It is a mystery why banks fail: banks are regulated by a state’s central bank. In this case, a saver lost a lot of money in the 2012 Italian banking crash. Initial research suggested the central bank might indeed have done something wrong. Consequently, the saver asked it for specific documents so that he could calculate his legal position and assert his rights. His request was refused. The legal question is: was the central bank legally right to refuse his request? If so, the state could swindle the saver out of his money and his legal rights.
For more than a decade, Mr Buccioni held an account with the Italian bank, ‘BNI’ (Banca Network Investimenti). However, in 2012 the BNI’s financial difficulties became so great that it was put into administration. The Italian press suggests that the plug on the bank was pulled by the Italian Central Bank.
Suddenly, thousands of BNI customers had their accounts frozen and were denied access to their money. Fortunately, people whose accounts had a credit of less than 100 000 euro were legally protected; unfortunately, Mr Buccioni still lost 100 000 euro of his money.
His initial research suggested that the Italian Central Bank might have acted wrongly. Consequently, he wrote to it asking for access to specific documents that might help him to work out what his legal position might be and how he might defend and protect his legal rights.
The Italian Central Bank partially turned down his request. They informed him that some of the documents related to their statutory supervisory task. By dint of legal decisions taken by the President of the Italian Central Bank many years earlier, he therefore had no legal right to access those documents.
Mr Buccioni challenged the legality of that decision all the way from the local administrative court in Rome (the TAR Lazio) up to the Italian Council of State (the Consiglio di Stato).
At the Italian Council of State
Basically, the Italian Central Bank relied on the EU’s Directive 2013/36 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.
Article 53 of that Directive governs ‘Professional secrecy’ and provides:
1. Member States shall provide that all persons working for or who have worked for the competent authorities and auditors or experts acting on behalf of the competent authorities shall be bound by the obligation of professional secrecy.
Confidential information which such persons, auditors or experts receive in the course of their duties may be disclosed only in summary or aggregate form, such that individual credit institutions cannot be identified, without prejudice to cases covered by criminal law.
Nevertheless, where a credit institution has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that credit institution may be disclosed in civil or commercial proceedings.
The Italian Central Bank emphasised the phrase: ‘may be disclosed in civil or commercial proceedings’, and took this to mean that they could not disclose information before Mr Buccioni had commenced either civil or commercial proceedings – something which he had yet to do.
The judges at the Italian Council of State thought there was a problem with that legal interpretation. The Italian Central Bank was really rather like the European Central Bank.
In that context, EU law required the ECB to set down rules for accessing information possessed by the ECB, and those rules had to be read in light of the transparency principle in Article 15 TEU (Consolidated Version).
Thus, for example, there was Council Regulation No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions. Article 22 of the Regulation governs ‘Due process for adopting supervisory decisions’.
1. Before taking supervisory decisions in accordance with Article 4 and Section 2 of Chapter III, the ECB shall give the persons who are the subject of the proceedings the opportunity of being heard. The ECB shall base its decisions only on objections on which the parties concerned have been able to comment.
The first subparagraph shall not apply if urgent action is needed in order to prevent significant damage to the financial system. In such a case, the ECB may adopt a provisional decision and shall give the persons concerned the opportunity to be heard as soon as possible after taking its decision.
2. The rights of defence of the persons concerned shall be fully respected in the proceedings. They shall be entitled to have access to the ECB’s file, subject to the legitimate interest of other persons in the protection of their business secrets. The right of access to the file shall not extend to confidential information.
The decisions of the ECB shall state the reasons on which they are based.
To the Italian judges, it seemed clear that Article 22 of the Regulation meant there had to be a reasonable procedure leading up to decisions, and people were entitled to access the ECB’s file.
However, there was a wrinkle with that interpretation. Article 22 also declared, ‘The right of access to the file shall not extend to confidential information.’ To the eyes of the Italian judges, that phrase seemed objectionable because it seemed to drain the preceding sentence of its legal effect, which was indeed to grant access to the ECB’s file!
Furthermore, Article 27 of the same Council Regulation governs ‘Professional secrecy and exchange of information’ and provides:
1. Members of the Supervisory Board, staff of the ECB and staff seconded by participating Member States carrying out supervisory duties, even after their duties are ceased, shall be subject to the professional secrecy requirements set out in Article 37 of the Statute of the ESCB and of the ECB and in the relevant acts of Union law.
The ECB shall ensure that individuals who provide any service, directly or indirectly, permanently or occasionally, related to the discharge of supervisory duties are subject to equivalent professional secrecy requirements.
2. For the purpose of carrying out the tasks conferred on it by this Regulation, the ECB shall be authorised, within the limits and under the conditions set out in the relevant Union law, to exchange information with national or Union authorities and bodies in the cases where the relevant Union law allows national competent authorities to disclose information to those entities or where Member States may provide for such disclosure under the relevant Union law.
Further legal uncertainty arose from whether it was possible to read the Directive and the Regulations in light of not just the transparency principle in Article 15 of the Treaty but also Article 41 of the EU Charter, and Article 47 of the EU Charter read together with Article 6 ECHR and the right to a fair trial.
President of the Italian Council of State, Judge Barra Caracciolo, observed that a preliminary reference to the CJEU was on the cards since the Council of State was the court of last resort.
My not-very-good unofficial translation of the baroque questions asked by the Consiglio di Stato reads:
a) is the principle of transparency, expressly enshrined in Article 15 of the consolidated version of the Treaty on European Union, and as a generally binding rule in so far as this principle can be altered by the sources of law mentioned in paragraph 3 or their equivalents, when its content could indicate an excessively wide discretion lacking a legal basis in a superior source of European law, in respect of the need to set down non-derogable minimum principles which do not conflict with a similar sectoral limitation in respect of the European norms governing the supervisory functions of credit institutions, [but which] drains the said transparency principle, even in cases where the access interest appears anchored to the applicant’s essential interests but is consistent with the exceptions to the sector’s limitations?
b) If, as a consequence, Articles 22(2) and 27 of Regulation 1024/2013 […] are not to be interpreted as non-exceptional cases to which derogations to the non-accessibility of documents are possible, but instead are really rather to be interpreted in light of the broader aim of Article 15 of the Consolidated Version of the Treaty on European Union, and, as such, in light of [this] general legal principle of EU law, with the effect that access should not be restricted, according to a reasonable and proportionate balancing of the needs of the financial sector with those fundamental to savers, and in a situation where there is ‘burden sharing’, and depending on the relevant circumstances possessed by a supervisory authority which display sectoral organizational features and jurisdictional competences analogous to those enjoyed by the European Central Bank?
c) If, then, in light of Article 53 of Directive 2013/36 […] and the corresponding national implementing provisions these cannot be reconciled with the remaining framework of laws and principles mentioned in Question (a), can access be allowed where, not only the claimant has commenced civil or commercial proceedings with a view to protecting his property rights that have been affected by the compulsory administration and liquidation of the bank, but also where the claimant is trying to determine their chances of legal success before a court whose jurisdiction extends to protecting access rights and transparency, precisely for the purposes of ensuring the full protection of the defence rights and rights to appeal, particularly in a situation where a saver who has already suffered the effects of ‘burden sharing’ in the context of the insolvency of the credit institution in which he had deposited his savings.
Aspects of this Italian preliminary reference could be affected by other preliminary references currently pending before the CJEU.
The issue of information orders, information exchange between authorities, and a fair trial, is at stake in a preliminary reference emanating from Luxembourg Cour Administrative; see further, Case C-682/15, Berlioz Investment Fund – tax information exchanges not fishing expeditions. The Opinion of the Advocate General is due out today.
The issue of a fair trial under Article 47 of the EU Charter is at stake not only in the Berlioz Investment Fund case but also in Case C-64/16, Associação Sindical dos Juízes Portugueses – a pay cut ends judicial independence.
There is also a financial case involving a Dutch lawyer who wants to establish his innocence but to do so requires the Luxembourg financial authority and a bank to release confidential documents to him; see further, Case C-358/16, UBS – stopping a lawyer accessing innocence-establishing documents.
A further case of potential relevance to the Italian preliminary reference is Case C-15/16, Baumeister. Here, the German authority has refused to release information relating to the UK’s Financial Services Authority, and the German authority has done so on grounds of ‘professional secrecy’, an escape route in Article 54 of the EU’s ‘financial instruments’ Directive 2004/39/EC – see further, Case C-15/16, Baumeister – seeking access to documents held by financial services authorities.
And when it comes to the issue of third parties and their rights to privacy, it should be recalled that there is already a case pending before the CJEU on the limitation of the privacy right by the ‘rights of others’ in Article 8(2) ECHR; see further, Case C-13/16, Rīgas satiksme – our police data request is necessary for our legitimate interest.
Parallel to public law access to information requests where this affects a person’s property, there is also a preliminary reference in private law from a Dutch court. This turns on the right to inspect documents which are held by the other side but which have already been seized by court bailiffs. Article 47 of the EU Charter has also been invoked. According to claimant, he needs access to the documents to help him prove in court that his intellectual property rights have been infringed; see further, Case C-644/16, Synthon – resisting its impounded documents being inspected by a rival.