ESG compliance in lending: the role of EBA guidelines and civil liability in Belgian banking

ABSTRACT

In Belgium, banks granting credit are legally obliged to assess the creditworthiness of applicants based solely on their financial strength. Previous instances of incorrect assessments, such as extending credit to near-insolvent entities, have led to banks being held civilly liable to external parties. Following the enforcement of the 29 May 2020 EBA Guideline, banks are additionally required to evaluate credit applicants for exposure to ESG risks. This raises the issue of whether non-compliance might similarly incur civil liability towards third parties. This study examines whether non-compliance with EBA Guidelines, particularly ESG-related obligations, could constitute a civil fault under Belgian law. We argue that a breach of EBA Guidelines does not invariably lead to a breach of a bank’s duty of care within the context of a private law dispute, since due consideration should always be given to the underlying purpose of the EBA Guidelines when assessing prudent conduct.

Acknowledgement

I would like to thank Prof. Dr. Reinhard Steennot and the anonymous reviewers of the Law and Financial Markets Review, for their valuable comments to earlier drafts of this paper. Comments are welcome at [email protected].

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 D Blommaert and D Bracke, De aansprakelijkheid van de bankier als kredietverlener in het gemeen en bijzonder kredietrecht (Larcier 2015) 115–16; E Wymeersch, R Steennot and M Tison, ‘Overzicht van rechtspraak. Privaat bankrecht (1999–2007)’ [2008] TPR 1053; E Wymeersch, M Dambre and K Troch, ‘Overzicht van rechtspraak. Privaat bankrecht (1992–1998)’ [1999] TPR 1797 et seq.; See i.a.: Bergen 12 June 2006 [2007] JLMB 146; Luik 29 June 2001 [2001] JT 864; Gent, 3 October 2018 [2019] RABG 438, note J Benoot; Gent, 26 June 2019 [2020] TBH 344, note E. De baere; Kh. Tongeren 16 November 2013 [2014] RABG 1121; Rb. Aarlen 13 March 2003 [2003] DAOR 78, note D. Blommaert; Rb. Luik 4 April 1990 [1990] JLMB 1291; Gent 19 September 2012 [2014] RABG 1098, note D Blommaert; Brussel 28 April 2008 [2009] RABG 1031, note D Bracke and D Blommaert; Gent 19 October 2011 [2012] RABG 1189; Antwerpen 8 September 2020 [2021] HOR 112–14; G Laguesse and P Proesmans, ‘Baromètre de jurisprudence en droit bancaire: 2019’ [2021] DAOR 13–14. However, certain case law emphasises the role of the borrower (see for example the judgment of the Court of Appeal of Antwerp of 21 November 2002, where the borrower's own duty of investigation and primary responsibility were strongly emphasised. According to the Court, it is primarily for the borrower to assess the appropriateness of applying for credit. Cf. Antwerpen 21 November 2002 [2003] DAOR 69). Blommaert and Bracke, 115.

2 Cf. n 1.

3 For consumer credit see Article VII. 69, §1 WER & VII.77, §1 WER. Cf. D Blommaert, F Bonnarens and J Vannerom, ‘Art. VII.77 WER’ in Bijzondere overeenkomsten. Artikelsgewijze commentaar met overzicht van rechtspraak en rechtsleer, II. Andere benoemde overeenkomsten, Consumentenkrediet (Kluwer 2016) 1 et seq.; Cass. 7 January 2008 [2009] T.Vred. 281, note C Biquet-Mahieu.; for mortgage credit see Article VII.133, §1 WER; for credit granted to SME’s see Article 5–7 Wet betreffende diverse bepalingen inzake de financiering voor kleine en middelgrote ondernemingen.

4 G Schrans and R Steennot, Algemeen deel van het Financieel recht (Intersentia 2003) 469, 615, with reference to: Bergen 20 September 1999 [2000] JLMB 1684; Luik 10 November 1998 [1999] RRD 31; Kh. Brussel 2 June 1998 [1998] Rev. Rég. Dr. 195; A Zenner and LM Henrion, ‘La responsabilite du banquier dispensateur de credit en droit belge’ [1984] JT 477. Particular obligations are incumbent on a banker who intends to grant credit to a company in financial difficulties. G Schrans and R Steennot, Algemeen deel van het Financieel recht (Intersentia 2003) 470.

5 See for example: L Cornelis, ‘De aansprakelijkheid van de bankier bij kredietverlening’ [1986] TPR 375.

6 E Wymeersch, R Steennot and M Tison, ‘Overzicht van rechtspraak. Privaat bankrecht (1999–2007)’ [2008] TPR 1058; Rb. Antwerpen 28 November 2000 [2001–2002] RW 1072; Kh. Brussel 3 April 2001 [2003] TBH 21; Antwerpen, 25 March 1987 [1989] T.B.H. 77; Blommaert and Bracke (n 1) 255–56. See also: E Wymeersch, ‘Bank Liability for Improper Credit Decisions in the Civil Law’ in R Cranston (ed.), Banks, Liability and Risk (Lloyd’s of London Press 1995) 186–87. It is not the appearance of the borrower's creditworthiness that is attributed to the bank as a fault. The fault of the banker lies in his decision to provide or maintain the credit, even though a normally prudent and reasonable banker, placed in the same circumstances, would not have granted the credit or would have terminated it. Cf. L Cornelis, ‘De aansprakelijkheid van de bankier bij kredietverlening’ [1986] TPR 375. The legal basis for the bank's fault is article 1382 BW, whereby the granting (or maintenance) of credit will be judged as a fault if it does not correspond to the conduct that might be expected of a normal prudent bank placed in the same circumstances. See for example Antwerpen, 25 March 1987 [1989] T.B.H. 77. Also in France, the principle of bank liability vis-a-vis third parties was founded on Article 1382 Civil Code. Cf. Blommaert and Bracke (n 1) 255. The fault of the bank can occur both during the granting and the duration of the credit agreement. Cf. Blommaert Bracke, (n 15) 255. The improper decision to grant or maintain credit could be due, for example, to insufficient research concerning the creditworthiness of the credit applicant or, applying a risk assessment that exceeds the limit a normal, reasonable banker would respect. Cf. E Wymeersch, ‘Bank Liability for Improper Credit Decisions in the Civil Law’ in R Cranston (ed.) Banks, Liability and Risk (Lloyd’s of London Press 1995) 186–87; K Byttebier, ‘Ondernemingsfinanciering door kredietinstellingen’ [1994] TPR 1522–23.

7 EBA, ‘Guidelines on Loan Origination and Monitoring’ (29 May 2020) (EBA/GL/2020/06).

8 Cf. infra.

9 For EBA see: Regulation (EU) No. 1093/2010 on the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority). For EIOPA see: Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority). For ESMA see: Regulation (EU) no 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending decision no 716/2009/EC and repealing commission decision 2009/77/EC.

10 D Mariia, ‘The Broadening ‘Soft Law’ Powers of the European Banking Authority’ [2022], European Company Law Journal 22–23. Domina and Schemmel argue that these instruments have become ‘one of the central tools in the regulation of European financial markets’. J Schemmel, ‘The ESA Guidelines: Soft Law and Subjectivity in the European Financial Market – Capturing the Administrative Influence’ [2016] Indiana J. Global Legal Stud 457. For more on EBA’s objective see Art. 1(5) Regulation 1093/2010. The relevant provisions on EBA’s power to draft regulatory standards and implement technical standards are respectively Art. 290(1) TFEU and Art. 15(1) Regulation 1093/2010 of the European Parliament and of the Council of 24 Nov. 2010 establishing a European Supervisory Authority (European Banking Authority). Both are binding. Cf. Article 8(1)(a) of the Regulation 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority). Furthermore, as part of its task to establish consistent, efficient and effective supervisory practices within the ESFS, and to ensuring the common, uniform and consistent application of Union law, the EBA may issue guidelines and recommendations addressed to competent authorities or financial institutions in its field of competence. Cf. Art. 16(1) Regulation 1093/2010. Regulation 1093/2010 requires that the competent authorities and financial institutions shall make every effort to comply with the EBA guidelines and recommendations. Cf. Art. 16(3) Regulation . 1093/2010. For more on ‘soft law’ see for example: M Eliantonio, E Korkea-Aho and O Stefan, EU Soft Law in the Member States: Theoretical Findings and Empirical Evidence (Hart 2021) 11.

11 Regulation 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority).

12 EBA (n 7) 4.

13 ibid. 5–6 & 77. For the obligations on Credit institutions see art. Art. 4(1), point 3, Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms. Considering the interests of consumers, see also the binding regulations to assess consumer creditworthiness. Cf. Art. 18 and 20(1) Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property (Mortgage Credit Directive) and Art. 8 of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers (Consumer Credit Directive). For small and medium-sized enterprises, there is no duty at European level for credit institutions to assess creditworthiness, but in Belgium this duty is imposed at national level. Cf. Art. 5 Act of 21 December 2013 on various provisions on financing for small and medium-sized enterprises, BS 31 December 2013 (SME Financing Law).

14 The exact wording varies depending on the obligation imposed. For example, the text does not always stipulate that ESG Factors ‘should be taken into account’, but other wording, depending on the obligation, also occurs, such as: ‘consider the impact’, ‘assess the borrower’s exposure to’, ‘identify borrowers that are exposed to’ or ‘to document’. Cf. EBA (n 7), nr. 27 (concerning the development of their credit risk culture), 57 (concerning credit risk policies and procedures), 126–127, 146, 149 (concerning the assessement of the borrower’s creditworthiness), 196 (when making a credit decision) and 208 (when valuing collateral).

15 EBA, ‘On management and supervision of ESG-risks for credit institutions and investment firms’ (EBA/REP/2021/18).

16 EBA (n 15) 6. Freely translated from: ‘Environmental, social or governance matters that may have a positive or negative impact on the financial performance or solvency of an entity, sovereign or individual’.

17 ibid. 43. ‘Social matters’ have, according to the report, its own but substantively similar definition to ‘Social Factors’: ‘Social matters that may have a positive or negative impact on the financial performance or solvency of an entity, sovereign or individual’. Cf. ibid. 7.

18 ibid. 43.

19 ibid.

20 The fact that human rights fall under ‘ESG factors’ is confirmed by the fact that they are included in the non-exhaustive list of social factors proposed by the report. Cf. EBA (n 15) 160.

21 EBA (n 7) 35, nr. 97; 38, nr. 120, 42, nr. 143. Such principle is also found in Belgian legal doctrine and case law. See, for example: Gent, 3 October 2018 [2019] RABG 438, note J. Benoot; Gent, 26 June 2019 [2020] TBH 335, note E. De baere; E Wymeersch, M Dambre and K Troch, ‘Overzicht van rechtspraak. Privaat bankrecht (1992–1998)’ [1999] TPR 1802 et seq.; Kh. Brussel 8 November 2002 [2004] TBH 170; E De baere, ‘De aansprakelijkheid van de bank bij de kredietverlening naar gemeen recht: over (wederzijdse) informatieverplichtingen en ontevreden borgen’ [2020] TBH 347; Gent 19 October 2011 [2012] RABG 1189; Luik, 16 May 2006 [2006] Jaarboek Kredietrecht3.

22 EBA (n 7) 18.

23 NBB, ‘EBA-richtsnoeren inzake de initiëring en monitoring van leningen (EBA/GL/2020/06)’, Circulaire, 20 July 2021, 2.

24 EBA (n 7) 18. The Dutch text mentions 30 June 2021, but the English text mentions 30 June 2022. The National Bank of Belgium follows the English text for the entry into force. See in this regard: NBB, ‘EBA-richtsnoeren inzake de initiëring en monitoring van leningen (EBA/GL/2020/06)’, Circulaire, 20 July 2021, 2.

25 EBA (n 7) 18.

26 Cf. Guidelines from 22 March 2016 (EBA/GL/2015/18).

27 Case C-911/19 Fédération Bancaire Française (FBF) v Autorité de Contrôle Prudentiel et de Résolution (ACPR) EU:C:2021:599, para. 34.

28 ibid. para. 36, with reference to C-16/16 Belgium v Commission EU:C:2018:79, para. 31, and C-621/16 P Commission v Italy EU:C:2019:251, para. 44 and the case law cited

29 Harley explains that legal effects can be defined as ‘the capacity of EU legal instruments to change the rights and obligations of actors’. Cf. T Harley, The Foundations of European Community Law 354 (7th edn, OUP 2010). Under the TFEU, acts can be challenged either directly, via an action for annulment (Articles 263 and 265 TFEU), or indirectly via preliminary ruling (Article 267 TFEU) and incidental review (Article 277 TFEU). Cf. F Annunziata, ‘The Remains of the Day: EU Financial Agencies, Soft Law and the Relics of Meroni’ [2021] EBI Working Paper Series 5.

30 FBF v ACPR (n 27) para. 38, with reference to judgments C-599/15 P Romania v Commission EU:C:2017:801, para. 48, and Belgium v Commission (n 28) para. 32). See also the IBM Case where the CJEU explained that legal effects are deemed to exist where the measure is ‘binding on, and capable of affecting the interests of the applicant by bringing about a distinct change in his legal position’. Cf. Case C-60/81 IBM v Commission EU:C:1981:264, para. 9. For more details, see for example: M Eliantonio, E Korkea-Aho and O Stefan, EU Soft Law in the Member States: Theoretical Findings and Empirical Evidence (Hart 2021) 263.

31 Cf. FBF v ACPR (n 27) para. 39–46.

32 Cf. ibid. para. 50. See also for example: Annunziata (n 29)29.

33 Cf. ibid. para. 54, with reference to Belgium v Commission (n 28) para. 44.

34 Opinion of Advocate General Bobek, Case C-911/19, FBF v ACPR, para. 105.

35 D Quelhas, ‘The relative normativity of European Supervisory Authorities’ guidelines and their judicial review: A look at the FBF v. ACPR Case before the CJEU’ [2021] RISF 103.

36 FBF v ACPR (n 27) para. 62.

37 ibid. para. 65. In this same line, the CJEU had already ruled in Case C-491/01 British American Tobacco (Investments) and Imperial Tobacco EU:C:2002:741, para. 40; Case C-477/14 Pillbox 38 EU:C:2016:324 , para. 19; Case C-62/14 Gauweiler EU:C:2015:400 para. 29; Case C-643/16 American Express EU:C:2018:67, para. 30; See also Annunziata (n 29) 46–48.

38 FBF v ACPR (n 27) para. 66 et seq. For more on the validity of the Guidelines, see for example the excellent analysis in Annunziata (n 29) 20–29.

39 Case C-501/18 Balgarska Narodna Banka EU:C:2020:729.

40 Cf. FBF v ACPR (n 27), para. 45–46. AG Bobek states that even if the contested guidelines are formally addressed to competent authorities and to financial institutions (while Article 16(1) of Regulation 1093/2010 provides that the EBA shall issue guidelines addressed to competent authorities or financial institutions), it is clear that the financial institutions are those that will end up having to comply with the obligations and, as such, are the genuine addressees (para. 47). He continues saying that: ‘In systemic terms, the guidelines closely resemble directives: although formally addressed to the Member State, their provisions are in due course meant to govern the conduct of individuals, with the latter having no choice but to apply them. Competent authorities are not the real addressees of those obligations; their task is simply to opt in or to opt out. However, once that decision is made, the initially non-binding nature becomes very much binding, as the ‘nominal addressee’ (the competent supervisory authority) becomes an effective ‘enforcer’. Thus, there is very little choice, or rather none at all, on the part of the real addressees of the guidelines, namely the financial institutions, on whether to comply with them (para. 48)’.

41 ibid. para. 38. For settled case-law, see for example: Romania v Commission (n 30)para. 48, and Belgium v Commission (n 30), para. 32. Annunziata explains that the Court uses different requirements in each specific situation, including: content, wording, context, intention of the author of a certain measure, the perception of the parties concerned, and the powers of the author itself. The Court does not necessarily rely on all these criteria at the same time. Cf. Annunziata (n 29) 9.

42 FBF v ACPR (n 27) para. 39–41.

43 ibid. para. 42. See, to that effect, Belgium v Commission (n 30)para. 30.

44 FBF v ACPR (n 27) para. 43.

45 ibid. para. 44.

46 Cf. ibid. para. 45–46.

47 ibid. para.70; see also: Quelhas (n 35).

48 See also: D Quelhas, ‘The relative normativity of European Supervisory Authorities’ guidelines and their judicial review: A look at the FBF v. ACPR Case before the CJEU’ [2021] RISF 102.

49 Mariia (n 10).

50 NBB, ‘EBA-richtsnoeren inzake de initiëring en monitoring van leningen (EBA/GL/2020/06)’, Circulaire, 20 July 2021, 4. Within two months of a Guideline’s issuance, each competent authority must confirm whether it intends to comply with that Guideline or not. If it does not intend to comply, it must inform the EBA, stating its reasons (explain). When EBA receives the reasons provided by the competent authority for not complying, EBA must publish the decision and may decide, on a case-by-case basis, to publish the reasons provided by the competent authority. The banks that must make every effort to comply with the Guidelines are the ones under supervision of the NBB.

51 P Van Ommeslaghe and L Simont, ‘De aansprakelijkheid van de bankier-kredietverlener in het Belgische recht’ [1986] TPR 1095. See also: S Stijns and I Samoy, Leerboek verbintenissenrecht–Boek 1bis (die Keure / la Charte 2020) 52 et seq. After the reform of the law of extra-contractual liability it remains that a fault constitutes a violation of a specific legal rule or a failure to comply with a duty of care. See in this regard art. 5.146–5.147 of the Act of 6 August 2018 inserting the provisions on extra-contractual liability in the new Civil Code. For an analysis of these new provisions, see for example: Grotius-Pothier Onderzoeksgroep, ‘Een rechtsvergelijkende analyse van de Belgische hervorming van het buitencontractuele aansprakelijkheidsrecht: enkele suggesties voor wetgever en rechter’ [2020] TBBR 133–37.

52 Cf. Wet van 22 februari 1998 tot vaststelling van het organiek statuut van de nationale bank van België.

53 Art. 12bis, §2, lid 3. For binding regulation on Money Laundering see for example: Reglement van de Nationale Bank van België van 21 november 2017 betreffende de voorkoming van het witwassen van geld en de financiering van terrorisme, BS22 December 2017.

54 Council of State, Verdict nr. 241.822 of 19 June 2018, XIV-35.624. The FSMA is the regulatory authority responsible for overseeing and regulating various aspects of the financial sector in Belgium.

55 ibid. XIV-35.624-25/30.

56 Although circulars are not binding, they are subject to annulment and suspension: ‘Overwegende dat circulaires van een bevoegde overheid, die nieuwe regels aan de bestaande toevoegen waarvan het bovendien de bedoeling is ze verbindend te maken door die bevoegde overheden en waarvan de naleving afdwingbaar is, omzendbrieven zijn met verordenend karakter die in beginsel vernietigbaar zijn en derhalve ook voor schorsing vatbaar; dat te dezen de CBF regels en voorwaarden vaststelt die niet voorkomen in de bestaande wetgeving maar die de bestaande wetgeving aanvullen;’ (Freely translated: ‘Whereas circulars issued by a competent authority, which add new rules to the existing ones which, moreover, are intended to be made binding by those competent authorities and compliance with which is enforceable, are circulars of a regulatory nature which are in principle voidable and therefore suspendable; whereas, in this regard, the CBF adopts rules and conditions which do not appear in the existing legislation but which supplement the existing legislation;’) Cf. Council of State, Verdict nr. 91.998 8 January 2001 in the case A. 93.715/IX-2465, IX-2465-6/19.

57 Cf. Cour de Cassation, civil, Chambre commerciale, 21 septembre 2022, 21-12.335, ECLI:FR:CCASS:2022:CO00519.

58 More specifically, the French Court of Cassation ruled that a breach of anti-money laundering legislation could not result in a fault within the meaning of Art. 1382 of the Civil Code. Cf. Cour de Cassation, civil, Chambre commerciale, 21 septembre 2022, 21-12.335, FR:CCASS:2022:CO00519, para. 11: ‘la victime d'agissements frauduleux ne peut se prévaloir de l’inobservation des obligations de vigilance et de déclaration précitées pour réclamer des dommages-intérêts à l’organisme financier’.

59 Cf. Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.

60 In Genil (C-604/11, EU:C:2013:344, para. 57), the Court of Justice of the European Union held that in the absence of EU legislation, it is for the Member States to determine the contractual consequences of non-compliance with MiFID I obligations, as long as those consequences are subject to the principles of equivalence and effectiveness: ‘It should be noted that, although Article 51 of Directive 2004/39 provides for the imposition of administrative measures or sanctions against the parties responsible for non-compliance with the provisions adopted pursuant to that directive, it does not state either that the Member States must provide for contractual consequences in the event of contracts being concluded which do not comply with the obligations under national legal provisions transposing Article 19(4) and (5) of Directive 2004/39, or what those consequences might be. In the absence of EU legislation on the point, it is for the internal legal order of each Member State to determine the contractual consequences of non-compliance with those obligations, subject to observance of the principles of equivalence and effectiveness (see, to that effect, Case C-591/10 Littlewoods Retail and Others EU:C:2012:478 para. 27 and the case-law cited)’.

61 Cf. M Kruithof, ‘De Privaatrechtelijke Werking van de MiFID-2004 Gedragsregels: Een Analyse van de Mate Waarin Zij de Wederzijdse Rechten En Plichten van Dienstverlener En Cliënt Kunnen Aanvullen En Beperken’ [2012] Financiële Regulering in de Kering 308 with reference to : M Tison, ‘De civielrechtelijke dimensie van MiFID in rechtsvergelijkend perspecief’ [2010] Ondernemingsrecht (The Nederlands) 308; G Ferrarini, ‘Contract Standards and the Markets in Financial Instruments Directive (MiFID)’ [2005] European Review of Contract Law 20; F Ferrarini, ‘Contract Standards and the Markets in Financial Instruments Directive (MiFID)’ [2005] European Review of Contract Law 21; W Vandevoorde, ‘De Bescherming van de belegger herbekeken. Een commentaar bij enkele instutionele en transactionele innovaties van de Belgische bepalingen tot omzetting van Richtlijn 2004/39 (de ‘MiFID-Richtlijn’) en Richtlijn 2006/73’ [2007/VI] BFR 382; M-D Weinberger, Gestion de portefeuille et conseil en investissement: aspects contractuels et de responsabilités avant et après MiFID (Wolters Kluwer 2008) 166.

62 Kruithof (n 61) 312.

63 ibid. See for example art 27, §1 Wet van 2 augustus 2002 betreffende het toezicht op de financiële sector en de financiële diensten, BS4 September 2002: ‘Bij het aanbieden of verstrekken van financiële producten of diensten of, in voorkomend geval, nevendiensten, zetten de gereglementeerde ondernemingen zich op loyale, billijke en professionele wijze in voor de belangen van hun cliënten, en op een manier die bevorderlijk is voor de integriteit van de markt. Bij het aanbieden of verstrekken van beleggingsdiensten of, in voorkomend geval, nevendiensten, nemen zij inzonderheid de in de paragrafen 2 tot en met 10 en de artikelen 27bis tot 27quater neergelegde gedragsregels in acht’ (Freely translated: ‘When offering or providing financial products or services or, where appropriate, ancillary services, regulated firms shall act honestly, fairly and professionally in accordance with the best interests of their clients and in a manner which promotes the integrity of the market. In particular, when offering or providing investment services or, where appropriate, ancillary services, they shall comply with the conduct of business rules set out in paragraphs 2–10 and Articles 27a to 27c.’). It is clear that the consumer investor has to prove that the investment firm did not behave like a normally prudent professional.

64 ESMA, 'Final Report–Guidelines on certain aspects of the MiFID II suitability requirements' (23 September 2022).

65 ESMA, 'Frequently Asked Questions, A Guide to Understand ESMA'(3 January 2011) 5.

66 Regarding that market participants will hardly be able to deviate from ESMA Guidelines, see for example ESMA, SMSG advice to the European Commission–Response to the Public Consultation on the Operations of the European Supervisory Authorities, 10 May 2017, mn. 9.

67 To recall: in the Dutch RDS case, both the UNGP and the OECD Guidelines were used to substantiate the duty of care standard of Royal Dutch Shell. Both the UNGP and the OECD are soft-law instrument, intended to give rights to individuals. Although these soft-law instrument cannot be enforced since the provisions are non-binding, it does seem appropriate to consider these regulations to determine the scope of a legal entity–although they cannot be enforced since the provisions are non-binding.

68 Balgarska Narodna Banka (n 39). In tBalgarska Narodna Banka, the CJEU declared, for the first time, invalid a part of a legally non-binding EU act – a recommendation adopted by the European Banking Authority and addressed to the Bulgarian National Bank. The facts of the Balgarska Narodna Banka case are as follows: BT, and individual depositor, brought an action for damages against the Bulgarian National Bank (BNB). BT, an individual depositor concluded, between 2008 and 2011, three contracts with Bulgarian bank Korporativna Targovska Banka (KTB) on unlimited deposits in euros and leva at preferential conditions. The amounts deposited were guaranteed by the Bulgarian Bank Deposit Guarantee Fund (‘Fund’) up to BGN 196,000 (approximately EUR 100,000). On 20 June 2014, KTB informed the BNB that it was suspending payments to its customers due to a lack of liquidity due to a massive bank run. As a reaction, the BNB decided to place KTB under special supervision for a period of three months due to a risk of insolvency, appointed receivers, suspended the execution of all KTB’s commitments and prohibited KTB from carrying on all activities covered by its banking licence. On 17 October 2014, the EBA adopted Recommendation EBA/REC/2014/02, addressed to the BNB and the Fund. The Recommendation established essentially that the BNB breached EU Law and concluded that the Fund is required to pay out the guaranteed amounts of unavailable deposits following the determination of the BNB. On 4 December 2014, the Fund paid out to BT the amount of BGN 196,000 plus contractual and remuneration interest for the period from 30 June to 6 November 2014. The remaining credit balances (BGN 44.070) were included in the list of recognised claims within the bankruptcy proceedings. Since BT was not fully reimbursed, he brought an action before the Administrative Court of the City of Sofia, Bulgaria, demanding compensation for all damage resulting, directly and immediately, from actions and omissions of the BNB committed in breach of EU law. BT argues that the special supervisory measures vis-à-vis KTB were unjustified and disproportionate to the situation of that bank. To the effect that the decision in Balgarska Narodna Banka Case was in line with the CJEU former rulings, seeC-322/88 Grimaldi EU:C:1989:646, para.18: ‘However, in order to give a comprehensive reply to the question asked by the national court, it must be stressed that the measures in question cannot therefore be regarded as having no legal effect . The national courts are bound to take recommendations into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding Community provisions’; C-207/01 Altair Chimica EU:C:2003:451, para. 41: As regards, third, the interpretation of Recommendation 81/924, it must be recalled that, according to the case-law of the Court, even if recommendations are not intended to produce binding effects and are not capable of creating rights that individuals can rely on before a national court they are not without any legal effect. The national courts are bound to take recommendations into consideration in order to decide disputes submitted to them, in particular where they cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding Community provisions (Case C-322/88 Grimaldi [1989] ECR 4407, paragraphs 7, 16 and 18); and C-28/15 Koninklijke KPN and Others EU:C:2016:692, para. 41: ‘Nevertheless, according to the Court’s settled case-law, even if recommendations are not intended to produce binding effects, the national courts are bound to take them into consideration for the purpose of deciding disputes submitted to them, in particular where the recommendations cast light on the interpretation of national measures adopted in order to implement them or where they are designed to supplement binding EU provisions (C-55/06 Arcor,EU:C:2008:244, paragraph 94 and the case-law cited).’).

69 Balgarska Narodna Banka (n 39) para. 81.

70 FBF v ACPR (n 27) para. 71, with reference toGrimaldi (n 68), para. 18 and Balgarska Narodna Banka (n 39) para. 80.

71 para. 71, with reference to C-322/88 Grimaldi (n 68), para. 18, and to Balgarska Narodna Banka (n 39) para. 80.

72 Mariia (n 10).

73 The Court fails to clarify which courts must consider EBA Guidelines in order to resolve the disputes submitted to them. Until now, the context in which the Court always considered that both EBA Recommendation and EBA Guidelines should be considered were disputes before an administrative court. In the case BT v Balgarska Narodna Banka the referring court was the Administrative Court of the City of Sofia, Bulgaria. In the FDF case, the reffering court was the Conseil d’État (Council of State, France). The Court does not state that EBA recommendations or Guidelines should be taken into consideration before a civil court.

74 K Chen, Legal Aspects of Conflicts of Interest in the Financial Services Sector in the EU and China (Stockholm University 2018) 135.

75 Sydinnovator AB and Conny H v Alfred Berg Fondkommission AB [1995] NJA 695.

76 ibid. 699.

77 ibid. 705. Freely translated from: ‘Eftersom allmänna råd principiellt sett saknar bindande verkan kan enbart det förhållandet att de inte har följts iett visst fall inte grunda skadeståndsskyldighet. Allmänna råd kan emellertid allt efter sin karaktär, såsom HovR:n funnit, ha betydelse för en bedömning av omomständigheterna i ett fall är sådana att skadeståndsgrundande vållande skall anses föreligga. Sålunda kanden som har följt ett exempel i allmänna råd ofta bedömas ha handlat med tillbörlig aktsamhet, medan det kanligga nära till hands att anse att den som har avvikit från ett rekommenderat handlingssätt har gjort sig skyldigtill vårdslöshet’.