15 April, 2021, Advocate General Bobek (the AG) published his opinion in the Fédération bancaire française (FBF) case (C‑911/19) (the Opinion). In sum, the AG proposes that the Court of Justice of the European Union (CJEU) should declare the European Banking Authority’s Guidelines on Product Oversight and Governance Arrangements for Retail Banking Products invalid. The AG also proposes that the CJEU should rule that the preliminary reference procedure may be used in order to review the validity of soft law acts. This Opinion could lead to a landmark ruling, and may create a precedent on the validity of Level 3 regulations (guidelines, Q&As etc.) in the European Union (EU). In this blog, I will discuss the most relevant aspects of this Opinion.

Background information

In 2017, the European Banking Authority (EBA) issued Guidelines on product oversight and governance arrangements for retail banking products (the Guidelines, link). The relevant French supervisory authority (Autorité de contrôle prudentiel et de résolution) announced in a notice that it complied with those Guidelines, thus making them applicable to all financial institutions under its supervision.

The FBF (the French Banking Federation) lodged an application seeking the annulment of the ACPR notice before the Council of State (Conseil d’État). FBF claimed that the Guidelines are invalid due to the EBA’s lack of competence to issue such guidelines. In its reference order to the CJEU, the Council of State expressed some doubts as to the admissibility under Article 267 of Treaty on the Functioning of the European Union (TFEU), the article on preliminary rulings, and the merits of the plea under which Guidelines are invalid.

Opinion

The AG notes in his Opinion that, when comparing the scope of application with the actual content of the Guidelines that, with regard to their legal basis, the Guidelines go further than what Regulation No 1093/2010 (i.e. the Regulation establishing, inter alia, the EBA and its powers) allows for. As regards the directives (e.g. CRD IV) which are specifically cited by Guidelines in relation to its scope of application, the AG notes that there is a clear mismatch between the subject matter of those acts and that of the Guidelines. While the Guidelines have set out specific ‘rules’ that concern product governance, the directives mentioned in the Guidelines all relate to corporate governance. All in all, the AG finds that the EBA could not lawfully adopt the Guidelines.

Then, the AG concludes that it is essential to make soft law acts (like the Guidelines) subject to normal judicial review, at least with regard to their competences, so that those agencies as the EBA do not unlawfully interfere with the competences of other EU bodies or institutions. In respect to the formal outcome of the review of soft law measures, the AG recommends the CJEU to expressly provide an answer as to the validity of the Guidelines despite their nature as soft law measures instead of providing a binding interpretation.

The AG then goes into the rather complicated and technical questions whether a soft law measure like the Guidelines can be subjected to the CJEU’s review under Article 267 TFEU. It goes beyond the scope of this blog to discuss the finesses of this EU law conundrum in depth, but, ultimately, the AG comes to the ‘(structurally) dissatisfying (but necessary) conclusion’ that submitting a request for a preliminary ruling on validity of soft law measures is the only way in which the CJEU may ensure that there is at least some resemblance of a complete system of remedies provided for in EU law.

That said, the AG finds that a national court is within its right to annul, if it is itself entitled to do so under national law, the national ‘incorporation’ or ‘implementation’ measure that made a soft law EU measure applicable within the national territory, without first being obliged to submit a request for a preliminary ruling to the CJEU on that matter.

Conclusion and take away

First, and foremost, hold your horses. It is important to note that the AG’s Opinion is not binding on the CJEU and that the CJEU may come to a different ruling. However, if the CJEU follows the Opinion of the AG it may have, inter alia, the following consequences:

1. The Guidelines will be declared invalid. This will most likely mean that national supervisory authorities, like DNB, cannot rely on the Guidelines in its supervision anymore. But maybe even more important: the EBA will also be required to adopt new guidelines and/or Regulation No 1093/2010 should be revised; and
2. Level 3 regulations like guidelines and Q&A’s will be subjected to judicial review. The CJEU and the national courts, whether or not via the preliminary reference procedure, will be able to rule on the validity of these soft law measures. This means that financial institutions will have explicit legal remedies available to challenge, for example, guidelines issued by EBA, but also the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority.

The proof will be in the pudding. But I believe it is fair to say that if the CJEU adopts this Opinion, it will qualify as a landmark case. We will keep you posted.