Article 16 - Freedom to conduct a business
Article 17 - Right to property
Article 52 - Scope and interpretation
Key facts of the case:
Reference for a preliminary ruling — Admissibility — Article 63 et seq. TFEU — Free movement of capital — Article 107 et seq. TFEU — State aid — Articles 16 and 17 of the Charter of Fundamental Rights of the European Union — Freedom to conduct a business — Right to property — Regulation (EU) No 575/2013 — Prudential requirements applicable to credit institutions and investment firms — Article 29 — Regulation (EU) No 1024/2013 — Article 6(4) — Prudential supervision of credit institutions — Conferral of specific tasks on the European Central Bank (ECB) — Delegated Regulation (EU) No 241/2014 — Regulatory technical standards for Own Funds requirements for institutions — National regulation imposing an asset threshold on people’s banks established as cooperative societies and allowing the right to redeem shares by the withdrawing shareholder to be limited.
Outcome of the case:
Accordingly, in view of all the foregoing, if the Court considers that the questions referred are admissible, it is my view that the Court should answer the questions referred by the Consiglio di Stato (Council of State, Italy) as follows:
5) Specifically, this request for a preliminary ruling concerns the interpretation of Articles 3, 63 and 107 et seq. of the FEU Treaty; Articles 16, 17 and 52 of the Charter of Fundamental Rights of the European Union (‘the Charter’); Article 29 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012; ( 2 ) Article 6(4) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions; ( 3 ) and Article 10 of Commission Delegated Regulation (EU) No 241/2014 of 7 January 2014 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards for Own Funds requirements for institutions. ( 4 )
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32) In those circumstances, the Consiglio di Stato (Council of State) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Do Article 29 of [Regulation No 575/2013]…, Article 10 of [Delegated Regulation No 241/2014], and Articles 16 and 17 of the Charter …, with reference to Article 6(4) of [Regulation No 1024/2013], preclude a national provision such as that introduced by Article 1 of Decree-Law No 3/2015, converted, with amendments, by Law No 33/2015 (and currently also Article 1(15) of Legislative Decree No 72/2015, which has replaced Article 28(2-ter), [CBL], substantially reproducing the text of Article 1(1)(a) of Decree-Law No 3/2015, as converted, with amendments that are not relevant to the present case), which imposes an asset threshold above which a people’s bank must be converted into a company limited by shares, setting that limit at EUR 8 billion of assets? Furthermore, do the abovementioned unified European parameters preclude a national provision which, if a people’s bank is converted into a company limited by shares, makes it possible for that company to defer or limit, including for an indefinite period, redemption of the shares held by the withdrawing shareholder?
(5) Where, in its interpretation, the Court of Justice holds that the European legislation is compatible with the interpretation asserted by the opposing parties, can the Court of Justice assess the lawfulness, in European terms, of Article 10 of [Delegated Regulation No 241/2014], in the light of Articles 16 and 17 of the Charter …, supplemented, also in the light of Article 52(3) of that Charter … and the case-law of the European Court of Human Rights on Article 1 of the First Additional Protocol to the European Convention on Human Rights?’
46) By the first part of its first question, the Consiglio di Stato (Council of State) asks the Court, in substance, whether Article 29 of Regulation No 575/2013, Article 10 of Delegated Regulation No 241/2014, Articles 16 and 17 of the Charter and Article 6(4) of Regulation No 1024/2013, preclude national provisions which impose an asset threshold of EUR 8 billion above which a people’s bank must be converted into a company limited by shares. ( 23 )
47) By the second part of its first question the Consiglio di Stato (Council of State) asks the Court, in substance, whether Article 29 of Regulation No 575/2013, Article 10 of Delegated Regulation No 241/2014, Articles 16 and 17 of the Charter and Article 6(4) of Regulation No 1024/2013, preclude a national provision which, upon conversion of a people’s bank into a company limited by shares, makes it possible for that company to defer or limit, including for an indefinite period, redemption of the shares held by the withdrawing shareholder.
50) In my view, the first question as a whole is inadmissible as the referring court has failed to comply with Article 94(c) of the Rules of Procedure of the Court. In that regard, I consider that the referring court failed to provide ‘a statement of the reasons which prompted [it] to inquire about the interpretation or validity of certain provisions of European Union law, and the relationship between those provisions and the national legislation applicable to the main proceedings’. Thus, aside from the very summary explanation as to what prompted the referring court to inquire about the interpretation of Article 29 of Regulation No 575/2013, Article 10 of Delegated Regulation No 241/2014, Articles 16 and 17 of the Charter and Article 6(4) of Regulation No 1024/2013, there is no explanation in the request for a preliminary ruling on the relationship between those provisions of EU law and the national legislation applicable to the main proceedings.
51) In addition to the question of admissibility of the first question as a whole, I consider that it is necessary to examine whether the Court has jurisdiction to provide an answer to the first part of the first question as regards more particularly the interpretation sought by the referring Court of Articles 16 and 17 of the Charter in connection with the establishment by the Italian legislature and the Banca d’Italia of the threshold of EUR 8 billion.
52) It is settled case-law that the requirements flowing from the protection of fundamental rights are binding on Member States whenever they implement European Union law, and they are bound, to the fullest extent possible, to apply the law in accordance with those requirements. Article 51(1) of the Charter states, however, that its provisions are addressed ‘to the Member States only when they are implementing Union law’. Moreover, by virtue of Article 6(1) TEU, the Charter does not establish any new power for the Union or modify its powers. ( 24 )
53) Given that the order for reference does not contain any specific information to show that the national provisions in question establishing the EUR 8 billion threshold are measures implementing EU law within the meaning of Article 51(1) of the Charter or are connected in any other way with that law, I consider that the Court has no jurisdiction to provide an interpretation of Articles 16 and 17 of the Charter in the context of the first part of the first question.
64) The question which must be addressed therefore is whether and to what extent an institution may defer for an unlimited period of time the redemption of capital and to what extent it may limit the amount to be redeemed. I propose to examine this matter in the light of, first, Article 29 of Regulation No 575/2013 and Article 10 of Delegated Regulation No 241/2014, second, Article 6(4) of Regulation No 1024/2013 and, third, Articles 16 and 17 of the Charter.
81) While the essence of the investors’ property interests in the relevant shareholdings must, of course, be respected — after all, Article 17(1) of the Charter requires no less — these investors must also be taken to be aware of the fact that investment in a credit institution operating in a highly regulated market in accordance with the terms of its banking licence brings its own particular constraints. There is a clear public interest in ensuring that core equity investment in a credit institution is not abruptly withdrawn, not least at a time when the financial stability of the institution may be itself placed under stress were this to happen. This is plainly the thinking behind the provisions of Article 10(3) of Delegated Regulation No 241/2014.
84) In paragraphs 41 to 46 of the judgment of 22 January 2013, Sky Österreich (C‑283/11, EU:C:2013:28), the Court recalled that the protection afforded by Article 16 of the Charter covers the freedom to exercise an economic or commercial activity, freedom of contract and free competition. Moreover, in accordance with the Court’s case-law, the freedom to conduct a business is not absolute, but must rather be viewed in relation to its social function. On the basis of that case-law and in the light of the wording of Article 16 of the Charter, which differs from the wording of the other fundamental freedoms laid down in Title II thereof, yet is similar to that of certain provisions of Title IV of the Charter, the freedom to conduct a business may properly be subject to a broad range of interventions on the part of public authorities which may limit the exercise of economic activity in the public interest.
85) By virtue of Article 17(1) of the Charter everyone has the right to own, use, dispose of and bequeath his or her lawfully acquired possessions and no one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. In addition, the use of property may be regulated by law in so far as is necessary in the general interest.
86) Given that the rights guaranteed by Articles 16 and 17(1) of the Charter are not absolute, their exercise may be subject to restrictions justified by objectives of general interest pursued by the European Union. In accordance with Article 52(1) of the Charter, any limitation on the exercise of the rights and freedoms recognised by the Charter must be provided for by law and respect the essence of those rights and freedoms and, in compliance with the principle of proportionality, must be necessary and actually meet objectives of general interest recognised by the European Union or the need to protect the rights and freedoms of others.
87) In order to avoid repetition, I propose to examine the possibility of limiting the rights recognised and protected by Articles 16 and 17(1) of the Charter in the context of the second question together with the justification of restrictions to the freedom of establishment and/or the free movement of capital. ( 39 )
101) In addition it will be recalled that the rights guaranteed by Articles 16 and 17(1) of the Charter are not absolute and that their exercise may be subject to restrictions justified by objectives of general interest pursued by the European Union.
103) In my view, the restrictions to the freedom of establishment and/or the free movement of capital and the rights guaranteed by Article 16 and 17(1) of the Charter which result from the Italian legislation of 2015 may, at least in principle, be justified on the grounds outlined by the Consiglio di Stato (Council of State). ( 45 ) As I have already indicated, the restrictions in question would appear to be aimed at ensuring the good governance and stability of the banking sector as a whole in Italy and, in particular, the cooperative banking sector in that Member State. ( 46 ) In that regard, the importance of the stability of the banking sector and, indeed, in certain specific cases, individual banks, was stressed by the Court in the judgment of 20 September 2016, Ledra Advertising and Others v Commission and ECB (C‑8/15 P to C‑10/15 P, EU:C:2016:701, paragraph 72). ( 47 )
105) It is, however, further necessary that the restrictions in question, be they to the freedom of establishment or the free movement of capital, or to the rights recognised and protected by Articles 16 and 17(1) of the Charter, should be appropriate for ensuring the attainment of the objective in question and not go beyond what is necessary to attain that objective. ( 49 )
108) I consider, therefore, that Articles 49 and 63 et seq. TFEU, as well as Articles 16 and 17(1) of the Charter do not in principle preclude national provisions which limit the exercise of cooperative banking activities within a given asset limit, requiring the bank concerned to be converted into a company limited by shares if it should exceed that limit, where the provisions were adopted in order to ensure the good governance and stability of the banking sector or a particular section of the banking sector in a Member State and the restriction imposed by the provision is both necessary to achieve those objectives and is proportionate in nature. The assessment of the necessity and proportionality of this measure is, however, ultimately a matter for the referring court.
119) By its fifth question, the Consiglio di Stato (Council of State) asks the Court, in essence, to assess whether Article 10 of Delegated Regulation No 241/2014 is compatible with Articles 16 and 17 of the Charter.
122) Moreover, given that the referring court has not correctly challenged the validity of Article 10 of Delegated Regulation No 241/2014, that provision must be presumed valid and compatible with Articles 16 and 17 of the Charter. ( 51 ) In that regard, I consider that, in the absence of any evidence or indeed argument to the contrary by the referring court, the limitations on the rights recognised and protected by Articles 16 and 17 of the Charter imposed by the prudential rules and standards laid down in Article 10 of Delegated Regulation No 241/2014 are presumed to be in the public interest and to comply with the principle of proportionality.
123) Accordingly, in view of all the foregoing, if the Court considers that the questions referred are admissible, it is my view that the Court should answer the questions referred by the Consiglio di Stato (Council of State, Italy) as follows:
(3) Articles 49 and 63 et seq. TFEU and Articles 16 and 17(1) of the Charter do not preclude national provisions which limit the exercise of cooperative banking activities within a given asset limit, requiring the bank concerned to be converted into a company limited by shares if it should exceed that limit where the provisions were adopted in order to ensure the good governance and stability of the banking sector or a particular section of the banking sector in a Member State and the restriction imposed by the provision is both necessary to achieve those objectives and is proportionate in nature.