Berlusconi v. Bank of Italy: Single Supervisory Mechanism creates ‘single judicial review’ United Nations Photo

Berlusconi v. Bank of Italy: Single Supervisory Mechanism creates ‘single judicial review’

In Berlusconi and Fininvest v. Banca d’Italia, the CJEU held that within the framework of the SSM, national draft decisions preceding a final ECB decision are subject to ‘single judicial review’ at the EU Courts, precluding national jurisdiction.

Silvio Berlusconi is not an ordinary politician. Having served as Prime Minister of Italy in four governments, he is also known as the former owner and president of the football club A.C. Milan and as an Italian media tycoon. However, it is not only his political career and dominance over the national media environment that make him stand out. The former Prime Minister has been involved in a number of protracted legal battles. In 2013 he was convicted of tax fraud and sentenced to a four-year prison sentence, which was replaced by community service due to his age (77 at the time of conviction). Silvio Berlusconi’s convictions set the scene for the case Silvio Berlusconi and Fininvest v. Banca d’Italia (Case C-219/17, 19 December 2018, ECLI:EU:C:2018:1023), a new milestone case that brings some clarity in the mist of the Single Supervisory Mechanism (SSM).

The SSM constitutes the legal framework for the eurozone prudential banking supervision. The central supervisory authority is the European Central Bank (ECB). In carrying out its supervisory tasks, it relies on the national competent authorities (NCAs), which fulfil an essential role in assisting the ECB. This multi-level supervisory architecture creates uncertainties regarding judicial protection. One of the uncertainties concerns the issue of jurisdiction in supervisory decisions taken by the ECB that are preceded by an NCA draft decision.

The procedure for the assessment of the acquisition of a qualifying holding in a credit institution falls under this mechanism and was the topic of Berlusconi and Fininvest v. Banca d’Italia. In this procedure, the relevant NCA (Banca d’Italia) is responsible for assessing the acquisition and drafting a decision for the ECB. The final decision-making power lies with the ECB. The ECB assessed the acquisition and subsequently adopted a final decision that was in line with Banca d’Italia’s draft decision. Berlusconi and Fininvest not only sought to challenge the final ECB decision before the General Court, but also challenged the draft decision adopted by Banca d’Italia before the Consiglio di Stato (Italian Council of State). Whilst it is clear that the General Court has jurisdiction in reviewing the legality of this ECB decision, the jurisdictional picture becomes blurred where it concerns judicial review of Banca d’Italia’s draft decision. Therefore, the Consiglio di Stato referred (in short) the following question to the Court of Justice of the EU (CJEU) for a preliminary ruling:

Should Article 263 TFEU be interpreted as meaning that EU Courts have jurisdiction or as meaning that national courts have jurisdiction to review the NCA draft decision preceding the final ECB decision?

Case background

From the 1990s, Mr. Berlusconi, has held, through Fininvest SpA, a holding of more than 30% in the financial holding company Mediolanum SpA (Mediolanum), which in turn owned 100% of the shares in Banca Mediolanum SpA (Banca Mediolanum), a bank. In 2015 Mediolanum was absorbed by Banca Mediolanum, thus making Fininvest (fully controlled by Mr. Berlusconi) a holder of a qualifying stake in Banca Mediolanum. After Mr. Berlusconi was convicted of tax fraud, Banca d’Italia (NCA) considered that he no longer satisfied the reputational requirements, necessary for owning a qualifying holding (10% or more in shares and/or voting rights) in credit institutions.

The ECB is exclusively tasked to decide on the proposed acquisitions of qualifying holdings in credit institutions. On 25 October 2016, the ECB adopted a decision opposing the acquisition in question because of, inter alia, Berlusconi’s tax fraud convictions. As a result, Mr. Berlusconi’s acquisition was effectively blocked. Dissatisfied with this outcome, he and his company Fininvest (direct acquirer) challenged the ECB decision before the General Court. Simultaneously, they brought proceedings before the Regional Administrative Court (Lazio, Italy) for annulment of Banca d’Italia’s preparatory acts, as well as before the Consiglio di Stato, submitting that the draft decision by Banca d’Italia opposing the acquisition was void. The Consiglio di Stato had to establish whether it had jurisdiction in reviewing Banca d’Italia’s draft decision opposing the acquisition.

Decision of the CJEU

The CJEU starts with delineating the fundaments of the division of jurisdiction between national courts and EU courts in procedures where national authorities are involved in the decision-making process and a final decision is taken at EU level. It recalls that Article 263 TFEU confers upon the CJEU exclusive jurisdiction to review the legality of acts adopted by the EU institutions, including the ECB. It adds, referring to the case Sweden v. Commission (ECLI:EU:C:2007:802), that an act of an EU institution remains an EU act, also if the decision-making process preceding it involved decisions taken by NCAs, provided that the EU institution alone has the final decision-making power and that it is not bound by the national preparatory acts or national proposals.

The CJEU subsequently holds that in such a situation – non-binding national decisions are part of the procedure, but the EU institution has the final and exclusive decision-making power – “it falls to the EU Courts, by virtue of their exclusive jurisdiction to review the legality of EU acts on the basis of Article 263 TFEU (…), to rule on the legality of the final decision adopted by the EU institution at issue and to examine, in order to ensure effective judicial protection of the persons concerned, any defects vitiating the preparatory acts or the proposals of the national authorities that would be such as to affect the validity of that final decision.”

To take away any doubt as to the content and consequences of this consideration, the CJEU states that such national decisions preceding an EU final act cannot be subject to review by national courts of the Member States. Such ‘single judicial review’ is, according to the CJEU, necessary “(i)n order for such a decision-making process to be effective”, as a combination of national and Union procedures would increase the risk of diverging assessments.

The CJEU discusses the procedure for the assessment of the acquisition of a qualifying holding in light of these considerations and concludes that both the national and EU steps of this multi-level decision-making process are subject to a ‘single judicial review’. The Consiglio di Stato therefore does not have jurisdiction to review Banca d’Italia’s draft decision.

Discussion and conclusion

This judgment affirms and extends the CJEU’s position favouring strong centralisation, already revealed in the SSM landmark case Landeskreditbank Baden-Württemberg v ECB (ECLI:EU:T:2017:337). In that case, the CJEU emphasised that the SSM Regulation does not provide for a division of competences between the ECB and NCAs, but confers upon the ECB exclusive competences that are either executed by the ECB itself or otherwise implemented in a decentralised manner by NCAs.

A pro-centralisation position has now been confirmed for the judicial review in multi-stage SSM procedures that involve both a non-binding NCA decision and a final ECB decision. Although in this case the preliminary ruling was given in respect of the procedure governing the assessment of the acquisition of qualifying holdings in credit institutions, the same logic may apply to other SSM procedures that include non-binding national decisions that culminate in a final ECB decision. For instance, one may ask whether the other two so-called ‘common procedures’, i.e. the granting and withdrawal of authorisations, should also be subject to a ‘single judicial review’ by the CJEU.

The judgment in Berlusconi and Fininvest v. Banca d’Italia diminishes the role of national courts in reviewing draft decisions of the NCAs. National (administrative) rules that would provide for such review, shall either be interpreted in line with this judgment, or be disapplied. The direction is clear, but how long the CJEU’s road towards centralisation will be remains to be seen.


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