Opinion of the Advocate General — ECLI:EU:C:2019:943
Date: 2019-11-07
Language of the case: Latvian
Subject matter: Right of establishment;Free movement of capital;Internal market - Principles
Procedure: Reference for a preliminary ruling
Origin: Latvia

Summary C-480/18 — 1 
Case C-480/18 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
23 July 2018 
Referring court:  
Augstākā tiesa (Supreme Court, Latvia) 
Date of the decision to refer:  
13 July 2018 
Applicant and appellant: 
AS ‘PrivatBank’ 
Other party to the proceedings: 
Finanšu un kapitāla tirgus komisija (Financial and Capital Markets 
Commission, Latvia) 
 
Subject matter of the main proceedings 
An application by a credit institution for the annulment of a decision by the 
competent national authority in which the authority found the said credit 
institution liable, as a payment service provider, for a payment that was not 
executed, and therefore imposed various penalties on it. 
Subject matter and legal basis of the reference 
On the basis of Article 19(3)(b) TEU and Article 267 TFEU, the referring court 
requests an interpretation of Article 2(2), Article 20(1) and (5) and Article 21(2) 
of Directive 2007/64/EC, in order to clarify the scope of the competent national 
authority’s powers to supervise, impose penalties and resolve disputes concerning 
payments not made in euros or other currencies of the Member States. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-480/18 
 
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Questions referred 
(1) Is national legislation that empowers the [Latvian Financial and Capital 
Markets] Commission to examine complaints by payment service users even 
where the payment services have not been executed in euros or in the 
national currency of a Member State, and thus to find there to be 
infringements of the Law [on payment services and electronic money] and to 
impose penalties, compatible with Article 2(2) of Directive [2007/64/EC]? 
(2) Must Article 20(1) and (5) and Article 21(2) of the Directive be interpreted 
as allowing for the competent authority to supervise and impose penalties 
also in respect of payment services not executed in euros or the currency of a 
Member State outside the euro area? 
(3) For the purposes of the supervisory functions laid down in Articles 20 and 
21 of the Directive, or of the complaint procedures established in Articles 80 
to 82 of the Directive, does the competent authority have the power to 
resolve disputes between a payer and a payment service provider arising 
from the legal relationships referred to in Article 75 of the Directive, 
determining who is liable for non-execution or defective execution of a 
transaction? 
(4) In carrying out the supervisory functions laid down in Articles 20 and 21 of 
the Directive or the complaint procedures established in Articles 80 to 82 of 
the Directive, must the competent authority take account of an arbitral award 
made in settlement of a dispute between a payment service provider and a 
payment service user? 
Provisions of EU law referred to 
Directive 2007/64/EC of the European Parliament and of the Council of 
13 November 2007 on payment services in the internal market amending 
Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing 
Directive 97/5/EC (OJ 2007 L 319, p. 1): Article 2(2) (Titles III and IV of the 
Directive to apply only to payment services made in euros or the currency of a 
Member State); the first subparagraph of Article 20(1) and Article 20(2), (3), (4) 
and (5) (designation of competent authorities and delimitation of their supervisory 
duty); Article 21(1) and (2) (supervisory methods and scope to impose penalties); 
Article 23(1) (judicial review of decisions); Article 75(1) and the third 
subparagraph of Article 75(2) (part of Title IV) (payment service provider’s 
liability for the correct execution of the transaction); Article 80 (requirement for 
Member States to establish a complaint mechanism); Article 81(1) (requirement 
for Member States to establish effective, proportionate and dissuasive penalties); 
Article 82 (authorities’ power to administer complaint procedures and impose 
penalties); Article 83 (requirement to establish out-of-court complaint 
procedures); and Article 86(1), which is part of the Title on final provisions 
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(extent to which legislation must be harmonised with the Directive and exceptions 
to this obligation). 
Provisions of national law referred to 
Maksājumu pakalpojumu un elektroniskās naudas likums (Law on payment 
services and electronic money; ‘the Law’), Article 2(3): 
‘The provisions in Articles 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 
71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 
93, 94, 95, 96, 98, 99, 100, 101, 102, 103 and 104 of this Law shall apply to 
payment service providers who provide payment services in Latvia, where the 
payer’s payment service provider and the payee’s payment service provider are 
located in a Member State and the payment service is executed in euros or the 
currency of a Member State.’ 
Article 45 of the Law: 
‘The [Financial and Capital Markets] Commission [‘the Commission’] may 
establish additional requirements governing the activities of authorised institutions 
in order to reduce the risks of those activities and to protect electronic money 
holders and payment service users.’ 
Article 49 of the Law: 
‘In order to verify that institutions’ activities comply with the requirements of this 
Law, the Commission shall be authorised to: 
(1) ask institutions to provide the information required for supervisory purposes; 
(2) carry out inspections of institutions.’ 
Article 56(1) of the Law: 
‘If the Commission considers that the institution is not complying with the 
requirements of Chapters II, III, IV, V and VI of this Law, with the Commission’s 
legal acts, with the Law on the prevention of money laundering and the financing 
of terrorism, or with the directly applicable legal acts of the institutions of the 
European Union, it shall order the institution to adopt immediate measures to 
remedy the situation.’ 
Article 56(2) of the Law: 
‘In addition to the provisions of paragraph (1) of this Article, the Commission 
shall be authorised to adopt one or more of the following measures: 
(1) to issue a warning to the institution; 
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(2) to impose restrictions on the institution’s activities; 
(3) to suspend in whole or in part the provision of payment services; 
(31) to suspend in whole or in part the issue of electronic money; 
(4) to issue the institution’s management and supervisory bodies, and the 
managers and members of those bodies, with such written orders as may be 
required in order to restrict or stop any activities by the institution that jeopardise 
or may jeopardise the institution’s stability, solvency or reputation, giving reasons 
for its decisions; 
(5) to impose a fine of up to 100 000 Latvian lats (LVL).’ 
Article 99(1) of the Law: 
‘Where a payment order is submitted by the payer, his payment service provider 
shall be liable to the payer for correct execution of the payment transaction, unless 
the provider can prove to the payer and, where relevant, to the payee’s payment 
service provider that the payee’s payment service provider received the amount of 
the payment in accordance with Article 94(1) of this Law. Where the payer’s 
payment service provider can prove that the payee’s payment service provider 
received the amount of the payment, the payee’s payment service provider shall 
be liable for the correct execution of the payment transaction.’ 
Article 99(9) of the Law: 
‘Where the payment is not executed or is executed defectively and the payee’s 
payment service provider is not liable under this Article, the payer’s payment 
service provider shall be liable to the payer.’ 
Article 99(10) of the Law: 
‘Where the payer’s payment service provider is liable under paragraph 9 of this 
Article, he shall without delay refund to the payer the amount of the non-executed 
or defective payment transaction or restore the debited payment account of the 
payer to the state in which it would have been had the defective payment 
transaction not taken place.’ 
Article 104 of the Law: 
‘Payment service providers and electronic money issuers shall provide an 
effective procedure for handling complaints and claims (disputes) from payment 
service users and electronic money holders regarding the provision of services. 
Full information on the complaints and claims (disputes) procedure must be freely 
available in writing from the payment service provider or electronic money issuer 
and must also be available on the payment service provider’s or electronic money 
issuer’s website, where it has one.’ 
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Article 105(2): 
‘In accordance with the relevant legislation, the Commission shall examine 
complaints concerning infringement of the provisions of Chapters VII, VIII, IX, 
X, XI, XII, XIII and XIV of this Law submitted by payment service users or 
electronic money holders who are not consumers within the meaning of the 
Patērētāju tiesību aizsardzības likums (Consumer Protection Law), where the 
infringement has caused or may cause significant harm to the interests of groups 
of the aforesaid payment service users or electronic money holders (collective 
interests). Where the information in the complaint and in the accompanying 
documentation does not point to an infringement that has caused or may cause 
significant harm to the interests of groups of the said payment service users or 
electronic money holders (collective interests), the Commission may decide not to 
commence administrative proceedings. In this case, the Commission shall send a 
reply to the payment service user or electronic money holder.’ 
Article 105(5) of the Law: 
‘Where, as a result of undertaking administrative proceedings, the Commission 
finds that an infringement of the provisions of Chapters VII, VIII, IX, X, XI, XII, 
XIII and XIV of this Law has caused or may cause significant harm to the 
collective interests of payment service users or electronic money holders who are 
not consumers within the meaning of the Consumer Protection Law, it shall have 
the power to issue a decision ordering the payment service provider or electronic 
money issuer to cease the infringement of the provisions of Chapters VII, VIII, 
IX, X, XI, XII, XIII and XIV of this Law or to remedy the infringements that have 
been committed, and it may set a deadline for implementing the necessary 
measures.’ 
Article 106(1) of the Law: 
‘Where the payment service user or electronic money holder has submitted a 
complaint to the ombudsman of the Latvian Association of Commercial Banks 
(‘the ombudsman’) concerning infringement of the provisions of Chapters VII, 
VIII, IX, X, XI, XII, XIII and XIV of this Law, and the ombudsman finds that the 
payment service that was provided does not comply with the requirements of this 
Law or with the terms of the contract, to the detriment of the payment service user 
or electronic money holder, the ombudsman shall order the payment service 
provider to compensate the payment service user or electronic money holder for 
the damage caused.’ 
Article 106(3) of the Law: 
‘Payment service users or electronic money holders may apply to the courts 
irrespective of whether they have first submitted a complaint to the ombudsman.’ 
Article 23(1) of the Civilprocesa likums (Law on Civil Procedure): 
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‘All civil disputes shall come under the jurisdiction of the courts, unless the law 
provides otherwise. This does not prevent the parties, by mutual agreement, from 
submitting the dispute to arbitration.’ 
Article 132(1)(3) of the Law on Civil Procedure: 
‘The court shall not admit the claim to process where, under the established legal 
procedure, the parties have agreed to submit the dispute to arbitration.’ 
Brief summary of the facts and the main proceedings 
1. On 16 November 2011 ‘Forcing Development Limited’ (‘the customer’) 
sent a payment order to AS PrivatBank (‘the appellant’) for 394 138.12 US dollars 
(USD), to be transferred from an account held by the customer with the appellant 
to another person’s account at the Lithuanian bank ‘Snoras Bank’. 
2. On the same day, the appellant debited the amount of the payment from the 
customer’s account and at 15.24 it transmitted the payment order to ‘Snoras Bank’ 
via the SWIFT system. The appellant also transferred funds to its correspondent 
account with that bank, to be paid into the account of the customer’s payee. 
However, the payment order was not executed immediately, because there were 
insufficient funds in the correspondent account. 
3. On 16 November 2011 the Lithuanian Central Bank imposed a moratorium 
on ‘Snoras Bank’ prohibiting it from providing financial services. ‘Snoras Bank’ 
was apparently notified of the moratorium at 15.08. At 16.20, ‘Snoras Bank’ 
transferred the money into the appellant’s correspondent account, where it 
remained, as it was no longer possible to carry out any payment operations. 
4. In accordance with the account agreement, the customer applied to an 
arbitration tribunal for the repayment of the aforesaid sum by the appellant. The 
application was dismissed in an award dated 4 February 2014, on the grounds that 
the appellant had complied with its legal obligations. 
5. The Commission received a complaint from the customer about the 
appellant’s actions, namely the refusal to credit the customer’s account with the 
funds that had remained in the appellant’s possession as a result of the non-
execution of the payment order in question. In a decision dated 4 July 2013 the 
Commission found that, under Article 99(9) of the Law on payment services and 
electronic money, liability for executing the customer’s order lay with the 
appellant which, therefore, had to find a way to satisfy that obligation. The 
Commission ordered the appellant to consider whether changes were needed to its 
internal control systems and procedures, imposed a fine on it of LVL 100 000 
(approximately 140 000 euros) and ordered its shareholders to assess whether the 
members of the board were fit for office. 
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6. This decision was confirmed in a decision of the Commission dated 
17 October 2013 (‘the contested decision’). 
7. The appellant brought an action before the Administratīvā apgabaltiesa 
(Regional Administrative Court) seeking the annulment of the contested decision 
and the award of compensation for the material damage suffered. In its action, the 
appellant argued that it was precisely because of the actions of ‘Snoras Bank’, 
which had paid funds into a correspondent account after a moratorium on financial 
services had been announced, that it was not possible to execute the payment or 
return the money to the customer. In its opinion, internal procedures cannot make 
provision for such situations. 
8. The action was dismissed in a judgment handed down by the Administratīvā 
apgabaltiesa (Regional Administrative Court) on 5 August 2015, on the grounds 
that, under Article 99(9) of the Law [on payment services and electronic money], 
the appellant was liable for the execution of the payment order, and the payment 
order was not executed in due time before the imposition of the moratorium 
precisely because the appellant had not provided sufficient funds in its 
correspondent account with ‘Snoras Bank’. For its part, ‘Snoras Bank’ was not 
liable for the execution of the payment order under Article 99 of the Law because 
it did not even receive the money required to execute the payment order. That 
money ultimately remained in the appellant’s correspondent account, which was 
not debited. The Commission therefore acted with good reason in finding that the 
appellant was liable for the execution of the payment and had committed a breach 
of Article 99(9) of the Law. The court also held that the penalties imposed were 
justified. In addition, given that the appellant submitted a claim against ‘Snoras 
Bank’ for a refund that included the sum that legally was in the appellant’s 
possession, even if the appellant could not access it at the time, there were no 
grounds for the appellant to believe that it was entitled both to the money (as part 
of its claim for a refund) and also to withhold the money from the customer, thus 
enriching itself at the customer’s expense. 
9. The appellant filed an appeal with the referring court against the judgment. 
Essential arguments of the parties in the main proceedings 
10. The appellant considers that it satisfied the customer’s payment order and 
that liability for the execution in full of the payment rests with the payee’s bank. It 
claims that the Administratīvā apgabaltiesa (Regional Administrative Court) 
exceeded its powers when it decided on a civil dispute concerning relations 
between the credit institution and the customer, and that it failed to take into 
account the award made by the arbitration tribunal that had settled the dispute. As 
the arbitration tribunal had declared that the appellant was not to blame for the 
non-execution of the payment, there were no grounds for the Commission to 
impose penalties. In its opinion, Article 99 of the Law does not apply to the 
present case, because the currency of the payment in question was neither the euro 
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nor the national currency of a Member State, and the parties had determined 
liability for this type of payments in a private agreement. 
11. The Commission is seeking to have the appeal dismissed. It considers that, 
in the circumstances of the present case, it has the power to resolve complaints 
and impose penalties. The aforementioned arbitral award does not affect the 
appellant’s liability as regards its compliance with the legislation because the civil 
proceedings before the arbitration tribunal, which were inter partes, examined the 
reciprocal liability of the appellant and its customer arising from their reciprocal 
commercial relationship. By contrast, the purpose of the administrative 
proceedings, which were conducted in accordance with the principle of objective 
investigation, is to determine whether an institution has acted within the limits of 
the powers conferred on it by the legislation. 
Brief summary of the grounds for the request for a preliminary ruling 
12. Article 2(2) of the Directive stipulates that Titles III and IV of the Directive 
are to apply to payment services made in euros or the currency of a Member State 
outside the euro area. 
13. This means that those Titles of the Directive do not apply to payment 
services made, for example, in US dollars. 
14. Title IV of the Directive also contains provisions governing out-of-court 
complaint and redress procedures for the settlement of disputes, namely 
Articles 80 to 83. These provisions address matters concerning the right of 
payment service users and other interested parties to submit complaints to the 
competent authorities regarding infringements of the provisions of national law 
that implement the provisions of the Directive, the imposition of penalties 
applicable to infringements of the national provisions adopted pursuant to the 
Directive, and the designation of the authorities competent to administer the 
aforesaid complaint and penalty procedures, which are empowered to ensure 
compliance with the provisions of national law adopted pursuant to Articles 80 to 
82 of the Directive. These provisions also address the need to ensure the existence 
of out-of-court complaint and redress procedures. 
15. It follows from the above that, in the case of a payment service executed in 
US dollars, under Article 2(2) of the Directive the competent national authorities 
do not have power to perform a check on compliance with the provisions of 
national law implementing the Directive and adopted in accordance with Titles III 
and IV thereof. Therefore, the competent authorities are not authorised to examine 
complaints relating to infringements of those legislative provisions or to declare 
that such infringements have occurred and to impose penalties. 
16. The requirements laid down in Articles 80 to 83 of the Directive are 
contained in Articles 105 to 107 of the Law. The statutory provisions that apply to 
the present case (Article 105(2) and (5) of the Law) stipulate that the Commission 
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is empowered to examine complaints from payment service users concerning 
infringements of the provisions of Chapters VII, VIII, IX, X, XI, XII, XIII and 
XIV of the Law. These Chapters cover Articles 57 to 104 of the Law. These 
Articles are in turn (apart from Article 97) subject to the exception laid down in 
Article 2(3) of the Law, which establishes that Articles 57 to 104 (with the 
exception of Article 97) are to apply to payment service providers who provide 
payment services in Latvia, where the payer’s payment service provider and the 
payee’s payment service provider are located in a Member State and the payment 
service is executed in euros or the currency of a Member State 
17. However, the exception in Article 2(3) does not apply to Articles 105 to 107 
of the Law. Therefore, under the Law, claims or complaints regarding 
infringements of Chapters VII, VIII, IX, X, XI, XII, XIII and XIV of the Law may 
also be submitted in respect of payment services executed in a currency that is not 
mentioned in Article 2(3) of the Law. The Commission is therefore empowered to 
examine those complaints. 
18. It follows from Article 86(1) of the Directive (which is part of Title VI of 
the Directive) that, without prejudice to the provisions referred to in that 
paragraph, Member States must ensure that their legislation is fully harmonised 
with the Directive. 
19. Bearing in mind that Article 2(2) of the Directive also includes provisions 
governing out-of-court complaint and redress procedures for settling disputes, it is 
necessary to clarify whether a provision of national law that empowers the 
Commission to examine complaints by payment service users even where the 
payment services have not been executed in euros or the national currency of a 
Member State, and thus to find there to be infringements of Articles 57 to 104 
(with the exception of Article 97) and to impose penalties, is compatible with the 
provision made by the Directive. 
20. At the same time, Articles 20, 21 and 23 of the Directive, which form part of 
Chapter 1, Section 3 (‘Competent authorities and supervision’) of Title II (to 
which the exception in Article 2(2) does not apply), indicate that under the 
Directive Member States are required to ensure the supervision of payment 
institutions. Although the reference in Article 20(1) and (3) and Article 21(1) of 
the Directive to ‘this Title’ (that is, Title II) suggests that the supervision applies 
only to issues such as, for example, the requirements relating to own funds, 
accounting and statutory audit and other matters regulated by Title II, 
Article 20(5) nevertheless indicates that the competent authorities are also to 
supervise the provision of payment services listed in the Annex to the Directive. 
21. The Law also makes provision for ongoing supervision, and it can be 
concluded from various provisions in the Law (see Articles 45 and 49) that the 
Commission verifies that payment service providers’ operations comply with all 
provisions of the Law, even though it follows from Article 56 of the Law that the 
consequences for payment service providers arise from breaches of Chapters II, 
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III, IV, V and VI of the Law (which cover Articles 4 to 56 of the Law, and 
therefore do not include the exceptions in Article 2(3)). 
22. Given that the exception in Article 2(2) of the Directive does not apply to 
Title II of the Directive, it is possible that the competent authority retains its 
supervisory function and its power to impose penalties for infringement of the 
provisions of national law that implement the provisions in Titles III and IV of the 
Directive, even where the payment services have not been executed in euros or the 
currency of a Member State. 
23. In these circumstances, there is a need to clarify whether Article 20(1) and 
(5) and Article 21(2) of the Directive must be interpreted as allowing for the 
competent authority to undertake supervision and impose penalties also in respect 
of payment services not executed in euros or the currency of a Member State 
outside the euro area. 
24. If the competent authority ― in this case, the Commission ― has the power 
to open a complaint procedure or to carry out supervision in respect of payment 
services that are not executed in euros or the currency of a Member State outside 
the euro area, then there is a need to clarify the extent of the Commission’s 
powers for the purposes of the application of Article 75 of the Directive, which 
corresponds to Article 99 of the Law. 
25. Article 75 of the Directive regulates the reciprocal legal relationships (rights 
and obligations) between the payer, the payee, the payer’s payment service 
provider and the payee’s payment service provider, and the limits of the liability 
of each of them. 
26. It follows from the substance of the provisions in Article 75 of the Directive 
that the persons involved in executing the payment may arrive at a solution to a 
specific situation by mutual agreement or, failing that, by means of a dispute 
resolution procedure involving all the parties who are or may be affected by the 
dispute. This is provided for, for example, in Article 75(1) of the Directive, which 
states that the payment service provider shall be liable to the payer for correct 
execution of the payments, unless he can prove to the payer and, where relevant, 
to the payee’s payment service provider that the payee’s payment service provider 
received the amount of the payment transaction in accordance with Article 69(1), 
in which case, the payee’s payment service provider shall be liable to the payee 
for the correct execution of the payment transaction. 
27. It can therefore be concluded that, under Article 75 of the Directive, the 
solution to a particular situation must be arrived at through a dispute resolution 
procedure which determines who, of all the parties involved in the payment, is 
liable for the non-execution of the payment, having regard to all the factual and 
legal circumstances of the case. 
28. The possibilities for dispute resolution are governed by Article 83 of the 
Directive, paragraph 1 of which stipulates that Member States must ensure that 
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adequate and effective out-of-court complaint and redress procedures for the 
settlement of disputes between payment service users and their payment service 
providers are put in place. These procedures are set out in Articles 104 and 106 of 
the Law. However, these provisions of the Law do not confer power on the 
Commission to settle disputes, which rests with the parties to the transactions 
(Article 104 of the Law), the ombudsman of the Latvian Association of 
Commercial Banks or the courts (Article 106 of the Law). 
29. At the same time, the situation can also be resolved by applying the 
procedure established in Article 80(1) of the Directive, that is to say, by means of 
an examination of the payment service user’s complaint by the competent 
authority, because the provision in question provides for complaints to be 
submitted with regard to infringements of the provisions of national law that 
implement the Directive. For its part, Article 82(2) of the Directive refers 
explicitly to an infringement of Titles III and IV of the Directive. Similar 
considerations could be applied to the supervisory procedures governed by 
Articles 20 and 21 of the Directive, in which context the competent authority may 
have power to supervise compliance with any provisions of national law that 
implement the provision made by the Directive. 
30. In these circumstances, the question must be asked whether, for the purposes 
of complaint procedures or supervision, the Commission is empowered to settle 
disputes between the payer and the payment service provider arising from the 
legal relationships referred to in Article 75 of the Directive, and to determine who 
is liable for the non-executed or defective transaction. 
31. If the Commission does have this power, a decision is required on whether 
the arbitral award that settled the dispute between the payer and the payment 
service provider has the effect of a ruling on a preliminary issue. 
32. Dispute resolution procedures are governed by Articles 104 and 106 of the 
Law. Article 106(3) of the Law gives payment service providers the right to go to 
court. For its part, the Law on Civil Procedure permits arbitration as an alternative 
resolution procedure for civil disputes, and this constitutes a ground for ruling that 
a claim of this kind cannot be admitted before the ordinary courts 
(Article 132(1)(3) of the Law on Civil Procedure). 
33. It is necessary to ask, therefore, whether, in carrying out complaint 
procedures or supervisory functions, the competent authority must take account of 
an arbitral award that settles a dispute between the payment service provider and 
the payment service user.