Introduction and Background


On the 8th of May 2024 following an action for annulment by German credit institution Max Heinr. Sutor OHG (“The Applicant”), the General Court annulled a decision by the Single Resolution Board (“SRB”) in regard to the setting of 2021 contributions to the Single Resolution Fund (“SRF”). The SRB is a Board responsible for determining the annual contributions from financial institutions to the SRF as part of the Single Resolution Mechanism (“SRM”), which acts as an operation framework designed to ensure the orderly resolution of failing banks with minimal impact on the Union and Member States’ public finance. Such action was brought by the applicant due to failure of the Board to fulfil its obligation to provide reasons as regards to the determination of the annual target level.


The ruling underscores the necessity for the SRB to offer a clear and comprehensive explanation for their financial determinations, ensuring transparency and accountability within the Union’s financial regulatory framework. The Court delved into whether the SRB’s decision adhered to the procedural and substantive requirement set out within EU legislation, including but not limited to Regulation 806/2014 and Delegated Regulation 2015/63 dealing with ex ante contributions and whether sufficient reasoning was provided in its decision to allow for the applicant to verify and understand the calculations of its contribution.


The Court’s Findings


Transparency and duty to provide reasons


Amongst other pleas brought forward by the applicant the decision of the SRB was mainly contested for not meeting the requirements in light of the SRB’s obligation to provide reasons, as while the Court outright rejected the former pleas of the applicant, it examined ex officio whether the SRB was in breach of its duty to provide reasons regarding determination of the annual target level (i.e. at least 1% of the amount of covered deposits)as encompassed within Article 69(1) of Regulation 806/2014.


The Court in regard to the issue of transparency recalled that failure to provide reasons constitutes a plea of public policy as provided for in C-89/08 and must therefore take into account any failure of the SRB to state reasons in determining the annual target level as well as the method of calculating such contributions as held in C-584/20. In terms of the content of such obligation, the Court further notes that the statement of reasons for a decision taken by any institution or body of the Union, including the SRB, must be free of contradiction so as to enable the persons concerned to ascertain the real reason for that decision, with a view of defending their rights and enabling an exercise of its power of review.


Furthermore, when explanations regarding such grounds for that decision are given such explanations must be consistent with the consideration set out within the judgment. However, this was not the case within SRB decision taken against the applicant as the method of calculation actually applied by the SRB did not correspond to the method described within the contested decision, therefore making the reasons on the basis of which the target level was established unidentifiable by the institutions as well as the Court.


Decision


In view of such defects found in regard to consistency and transparency of the method employed by the SRB, the contested decision was vitiated by defect of the statement of reasons, and consequently lead to the annulment of the contested decision insofar as the applicant was concerned. However, recognising the potential disruption which such ruling may cause to the SRF, the Court maintained the effects of the annulled decision for six months, allowing for the SRB to adopt a new decision taking into consideration the judgment and findings of the Court.


Concluding Remarks


The General Court’s decision in case T-393/21 to annul the decision of the SRB in regard to Max Heinr. Sutor OHG underscores the importance of transparency and the duty to provide reasons within the decision-making processes of EU bodies. The Court in their judgment identified significant defects in the SRB’s decision drawing particular attention to inconsistencies and contradictions which led to annulment of the contested decision.


This ruling serves as a reminder to EU bodies of their obligation to provide thorough and transparent reasoning in their decisions, with such practice serving as a fundamental aspect of good governance, ensuring both accountability and the protection of rights within the EU legal system.


This article was first published on ‘The Malta Independent’ on 17/07/2024 and co-authored by Elena Sissons a Student Intern at Ganado Advocates.