Abstract;Judgment — ECLI:EU:C:2024:679
Date: 2024-09-05
Language of the case: Spanish
Court formation: First Chamber
Subject matter: Right of establishment;Approximation of laws;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Spain

Summary C-775/22 – 1 
Case C-775/22 
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: 
20 December 2022 
Referring court: 
Tribunal Supremo (Spain) 
Date of the decision to refer: 
15 December 2022 
Appellants: 
M. S. G. 
N. G. S. 
A. G. S. 
Respondent: 
Banco Santander, S.A. 
  
Subject matter of the main proceedings 
Claim for [1)] a declaration of nullity in respect of the purchase of subordinated 
obligations of Banco Popular Español, S.A. which, in the context of the resolution 
of that bank, were converted into shares and, subsequently, transferred to Banco 
Santander, S.A., without any consideration being received, and, secondarily, 2) an 
award of damages, based on the bank’s failure to fulfil its information obligations 
in relation to the subscription order for those obligations. 
Subject matter and legal basis of the request 
Interpretation of Article 34(1)(a) and (b) of Directive 2014/59/EU in relation to 
Article 53(1) and (3), Article 60(2)(b) and (c) and Article 64(4)(b) of the same 
directive. Legal basis: Article 267 TFEU. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-775/22 
 
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Question referred for a preliminary ruling 
Must the provisions of Article 34(1)(a) and (b), in relation to those of 
Article 53(1) and (3), Article 60(2), first subparagraph, points (b) and (c), and 
Article 64(4)(b), of Directive 2014/59/EU be interpreted as meaning that, 
following the conversion into shares – and the subsequent transfer of those shares, 
without effective consideration – of subordinated obligations (tier 2 capital 
instruments) issued by a credit institution that is the subject of a resolution 
procedure and which were not accrued when that resolution procedure was 
adopted, persons who purchased those subordinated obligations before the start of 
such a resolution procedure are precluded from bringing, against that institution or 
against its successor entity, an action for a declaration of nullity in respect of the 
subscription contract for those subordinated obligations, seeking the 
reimbursement of the price paid to subscribe for the subordinated obligations, plus 
the interest accrued from the date of conclusion of the contract? 
Provisions of European Union law relied on 
Directive 2014/59/EU of the European Parliament and of the Council of 15 May 
2014 establishing a framework for the recovery and resolution of credit 
institutions and investment firms and amending Council Directive 82/891/EEC, 
and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 
2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 
and (EU) No 648/2012, of the European Parliament and of the Council; 
– Article 34(1)(a) and (b). 
– Article 53(1) and (3). 
– Article 60(2)(a), (b) and (c). 
– Article 64(4)(b). 
Provisions of national law relied on 
Directive 2014/59/EU was transposed in Spain by Law 11/2015, of 18 June, on 
the recovery and resolution of credit institutions and investment firms, which 
contains various provisions that reproduce the provisions of that directive in 
identical or similar terms. 
The Spanish Civil Code contains rules governing the restitutory effects of a 
contract being declared void. 
Article 1303: ‘Where an obligation has been declared void, the contracting parties 
must restore to one another those things that formed the subject matter of the 
contract, together with the profits derived therefrom, and the price plus interest, 
subject to the provisions of the following articles.’ 
BANCO SANTANDER 
 
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Article 1307: ‘Where the party required by the declaration of nullity to return 
something is unable to do so because that thing has been lost, he must restore the 
profits derived from it and the value of the thing at the time when it was lost, plus 
interest from the same date.’ 
Article 1308: ‘For as long as one of the contracting parties does not effect the 
return of that which, pursuant to the declaration of nullity, he is required to return, 
the other contracting party cannot, for his part, be compelled to fulfil his 
obligations.’ 
Succinct presentation of the facts and procedure in the main proceedings 
1 On 29 July 2011, Banco Popular Español, S.A. carried out an issue of 
subordinated obligations, specifically, ‘Obligaciones Subordinadas Banco Popular 
VT.07-21’, which matured in July 2021. Mr I. G. C. and Ms M. S. G. subscribed, 
at that time, for 105 of those subordinated obligations, for a total amount of 
EUR 105 000.00. 
2 On 7 June 2017, the European Commission adopted Decision (EU) 2017/1246, 
endorsing the resolution scheme for Banco Popular Español, S.A. (OJ 2017 L 178, 
p. 15); the Single Resolution Board (SRB) adopted Decision SRB/EES/2017/08, 
which activated the resolution scheme for Banco Popular; and the Spanish 
Executive Resolution Authority (Fondo de Reestructuración Ordenada Bancaria; 
FROB) adopted the measures necessary to implement the resolution decision 
(Official State Gazette of 30 June 2017). In short, the resolution mechanism for 
Banco Popular consisted in the sale of the business by transferring the shares to a 
purchaser, Banco Santander, which purchased them for the sum of EUR 1. 
Specifically, the resolution involved the following measures: 
– First, reducing Banco Popular’s existing share capital to EUR 0 by 
writing down the nominal amount of its share capital in the amount of 
EUR 2 098 429 046, with the consequent write down and cancellation of 
100% of its existing shares. At the same time, carrying out a capital increase, 
in the amount of EUR 1 346 542 000, to convert all the additional tier 1 
capital instruments into newly issued shares with a nominal value of EUR 1 
(‘New Shares I’), in order, then, to reduce the share capital to zero once 
again by writing down all of those New Shares I. 
– Second, agreeing a capital increase, in the amount of 
EUR 684 024 000, in order to convert all the tier 2 capital instruments in 
circulation as at the date of the resolution decision into newly issued shares 
of Banco Popular (‘New Shares II’), and transferring all of the New Shares 
II to Banco Santander, which purchased them for the price of EUR 1. 
Thus, without the consent of their holders, the new shares issued as a result of the 
conversion of the tier 2 capital instruments were transferred to Banco Santander. 
Banco Santander paid EUR 1 for that transfer. Consequently, Mr I. G. C. and 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-775/22 
 
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Ms M. S. G. ceased to be the holders of the subordinated obligations converted 
into shares and transferred to Banco Santander, without receiving consideration of 
any kind. Up to that time, they had received EUR 48 328.82 by way of the yield 
on those obligations. 
3 On 5 July 2019, Ms M. S. G. and Ms N. G. S. and Mr A. G. S., as heirs of 
Mr I. G. C., brought a claim against Banco Santander. They claimed that Banco 
Popular had not provided them with adequate information about the nature of, and 
risks relating to, the subordinated obligations that they purchased and they sought: 
a) Principally, a declaration of nullity in respect of the subscription contract for 
the subordinated obligations issued by Banco Popular and reimbursement by 
Banco Santander, as the successor to Banco Popular, of the EUR 105 000 
they paid to purchase the subordinated obligations, with the relevant interest, 
while the appellants would return to Banco Santander the EUR 48 328.82 
they had received up to that time by way of the yield on the subordinated 
obligations, plus interest. 
b) Secondarily, an order requiring Banco Santander to compensate them for the 
damage caused by the defective information regarding the subordinated 
obligations offered by Banco Popular, in the amount of EUR 56 671.18, 
which was the difference between the price paid for the subordinated 
obligations and the yield they had obtained from those subordinated 
obligations. 
4 The court of first instance upheld the principal claim and declared the subscription 
contract for subordinated obligations concluded between Banco Popular and the 
appellants to be void. It ordered Banco Santander to reimburse them the difference 
between, on the one hand, the price paid for the subordinated obligations 
(EUR 105 000), plus the statutory interest from the date of subscription, and, on 
the other hand, the yield received by the appellants (EUR 48 328.82), plus the 
relevant interest, from the date of each coupon payment. 
5 Banco Santander appealed against the judgment and the Provincial Court allowed 
the appeal. While it determined that Banco Popular had not provided the 
appellants with adequate information regarding the complex and risky nature of 
the subordinated obligations it offered them and that that information deficit had 
caused a substantial and excusable error which vitiated their contractual consent, 
the Provincial Court dismissed the claim, because it held that, as a consequence of 
the resolution of Banco Popular, the subordinated obligations held by the 
appellants had been lost by reason of their conversion into shares and the 
subsequent transfer of those shares to Banco Santander, without being exchanged 
for other products and without any right to compensation. 
6 The appellants brought a further appeal against the judgment of the Provincial 
Court, challenging its dismissal of the principal part of their claim, relating to the 
BANCO SANTANDER 
 
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action for a declaration of nullity in respect of the subscription contract for the 
subordinated obligations. 
The essential arguments of the parties in the main proceedings 
7 The arguments of the parties are reproduced in the presentation of the reasoning in 
the request for a preliminary ruling. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
8 This dispute occurs against a backdrop of extensive litigation in Spain regarding 
the various capital instruments of Banco Popular (ordinary shares, preference 
shares, subordinated bonds, subordinated obligations, etc.). In general, the 
purchasers of such financial products have brought actions to have the contracts 
for the purchase of such products declared void, seeking in those actions the return 
of what was paid for such purchases, or actions for damages (either in relation to 
the information contained in the prospectus, as provided for in Article 6 of 
Directive 2003/71/EC, or in view of the general rules relating to contracts), in 
which payment of compensation is sought for the losses suffered on account of 
such purchases. The basis for such actions is the defective information provided 
by Banco Popular when marketing such financial products. Following the 
resolution of Banco Popular, the actions have been brought against Banco 
Santander. 
9 After the further appeal brought by the appellants was lodged, the Court of Justice 
gave its judgment of 5 May 2022, Banco Santander (C-410/20). That judgment 
states that ‘the combined provisions of Article 34(1)(a), Article 53(1) and (3), and 
Article 60(2), first subparagraph, (b) and (c) of Directive 2014/59/EU […], must 
be interpreted as precluding, following a total write-down of shares in the capital 
stock of a credit institution or investment firm subject to a resolution procedure, 
persons having acquired shares, in the context of a public offer to subscribe issued 
by that institution or firm, before the opening of such a resolution procedure, from 
bringing, against that institution or firm or its successor entity, an action for 
damages on the basis of the information provided in the prospectus, as provided 
for in Article 6 of Directive 2003/71/EC […] or an action for a declaration of 
nullity of the purchase contract for such shares, which, given its retroactive effect, 
results in the restitution of the value of said shares, plus interest from the date of 
conclusion of the contract’ (C-410/20, EU:C:2022:351, final paragraph). 
10 The above-referenced judgment ruled on how the provisions of Article 34(1)(a), in 
relation to those of Article 53(1) and (3) and those of Article 60(2), first 
subparagraph, points (b) and (c), of Directive 2014/59/EU, are to be interpreted, in 
relation to actions for damages on the basis of the information provided in the 
prospectus and actions for a declaration of nullity in respect of the subscription 
contract for Banco Popular shares that were written down in the resolution 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-775/22 
 
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procedure for that bank, [where such actions are] brought by persons who were 
holders of such Banco Popular shares. 
11 In the main proceedings, in relation to the Provincial Court’s view that the 
treatment of the subordinated obligations (tier 2 capital instruments, converted 
into new shares and subsequently transferred to Banco Santander, without 
effective consideration) had to be the same as that envisaged in the resolution 
procedure for shares that were written down, the appellants argue that the 
treatment has to be entirely different and that, consequently, the action for a 
declaration of nullity, based on the defect of consent, in respect of the subscription 
contract for such tier 2 capital instruments, which had not accrued when the 
resolution of Banco Popular was agreed, may be brought. They also consider that 
the judgment of 5 May 2022, Banco Santander (C-410/20), is not applicable in 
this case. To support their position, the appellants argue as follows: 
i) It is necessary to differentiate between the write-down measure 
(which, in the resolution procedure, affected the shares and the additional 
tier 1 capital instruments, after their conversion into shares) and the 
conversion and forced transfer measure (which affected the tier 2 capital 
instruments, as in the case of the subordinated obligations subscribed for by 
the appellants). Those measures have different purposes (the write down, 
that of absorbing losses; the conversion, that of ensuring the continuity of 
the entity in its essential financial and economic functions) and, 
consequently, different legal regimes. They argue that the provisions of 
Directive 2014/59 regarding the extinguishment of liabilities, obligations or 
claims (Article 53(3) and Article 60(2)) apply to the write-down measure, 
but not to the measures of conversion and subsequent transfer. 
ii) The standing of the purchasers of subordinated obligations to bring an 
action for a declaration of nullity is in accordance with the principle 
expressed in recitals 87 and 94 of Directive 2014/59 and the rules which that 
directive contains regarding the termination of contracts [Article 64(4)(b), 
Article 68(3) and (4) and Article 71]. In the case of conversion, no rule 
excludes or limits the right to bring actions seeking such a declaration of 
nullity. 
iii) The judgment of 5 May 2022, Banco Santander (C-410/20), puts the 
action for damages on a level with the action for a declaration of nullity, in 
the sense that it deprives investors of those actions. But it does so only in 
respect of capital instruments that have been written down, not in respect of 
those that have undergone conversion in the resolution procedure for Banco 
Popular. The appellants deduce, a contrario sensu, that it is possible bring 
such an action for a declaration of nullity in respect of the purchase contract 
for capital instruments to which the measures of conversion and subsequent 
transfer were applied. 
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iv) Recital 120 of Directive 2014/59 states that the exceptions included in 
that directive to the mandatory rules for the protection of shareholders and 
creditors of institutions which fall within the scope of Union company law 
directives must be clearly and narrowly defined, in order to guarantee the 
maximum degree of legal certainty for stakeholders. The appellants argue 
that the provisions of Directive 2014/59, as interpreted by the Court of 
Justice, prevent holders of capital instruments which have been subject to 
the write-down measure from bringing actions for a declaration of nullity or 
for damages, but they do not bar those actions in the case of capital 
instruments which have been subject to the conversion measure; 
consequently, a measure restricting rights, such as the limitation of rights 
and rights of action provided for in Directive 2014/59 in respect of the 
holders of capital instruments that have been written down, cannot be 
extended to the holders of capital instruments subject to the conversion 
measure. 
v) Limitations on the right to an effective remedy and the right of 
ownership of the holders of capital instruments of a company under 
resolution have to be interpreted restrictively. 
vi) The basis for the restitution sought by the appellants in the action for a 
declaration of nullity is not the loss of value of the subordinated obligations 
as a result of their conversion into shares and subsequent forced transfer, 
without consideration; rather it relates to the original transaction of 
subscribing for the subordinated obligations, which is void, and, 
consequently, they should never have occupied the position of creditors 
holding tier 2 capital instruments. The financial consequences of the 
resolution measures are, for these purposes, irrelevant and do not allow the 
write-down regime to be put on a level with that for the conversion of capital 
instruments. 
vii) A prudent and reasonable assessment of the assets and liabilities of 
Banco Popular during the resolution procedure had to take into consideration 
the considerable litigiousness that existed in relation to the marketing of 
such financial products. Consequently, if the existence of that litigiousness 
reduced the value of Banco Popular for the purposes of establishing the price 
of the transfer of the business to Banco Santander, the purchasers of such 
products cannot be deprived of the right to bring actions against Banco 
Santander for a declaration of nullity in respect of the subscription contracts 
for such financial products, as it would imply the unjust enrichment of that 
entity, which would have paid a derisory price for the business, among other 
reasons on account of the high degree of litigiousness affecting such a 
business, but which would subsequently find itself freed from the negative 
effects of such litigiousness, by the holders of the subordinated obligations 
issued by Banco Popular being deprived of the right of action. 
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viii) If they were deprived of the right to bring an action for a declaration of 
nullity in respect of the subscription contract for the subordinated 
obligations, it would infringe the principle prohibiting worse treatment, 
enshrined in Article 34(1)(g) and Article 73(b) of Directive 2014/59, since, 
in insolvency proceedings carried out in accordance with national law, they 
would have been recognised as holders of an ordinary claim against Banco 
Popular. 
12 Banco Santander argues that the case-law established in the judgment of 5 May 
2022, Banco Santander (C-410/20), is applicable to any capital instruments that 
are written down or cancelled as a result of the resolution of Banco Popular and 
that Article 64(4)(b) of Directive 2014/59 is not applicable to the measures for the 
resolution of Banco Popular. 
13 In the opinion of the referring court, this request for a preliminary ruling is 
justified for reasons of legal certainty: i) the existence of a great deal of 
litigiousness in this area and ii) the fact that the provisions of Directive 2014/59 
relating to the conversion measures and their significance in relation to the actions 
which holders of tier 2 capital instruments may be entitled to bring cannot, strictly 
speaking, be regarded as an acte éclairé, as the judgment of 5 May 2022, Banco 
Santander (C-410/20), ruled on a request for a preliminary ruling in relation to 
capital instruments (shares issued in a public offer to subscribe) which had been 
subject to a write-down measure, not in relation to capital instruments subject to a 
conversion measure.