Effective legal protection in the composite procedures of the SSM

It seems to be a given by now that shared administrations are increasingly used in the EU to ensure an effective implementation of Union law. However, the administrative reality of shared administrations still seems ahead of the legal and judicial reality. Shared administrations result in decisions based on often complex composite administrative procedures involving administrative authorities from both the EU and national legal orders. However, there is no single uniform set of EU administrative standards and the judicial orders are still relatively separate. The different administrative authorities involved may thus be subject to different administrative standards and, due to the relatively separate judicial orders, it is often uncertain in what manner effective judicial protection can be ensured. The extent to which an effective legal control is possible is thus questionable in case of composite administrative procedures. In this blog post, which is based on my new book ‘Effective Legal Protection in Banking Supervision. An Analysis of Legal Protection in Composite Administrative Procedures in the Single Supervisory Mechanism’ (Europa Law Publishing 2021), I will be addressing this question on the example of the Single Supervisory Mechanism (SSM). I have looked for a middle ground that ensures effective legal protection in composite procedures in such a way that persons’ rights are safeguarded without unnecessarily hampering the supervisors’ effectiveness. Although this is not such an easy task, it seems possible nonetheless.

Categorization of composite procedures and their main issues

The composite administrative procedures in place within the SSM have been categorized in a more general fashion in order to come to a meaningful conclusion. The following procedures have been analysed in detail:

  • Administrative procedures regarding an application for an authorization to take up the business of a credit institution, the withdrawal of an authorization, and the acquisition of qualifying holdings (i.e. common procedures, cf. Part V SSM Framework Regulation);
  • Administrative procedures in ongoing supervision, resulting in an ECB decision based on NCA preparatory measures (i.e. bottom-up procedures);
  • Administrative procedures in ongoing supervision resulting in an NCA decision and based on ECB preparatory measures (i.e. top-down procedures), and;
  • Administrative procedures that may end with sanctions of a criminal nature.
The general categorization of the procedures analysed may also make the research relevant for other fields of law in which shared administrations are in place. This also applies to the proposed approach and recommendations, since they are general in nature and derived from EU standards.

In short, the main issue in the bottom-up procedures is the way in which an effective judicial review of the national part of the procedure can be ensured, since it may conflict with the primacy, unity and effectiveness of EU law. This challenge may even be greater where the cooperation between the EU and national supervisors is both strongly intertwined and informal, instead of procedures consisting of more formalized preparatory national steps. In case of top-down procedures, the possibility for national courts to request a preliminary ruling from the Court about the validity and interpretation of ECB preparatory measures turns out to be a useful tool to overcome the problems with regard to ensuring judicial protection of the actions carried out at the ‘other’ level that may arise in the context of bottom-up procedures. A challenging question that arises, for instance, in case of top-down procedures is whether a national court may generally exclude ECB information as evidence for the national decision when it does not meet any national legal safeguards providing for more protection than the relevant EU legal safeguards.

Proposed approach within the current system of legal remedies and procedures

I have proposed that the court that reviews the final decision also assess the entire decision-making procedure, unless a preparatory measure is separately subject to judicial review on the basis of the Court’s standards of reviewability based on Article 263 TFEU. This approach is in line with the TWD criteria in case of top-down procedures. In case of bottom-up procedures, this would imply a new step in the way in which judicial protection is ensured. National courts would have to review the NCAs’ preparatory measures that are themselves subject to judicial review on the basis of the Article 263-TFEU standards. All other national preparatory measures would have to be included in the EU courts’ review of the ECB decision. In light of the unity and effectiveness of Union law, it is proposed that EU Courts review national preparatory measures that are included in the review of the final ECB decision on the basis of EU administrative standards only. The analyses showed that EU Courts may still be facing questions of fact and law relating to the national level.

Longer term recommendations

In my view, in order to better tackle the challenges that EU Courts may be facing due to the increased use of shared administrations, strengthening the cooperation between the EU Courts and the national courts is necessary. I join the views of Hofmann (p.159) and Alonso de León (pp. 357-360) to introduce a reversed preliminary ruling procedure to enable EU Courts to request an opinion from the highest relevant competent national court regarding national law matters. Preferably, this possibility should be included in the Treaties, but possibly this could also be required on the basis of Member States’ general duty of loyal cooperation, included in the Rules of Procedures of the Court of Justice, or laid down in recommendations of the Court.

Furthermore, the legislator’s tools could be better used to ensure effective legal protection in case of composite procedures in the longer term. Obviously, harmonization of the relevant substantive laws or one EU administrative act could help make legal protection more effective. But smaller steps such as a better clarification of the legal basis or legal effects of certain measures (e.g. the use of supervisory powers) in the relevant Union laws could also be useful. Equally, introducing an amicus curiae provision to improve the participation of the various parties in relevant judicial proceedings could be considered. In general, I advocate that, in practice, the interplay between legislation and the judicial reality deserve more attention.

Lastly, I propose greater alignment between EU and national judicial proceedings concerning related cases by creating, for instance, the possibility of transferring cases from one court to the other, or to stay proceedings in specific circumstances.

Some steps will be easier to take than others because they may, for instance, be easier to implement or are less political sensitive. But I generally see possibilities to better ensure effective legal protection in case of composite administrative procedures than currently is the case. The topic has been gaining attention due to the increasing use of shared administrations for the implementation of EU law and the accompanying increase of relevant cases before the Court. This will without doubt spark more interesting discussions to which this research can hopefully contribute.

Author: Laura Wissink

Laura Wissink is an external PhD Candidate of Utrecht University. Her research focuses on judicial protection in shared administrations.

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