only lodged actions against the SRB, others only against the Commission, and others against both. As noted by Lanceiro, the complexity of the question stems from the SRM’s legal framework and the changes to Article 263 TFEU brought about by the Lisbon Treaty. The SRM’s founding regulation namely states that proceedings may be brought against decisions of the SRB. It could be argued that its drafters must have had in mind that the SRB’s adoption of a resolution scheme must create external legal effects. In these pilot cases it had accordingly been argued (e.g. para 107, T-481/17) that only the Commission endorsement brings about ‘definitive legal effects’, following the statement in Article 18(1) of the SRM Regulation that if there is no objection by the Council or the Commission within 24 hours, the SRB’s resolution scheme, enters into force. The EU institutions argued that review of the SRB decision is not possible as it should be considered a mere preparatory act. The General Court disagreed and stated that (e.g. para 149, T-481/17) action may be brought against the SRB decision alone. It was unlikely that the Court would go against the literal wording of Article 86 SRM Regulation and thus it explained that the SRB decision ‘intends to produce legal effects’ (paras 114, 117, 120, T-481/17). Accordingly, action must be able to be brought against the SRB decision so as not to violate the SRM regulation and the principles of legal certainty and effective judicial protection. Persons affected by the SRB resolution decision cannot be subject to a condition for the admissibility of their action which is not expressly provided for (para 147, T-481/17). The General Court clarified that in any case, even in the hypothetical situation where we would not have an EU institution’s endorsement or objection within 24 hours, action can be lodged against the SRB decision since, given its substance, a resolution scheme produces binding legal effects (para 120, T-481/17). Additionally, Lanceiro noted that the General Court’s judgment presents a contradiction in that it, on the one hand, stated that the SRB’s decision is reviewable because it produces legal effects, but on the other hand explained that it is not able, independently, to produce the said effects. This contradictory constellation might be explained because obligatory endorsement by an EU institution is necessary in order to avoid a ‘genuine shift of responsibility’ following the Meroni doctrine. Chamon highlighted that the General Court noted that the Commission’s approval was solely aimed at ensuring compliance with the Meroni doctrine since this approval ensures that the Commission takes political responsibility for the resolution scheme’s discretionary aspects. Lanceiro explained that there might have existed another way of going about this legal issue. Article 86 SRM Regulation could also be read as saying that decisions of the SRB can be reviewed (only) if the conditions in Article 263 TFEU are met, namely if the legal act in question produces legally binding external effects. Only invoking Article 86 might not be enough (and might even be accused of overstretching the letter of the law) to justify the decision to accept the SRB’s decision as reviewable and therefore, Article 86 should be read together with Article 263 TFEU.
3. Still No Liability for the Resolution of Banks under the SRM
Nicolaides explained that while the case law on the EU Banking Union is expanding rapidly, issues, such as the liability for the resolution of banks remain unsettled. Since the start of the 2008 financial crisis, no investor, holder of bank shares or sovereign bonds has managed to persuade EU courts that EU institutions or agencies were liable for the damage they suffered. The case law holds that investors bear the risk and the consequences their investment in shares or bonds entail and that it is their unfortunate fate that the entire invested amount might be lost. While claimants have managed to persuade EU courts that Article 340 TFEU covers not only the seven EU institutions but all institutions, agencies and entities of the EU, so far no one has been able to demonstrate that any of those actors acted illegally or beyond its mandate. The causal link between the institution’s actions and the damage has never been proven because there is always an intermediary national authority implementing the resolution at the national level. Even in the case of SRB decisions which are extremely detailed and might arguably not leave much room for discretion for the national authority, the national authorities have always been the ones to bear potential liability. But while the national authorities bear potential liability, they can also escape liability since the right to property is not absolute (see below). It is thus not surprising that the General Court rejected the appeals in all five cases, given the overwhelming predisposition in the case law in favour of public authorities. The real issue for the EU, however, is that in the system it has established for banks, liability has become and remains, quite intangible. There is an element of inherent and unavoidable subjectivity in the complex tasks of the valuation and assessment of a bank’s prospects. The General Court (in line with the previous case-law) held that to prove that the SRB committed a manifest error, its conclusions had to be ‘implausible’ (paras 105-108, T-570/17). Proving implausibility is rather unlikely and it is moreover, near impossible to show that the Commission thoroughly assessed the SRB’s reasoning process and verified that the conclusions of the decision flowed from its underlying assumptions. In principle, the SRB’s liability is circumscribed by the extent of any discretion that remains with the national authorities. Nicolaides showed how this adds to the burden of the applicants in that they also have to disentangle the issues ultimately dictated by national authorities from those that are dictated by the SRB (para 416, T-510/17).
4. Referential Reasons-Giving and Limits to the SRB’s Power
Brito Bastos explained that the legal issue concerning the duty to state reasons in the pilot cases relates to the ‘referential statements of reasons’. Rather than setting out itself (in casu, the Commission) the reasons for the decision it takes, it pointed out the reasons contained in prior (often preparatory) acts (in casu, the SRB’s resolution scheme). The claim was that by simply agreeing with the scheme, the commission breached the obligation to state reasons but also that referential statements of reasons might be difficult to align with the Meroni doctrine. The General Court argued that since the commission did refer to the reasons cited by the SRB and only if it would object to the scheme, would it have to explain its views. Delegating discretionary choices of economic policy (such as those involved in a resolution scheme) to Union agencies (such as the SRB), without the competent Union institutions (the Commission or Council) having the final word, would amount to absolving the latter from the legal and political responsibility which, according to the Treaties, should belong to them. For that reason, referential reasons-giving in administrative procedures involving Union agencies raises constitutional issues that would not arise in administrative procedures which exclusively involve Union institutions – and indeed, which would not arise in purely national administrative decision-making either. As highlighted by both Nicolaides and Brito Bastos in their posts, it is (especially in a context where the Commission decision was taken within an hour) near impossible to assess whether the Commission actually exercised its endorsement power or merely rubber-stamped the SRB’s resolution scheme. For Brito Bastos, the failure of an EU institution to sufficiently explain how it analysed the assessment contained in the agency’s acts, or to justify why it agreed with such assessment, constitutes a violation of the duty to give reasons. The urgency of the decision, however, may ease the need for extensive reasons but at least some explanation as to why a decision is so very urgent, might be required.
5. Overriding the Rights to Be Heard, to Property and the Right of Access to Files in Resolution Matters
In all five cases, the applicants argued that their right to some aspect of good administration in Article 41 CFR had been infringed. The General Court explained that the SRB has so-called ‘technical discretion’ implying that the limited review for administrative discretion should be conducted. The General Court stated that this is justified by the complexity of the economic, legal and political assessments the SRB has to make. Reichel explained that since it should apply only a limited review of 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. The General Court decided that the applicants had no right to be heard and no right of access to files. However, these two parts of the principle of good administration are given different scopes of application ratione personae by the Court. The General Court argued that the right to be heard can be overridden because a resolution has to be affected quickly to prevent contagion and in light of protecting the stability of the financial market. In comparison, the right to access to files could not be relied upon altogether. In the pilot cases there existed ambiguity concerning the allocation of responsibility for ensuring that the right to good administration is applied. Reichel explained that especially in a case where the Commission is accused of merely having rubber-stamped the SRB’s decision, it can hardly wash its hands of possible infringements of the principle of good administration committed by the SRB. The right to good administration would be seriously undermined if such a position were taken too far.
With regard to the principle of proportionality, the Court reasoned that the object of the applicants’ property rights was shares that had no market value because they were shares of a failing bank for bankruptcy. From this perspective, there was no loss of economic value for which the applicants could seek compensation. Praduroux noted that this approach is largely in line with the previous case-law. By stating that the shareholders must bear the risks of their investments as well as the economic consequences of its possible failure (para 495, T-570/17), the General Court ruled out compensation under Article 17 CFR.
6. Evolution of the CJEU’s Non-Delegation Doctrine
Chamon argued that the Banco Popular judgments have clarified the non-delegation doctrine also referred to as the Meroni doctrine by showing how the doctrine has been fundamentally deconstructed, how the EU Courts are still in the phase of reconstructing a new non-delegation doctrine, and lastly how this new upcoming doctrine may be applied in future cases. The main criticism consisted of the argument that the Commission violated the doctrine because it had insufficiently evaluated the discretionary aspects of the SRB’s decision before endorsing it. According to Chamon’s reading of the Banco Popular judgments, the General Court held that Article 18(7) SRM Regulation requires an explicit endorsement by an EU institution thereby citing inter alia, the intention of the legislature to entrust the resolution policy to the Commission or Council, in line with Meroni (and excluded the possibility of a silent endorsement). To be in line with Meroni, the Commission must have assessed the discretionary aspects of the SRB’s decision and is under an obligation to effectively review the scheme, since otherwise, it would delegate powers in breach of Meroni (paras 121-123, T-570/17). Lanceiro explained that because of the amendment introduced in Article 263 TFEU allowing judicial review of EU agencies’ acts with legally binding external effects, the argument that significant decision-making powers should remain in the hands of the Commission to allow access to judicial review, lost its basis. The General Court considered the regime in Article 18 lawful and Meroni-compliant. Here again, the contradiction resurfaces that on the one hand, the regime is lawful because the Commission’s endorsement is essential and without it, the scheme does not produce effects and can thus not be judicially reviewed, while, on the other hand, the General Court explains that the Commission’s decision does not replace the SRB decision and that the SRB decision can be reviewed independently of the Commission’s decision. As Lanceiro pointed out, it is interesting that under the SRM’s resolution procedure (Article 18), the Commission plays a more limited role than is usually reserved by EU administrative procedures. The General Court downgraded the Commission’s endorsement to a ‘condition’ for the SRB’s decision to produce effects. This is interesting in light of Article 18(7) SRM Regulation which seems to admit the entry into force of the SRB’s decision without an express endorsement by the Commission. Lanceiro, contrary to Chamon, however, is of the view that the pilot cases have not answered the question of whether a ‘silent’ or ‘tacit’ endorsement would be Meroni-compliant or whether the Meroni doctrine demands an express decision by the Commission.
It is moreover important to note that the General Court argued that the Short-selling case law did not apply to the SRB’s powers to write down or convert and the power of ‘sale of business tool’ (Articles 21 and 24 SRM Regulation) since no autonomous powers are delegated to the SRB in the sense of Meroni (paras 146-148, T-628/17). The Court, however, could alternatively have ruled that the Meroni doctrine is not applicable in casu and that any power granted to the SRB should only be checked in light of the Short-selling case.
In the Banco Popular cases, the General Court uses the Commission’s observer status and the fact that it is kept informed of all developments and various previous drafts of the SRB’s scheme, as justification for the legality of the resolution scheme while as Chamon explained the same institutional constellation in Meroni failed to save the legality of the equalisation scheme for scrap metal. Difference in both cases was that in Meroni the High Authority (predecessor of the Commission) explicitly refused to take responsibility for irregularities committed by the agencies while in Banco Popular the Commission insisted on the SRB’s scheme being imputed to it, which the General Court refused. As Lanceiro explained since the changes brought about by the Lisbon Treaty to Article 263 TFEU EU agencies’ decisions, however, no longer need to be imputed to the Commission. Moreover, Chamon reminded us that since in Short-selling the ECJ considered the procedure to be followed, also the involvement of the Commission is an integral part of the Short-selling assessment. In Banco Popular it is unfortunate that the General Court incorrectly decided that the Commission delegated powers to the SRB whereas the opposite is true since EU agencies are public law bodies that are granted powers by the legislature (and not delegated powers from the Commission to a private law body which was the case in Meroni). Chamon argued that the interrelation between Meroni and Short selling by the General Court in casu, is untenable. In one of the cases, the Court explains that no autonomous powers in the sense of Meroni are conferred on the SRB, yet in another case, the General Court rejects the Commission’s plea of inadmissibility by noting that the SRB does have autonomous powers. This creates uncertainty as to the definition of the notion of ‘autonomous powers’. The Banco Popular cases substantiate the argument that the Meroni doctrine has been superseded by the Short-selling case law. In light of a reconstruction of a non-delegation doctrine for EU decentralised agencies, it would have been better had the General Court confirmed that the Meroni doctrine did not apply in casu, and that EU agencies’ powers should only be assessed in light of Short selling. What is more, the SRM’s resolution procedure would have passed the Short-selling test since the SRB’s powers under that procedure were precisely delineated. Now we are unfortunately left with the General Court’s suggestion that Meroni is still applicable and that it must be checked before pursuing the Short-selling assessment.
7. Strengthening the Institutional Position of the EU Resolution Authorities and the Institutional Framework of the SRM and the SRB
Markakis put forward that there are four principal ways in which the judgments strengthen the institutional position of the EU resolution authorities, as well as the institutional framework of the SRM and the SRB. First, it does so by stating that various provisions of the SRMR challenged by the applicants, were lawful. Second, confirming that Banco Popular’s resolution was lawful which is important since resolution actions were undertaken at the EU level by the SRB together with the Commission and/or the Council, are a rare species. Because Banco Popular was the very first resolution action by the SRB, the judgments gain particular importance in that regard. Third, the General Court set out its scope of review in the area of banking resolution and did not establish an area-specific standard of review tailor-made for the SRB or resolution action. As Markakis notes it will be a tough assignment for applicants to show that the SRB committed a manifest error in these types of cases. Fourth, these cases provided clarity for future resolution cases as regards the issues on the right to be heard and the ‘no creditor worse off’ principle in light of the right to property. As explained by Reichel and Praduroux (see point 5) the exercise of these rights may be subject to limitations and/or can be overridden by the resolution objectives pursued through the SRM framework.
Overall, the General Court has strengthened the role and credibility of the SRM framework and SRB. Moreover, as indeed pointed out by Markakis, the impression one gets from the pilot cases is that the General Court is being protective of the SRB and wants to safeguard the effectiveness of the SRB’s operations. Additionally, the General Court’s judgments are a very welcome development in terms of legal certainty and access to justice for other analogous acts by EU agencies and bodies, additionally confirming the significant role of Article 47(1) of the Charter in the development of EU administrative law. Regrettably, these judgments on the one hand, still leave many crucial issues unresolved or only further added to the existing confusion and on the other hand, are a reinforcement of the ‘agentification’ trend which is contributing to the EU’s perceived democratic deficit.
Unfortunately, as explained by Nicolaides, while we now have a system in which common rules are applied and enforced uniformly across the Eurozone, it is still not clear who is liable. The margins of the Commission’s duty to assess the SRB’s resolution schemes remain unsettled as well as the extent of the discretion of national authorities and the extent to which this makes them liable for implementing the SRB’s instructions. This impacts the institutional balance of the SRM and the European Banking Union as a whole.
Impacting further on the principle institutional balance, on the European Banking Union and EU administrative and constitutional law, are the numerous questions concerning the alignment of the ECJ’s infamous Meroni doctrine with the SRM’s institutional framework, of which the Banco Popular pilot cases permeate.
Firstly, the cases substantiate the claim that the Commission’s approval in the SRMR is effectively only aimed at securing compliance with Meroni since it ensures that the Commission takes political responsibility for the scheme’s discretionary powers.
Secondly, regardless of the previous finding, Lanceiro showed that the SRB decision also creates legal effects and can be judicially reviewed, since the wording of the SRMR provisions indicate that the SRB has autonomous powers in the resolution procedure and while the Commission has power to endorse or object, it cannot exercise the SRB’s powers in its place or instead of the agency (para 132, T-481/17).
Thirdly, on the question of a possible implied (or tacit) endorsement by the Commission of the scheme, as seemingly permitted by Article 18(7) of the SRM Regulation, there still seems to be unclarity as to the interpretation of the General Court’s judgments. Lanceiro explained that the Court left this question open, while Chamon argues that the General Court clarified that the SRB’s resolution scheme cannot enter into force by an implied endorsement and that the Commission’s agreement can thus not be assumed from its silence. The different conclusions seem to stem from the interpretation of para 123 of Case T-570/17 where the Court states the following: “If, (…), the resolution scheme entered into force following the Commission’s endorsement was not based on an assessment, but on a mere validation, that would have the consequence that the SRB assessed only the discretionary aspects involving a choice of economic policy and therefore of the need to implement the resolution, which would not be consistent with the principles laid down in (…) Meroni.” Again, it is unfortunate that the Court did not simply clarify, in plain, uninterpretable language, whether or not an implied endorsement is possible under the regulation.
Fourthly, since the ECJ’s 2014 Short-selling judgment it is not clear how the Meroni doctrine should exactly be applied to EU agencies. Unfortunately, the General Court might have further added to the confusion since in its 2019 ECHA ruling it decided that in Meroni we were dealing with a genuine delegation from the High Authority to two private law bodies, while we are currently dealing with EU decentralised agencies being public law bodies which are granted powers by the EU legislator. From the ECHA ruling, we could have distilled the conclusion that the Meroni doctrine would not apply to the SRB and that the SRB’s powers should only be assessed in light of the Short-selling ruling. Now contrary to its own ECHA ruling the General Court held that Meroni is still applicable and that it must be checked before pursuing the Short-selling assessment. Unfortunately, we are now left with case law from both EU Courts pointing in opposite directions. There is of course still the possibility that the ECJ in the appeal cases, dispels all doubts about the (non)-applicability of the Meroni doctrine to public law bodies so that a true reconstruction of a non-delegation doctrine for EU decentralised agencies can take place which would then be updated to the current constitutional framework of the Treaties.
Fifthly, the General Court thoroughly vetted the Commission’s claim that it was fully aware of all circumstances surrounding a potential resolution before deciding in less than one hour on the definitive resolution of a bank. This sets aside the criticism that the Commission would not be able to take an informed, substantiated stance on the SRB’s resolution scheme and that it did not discharge itself of its task of assessing and properly scrutinizing the discretionary aspects of the SRB’s scheme. This, however, still leaves unanswered the same question for the Council would it be asked to decide on a future resolution scheme. Nicolaides and Markakis, however, add to this that proving an error of assessment is rather unlikely since it is near impossible to show that the Commission thoroughly evaluated the SRB’s reasoning process and verified that the conclusions of the decision flowed from its underlying assumptions.
The rulings following Banco Popular’s resolution furthermore, appear to be the most developed analysis on referential reasons-giving in the CJEU’s case law to date. Brito Bastos argued that the cases illustrate well how tools of administrative procedure (which are broadly accepted in many national laws) may need to be adapted to the EU’s unique constitutional framework. While it thus seems that referential reasons-giving is perfectly admissible for the General Court when the Commission adopts a measure proposed by a Union agency, it remains to be seen whether laconic references to prior Agency measures will prove to be sufficient in future cases involving statements of reasons.
On the principle of good administration, Reichel explained that while these cases were a golden opportunity for the General Court to clarify, on the one hand, the scope of application ratione personae for the right to be heard and the right of access to files and on the other hand clarify, the allocation of responsibility to uphold the principle of good administration when multiple bodies collaborate in preparing a decision, the Court regrettably did not seize this opportunity. Additionally, in the Banco Popular cases an area-specific standard of review, tailor-made for SRB, has not been established and it seems that the General Court applied the same ‘standard of review test’ as in competition policy. Reichel questioned whether it is reasonable to hold that a person has the right to initiate action under Article 263 TFEU and a right to be heard – even though the right could not be exercised in this particular case – but no right of access to files. EU courts could and should do better in critically assessing not only the (in)actions of individual institutions or agencies but also the functionality of the procedural set-up as such.
The Court, furthermore, held that the essence of the applicant’s right to property was not impaired and thus took financial risks out of property rights protection under the CFR. Praduroux explains that this approach is in principle in line with the ECtHR’s jurisprudence which according to Article 52(3) CFR should guide the CJEU when interpreting and applying Article 17 CFR.
Since four out of the five pilot cases (no appeal is pending against case T-570/17) have been appealed to the ECJ, it remains to be seen whether the ECJ will be equally protective of the SRB and the SRM in light of the effective resolution and the overarching aim of guaranteeing the Eurozone’s financial stability.
Posted by Jolien Timmermans — PhD Researcher at the Ghent European Law Institute and coordinator of the REALawblog series concerning the 2022 Banco Popular cases.
I wish to express my gratitude for the fruitful collaboration and cooperation by all contributors to the series. I moreover, wish to express my sincerest gratitude to Yseult Marique for her continuous support and to Georgia Tuxford for her careful editing of the pieces.
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Suggested citation: J Timmermans, “Judicial Review of EU-level Resolution of a Systemically Significant Eurozone Bank by an EU Agency in the SRM – Concluding remarks to the blog series on the Banco Popular cases”, REALaw.blog available at https://wp.me/pcQ0x2-vw
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This text has been amended to clarify the discussion about the right to have access to files [14 November 2022].
 As recognized by the ECJ in Joined Cases C-551/19 P and C-552/19 P ABVL Bank and Others v ECB, para 66.
 Whenever the post refers to ‘action(s)’, this should be read as a reference to the action for annulment under Article 261 TFEU.
 Article 86 (1) and (2) SRM Regulation.
 The European Charter of Fundamental Rights.
 T-570/17 para 122: « Partant, la Commission doit avoir effectivement évalué des aspects discrétionnaires du dispositif de résolution avant son entrée en vigueur. À défaut, comme le font valoir les requérantes, la Commission aurait illégalement délégué son pouvoir discrétionnaire au CRU en violation des principes en matière de délégation de pouvoir découlant de l’arrêt du 13 juin 1958, Meroni/Haute Autorité (9/56, EU:C:1958:7) ».
 The ECJ in S.N.U.P.A.T. later imputed the decisions of the agencies to the High Authority. Which was necessary to ensure judicial review by the Court since Article 263 TFEU at that time did not allow locus standi for agencies. (Judgment of the Court of 17 July 1959, Société nouvelle des usines de Pontlieue – Aciéries du Temple (S.N.U.P.A.T.) v High Authority of the European Coal and Steel Community, Joined cases 32/58 and 33/58, EU:C:1959:18).
 The standard of review employed by the General Court in the Banco Popular cases seems to be a copy paste of the Tetra Laval test in competition policy. C-12/03 P Commission of the European Communities v Tetra Laval BV, para 39.