The unconditional recognition of a retroactive reorganisation measure of a banking group is contrary to European Union law if it limits a customer’s right to an effective remedy, the Court of Justice of the EU ruled on Thursday 29 April (Case C-504/19).
In the main proceedings, the Spanish branch of Novo Banco, the Portuguese bridge bank that took over certain assets and liabilities of the defaulting Portuguese bank Banco Espírito Santo (BES) from August 2014, considers that it cannot be sued by the natural person VR, resident in Spain, since the contract that VR had concluded with the Spanish branch of BES has not been transferred to it.
Novo Banco Spain also transmitted during the course of the proceedings two decisions of the Bank of Portugal stating, among other things, that the contract entered into by VR for the purchase of preference shares in an Icelandic bank had not been transmitted to Novo Banco.
The Spanish Supreme Court interprets Directive 2001/24 on the reorganisation and winding up of credit institutions.
In its judgment, the Court notes that under EU law, reorganisation measures of a bank are, in principle, applied in accordance with the law of the home Member State and produce their effects under the law of that State throughout the Union without any further formality.
However, as an exception to this principle, the Directive (Article 32) provides that the effects of reorganisation measures on pending proceedings concerning an asset or a right of which the credit institution is divested are governed exclusively by the law of the Member State in which the proceedings are pending.
The European Court specifies that three cumulative conditions must be met for Article 32 of Directive 2001/24 to apply: (1) the measures must be reorganisation measures; (2) there must be ongoing proceedings on the merits; (3) the ongoing proceedings must relate to an asset or right of which the bank has been divested.
Secondly, the Court is of the opinion that, according to EU law, the procedural and substantive effects of a bank reorganisation measure on ongoing judicial proceedings on the merits are exclusively those determined by the law of the Member State in which those proceedings are ongoing.
Finally, it considers that the recognition of the effects of the decisions of the Bank of Portugal would call into question the judicial decisions already taken in favour of VR, thus violating the principle of legal certainty and the right to an effective remedy.
See the judgment: https://bit.ly/3u4D5Xe (Original version in French by Mathieu Bion)