Lieve Lowet

Lieve Lowet

EU Affairs consultant and lobbyist

Guidelines again: The Opinion of Advocate-General Bobek in the case of the Féderation bancaire française (FBF) against the French Prudential Supervision and Resolution Authority (ACPR)

28 April 2021

On 15 April 2021, advocate-general Michal Bobek delivered his Opinion in a request for preliminary ruling from the French Conseil d’Etat in case C-911/19. On the dissecting table are the Guidelines on product oversight and governance arrangements for retail banking products which the European Banking Authority (EBA) issued in 2016. The ACPR in 2017 in a notice decided to comply with them, ‘thus making them applicable to all financial institutions under its supervision’. A month later, the FBF lodged an application seeking the annulment of the ACPR’s notice before the French Conseil d’Etat, citing the EBA’s lack of competence. The Conseil d’Etat decided to seek a preliminary ruling from the European Court of Justice (ECJ) on several questions, one of which was whether the EBA had exceeded its power.

As stated by Bobek, the present case has several layers and not all legal questions can be treated in this blog. We will focus on these questions: did the EBA go beyond its scope? Did the EBA have the power to adopt the contested guidelines? If yes, can the ECJ declare the guidelines invalid? Can this be done in a preliminary ruling procedure? Bobek writes that the specific example of the EBA guidelines provides a good illustration of the structural issues relating to the review of soft-law measures before the ECJ.

Before answering the question of power, Bobek dives into a preliminary issue: are the contested guidelines genuinely non-binding, i.e. not producing binding legal effects as all parties are arguing? It is established case law, according to Bobek, that any provision adopted by the institutions irrespective of their form, intended to have binding legal effects, are regarded as challengeable acts for the purposes of Article 263 TFEU. The traditional test is to examine the substance of the act and assess its effects based on objective criteria. While it is true that the guidelines are worded in non-mandatory terms (‘should’ as opposed to ‘shall’), that there is no obligation on NCA to comply with them, and that the EBA had no intention to adopt anything that would be binding, one can only conclude that the contested guidelines do not in themselves produce binding legal effects.

BUT…. given that Article 16(3) of the EBA regulation provides that NCAs and addressees must make ‘every effort to comply’, it can be presumed that guidelines are not adopted with the intention for them to be disregarded by the addressees, especially given the duty placed upon them. In a way, Bobek argues, the financial institutions are the genuine addressees. It is not even clear whether, if the NCAs formally decided not to comply, that the financial institutions would be exempted from complying and from making ‘every effort’. “Those guidelines may have a life of their own vis-à-vis financial institutions irrespective of the position adopted by competent authorities”. But the ACPR decided to comply with the EBA guidelines, making the content of the guidelines de facto obligatory through its ACPR notice. It made compliance with those guidelines enforceable in that Member State with that NCA becoming the effective enforcer.

However, as the traditional standard approach of the ECJ is to look exclusively at EU level, the contested guidelines are unlikely to be considered by the ECJ as binding, and consequently be reviewable under Article 263 TFEU. Bobek finds that approach problematic: “what may perhaps still be construed as soft law when looking only and exclusively at the EBA and the competent national authorities, becomes something very different one level down within the Member States. At that level, ‘soft law’ is ‘no longer so soft’ or may even turn into proper ‘hard law’. It should be pointed out that EU law certainly does not preclude that from happening. Quite to the contrary in fact: the entire system is designed to function in precisely that way.” He regrets that the Court remains focused on the act and its authors, going around in circles while carefully pleading for a hybrid remedy for this hybrid form of governance.

For the core question – has the EBA exceeded its powers given to it by the EBA Regulation, and if yes, what should be the formal result of such a finding – Bobek examines to which extent the guidelines go further than what Regulation No 1093/2010 allows for. Key is the reading of Article 1(2) of the EBA Regulation, stating that the Authority shall “act within the powers conferred by that regulation and within the scope of a number of legislative acts laid down therein and of any further legally binding Union act which confers tasks thereon”, completed by Article 1(3)“… provided that such actions… are necessary to ensure the effective and consistent application of those acts” (his emphasis). The acts mentioned in Article 1(2) constitute therefore the Authority’s ultimate horizon. But is such a formal test sufficient?

In his Opinion, Bobek dives one stage deeper, arguing that there is a clear mismatch between the subject matter of the three specific legislative acts, mentioned in Article 1(2), provisions of which were used as legal basis for the guidelines. The subjects regulated by the contested guidelines and by the legislative acts referred to in Article 1(2) are different. Product governance is not corporate governance. The EBA could not lawfully adopt guidelines on the governance of banking products.

In addition, one provision of a fourth directive, Article 7(1) of Directive 2014/17, was also used as legal basis for some sub-guidelines. Could this Article constitute a proper legal basis? Bobek argues that although a few provisions of Directive 2014/17 empowers the EBA to adopt certain rules, none of these provisions specifically concern product governance rules, nor do they refer to the adoption of guidelines in the matters concerned. In addition, Directive 2014/17 does not deal with product governance in the same sense as the contested guidelines.

Therefore, the only sensible option, according to Bobek, is that the guidelines must stand or fall as a whole. They do not fall within the scope of the legislative acts referred to in Article 1(2) or the ones conferring specific tasks on the EBA. The “EBA has (…) exceeded its competences in adopting guidelines the subject matter of which is not covered by those legislative acts”. Bobek’s advice on this question is to reply to the Conseil d’Etat that the guidelines are invalid.

But that is an interim conclusion as it uses the methods used for a normal scrutiny to examine the validity of measures with a binding legal effect. Is it appropriate to use the same degree of intensity of review for measures allegedly not generating any binding legal effects? The ACPR and EBA both argued for a lower scrutiny, and added that the guidelines could still be seen as falling within the EBA’s mandate because the EBA Regulation is expressly aimed at consumer protection. Bobek opines that he cannot subscribe to these arguments, neither in this specific case nor in general. Article 9(1) of the EBA regulation sets out specific tasks related to consumer protection: justifying the scope of the EBA’s guidelines based on vague overall consumer protection aims is not tenable compared to the rather circumscribed role of EBA in that article. He further extensively argues that the judicial review of non-binding legal acts adopted by EU agencies ought to be a normal standard type of review, at least with regard to their competences, so that those agencies do not unlawfully interfere with the competence of other EU bodies or institutions.

The full Opinion can be read here.

Lieve Lowet

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