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Liability under EU Law of the Supervisory Authorities for Losses Resulting from Defective Supervision

2 euros. Website of the Bank of Estonia

2 Estonian euros. The €-Day being fixed as 1/1/2011. Website of the Bank of Estonia

This Monday, I continued with my EU Law course with a lecture on Free Movement of Capital and the euro, at the Tallinn University. Preparing for the lecture, I found (There is no better way of studying than teaching!) an interesting, though perhaps not the freshest, case from my King’s College study materials – Case C-222/02 Peter Paul and Others [ECR] I-9425. For quite a while I thought, whether I should or shouldn’t refer to the case in my study materials. As the case was about implementation of directives (and with an intriguing name), I finally considered that a reference could be useful. The main question was not whether a Member State was liable for late transposition of a directive, but whether a directive (in the concrete case Directive 94/19) that foresaw deposit-guarantee scheme, could confer on depositors also the right to have the competent authorities take supervisory measures in their interest.

The facts of the case:

11          Paul and others were customers of the BVH Bank für Vermögensanlagen und Handel AG (‘the BVH Bank’). In 1987, that bank had received authorisation from the Bundesaufsichtsamt to engage in banking transactions, but it was not a member of a deposit-guarantee scheme. From 1987 to 1992, the bank applied unsuccessfully for admission to the deposit-guarantee fund of the Bundesverband deutscher Banken eV, but it withdrew from the admission process since it did not fulfil the necessary conditions.

12          In 1991, 1995 and 1997, BVH Bank’s difficult financial situation prompted the Bundesaufsichtsamt to carry out examinations of its affairs. Following the third such examination, on 14 November 1997 the Bundesaufsichtsamt filed a bankruptcy petition and revoked the bank’s authorisation to engage in banking transactions.

13          Paul and others had opened term deposit accounts with the BVH Bank on 7 June 1995, 28 February 1994 and 17 June 1993. In the context of the bankruptcy proceedings opened in December 1997, they declared claims in the sums of DEM 131 455.80, DEM 101 662.51 and DEM 66 976.20.

14          Paul and others brought proceedings before the Landgericht Bonn (Regional Court, Bonn) (Germany) against the Bundesrepublik Deutschland for compensation in respect of the losses of their deposits. They claimed that they would not have lost those deposits if Directive 94/19 had been transposed within the period prescribed in Article 14(1) thereof, that is before 1 July 1995. [J. Erne’s accent] The Bundesaufsichtsamt would then have taken supervisory measures vis-à-vis the BVH Bank before the applicants made payments to that bank.

15          Instead, however, Directive 94/19 was transposed into German law only by the Law transposing the EC Deposit-Guarantee Schemes Directive and the EC Investor-Compensation Schemes Directive, of 16 July 1998 (BGBl. 1998 I, p. 1842), which entered into force on 1 August 1998

 16         At first instance, the Landgericht Bonn held that the belated transposition of Directive 94/19 constituted a serious breach of Community law by the Bundesrepublik Deutschland and ordered the defendant to pay to each of the applicants the sum of DEM 39 450, the equivalent of EUR 20 000, that is the amount prescribed in Article 7(1) of Directive 94/19, plus interest.

17          In respect of the pecuniary loss exceeding that amount, the claims of Paul and others were rejected by the Landgericht Bonn and by the Oberlandesgericht Köln (Higher Regional Court, Cologne) (Germany). According to those two courts, liability for breach of official duty is incurred under Paragraph 839 of the BGB in conjunction with Article 34 of the GG in the event of a breach of ‘official duty … as against a third party’, that is a duty which exists in any case as against the injured party. They held that that was precluded in the case of the Bundesaufsichtsamt, which exercises the functions assigned to it only in the public interest, pursuant to Paragraph 6(4) of the KWG.

18          Paul and others thus brought an appeal on a point of law (‘Revision’) before the Bundesgerichtshof (Federal Court of Justice) and sought an order against the Bundesrepublik Deutschland for payment of damages for breach of Community law.

The Bundesgerichtshof stayed the proceedings and asked a preliminary ruling from the ECJ. A decisive question was, whether Directive 94/19 or other directives in the field of credit institutions confer on depositors the right to have the competent authorities take supervisory measures in their interest. The ECJ said no.

You may read about the general problems connected to national implementation of EU directives at http://ec.europa.eu/community_law/directives/directives_en.htm



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