Judgment;Abstract — ECLI:EU:T:2020:304
Date: 2020-07-08
Language of the case: French
Court formation: Second Chamber, Extended Composition
Subject matter: European Central Bank (ECB);Economic and monetary policy
Procedure: Action for annulment - successful
Origin: France

summary manner, for example by reference to those decisions (judgments of 14 February 1990, Delacre and Others v Commission, C‑350/88, EU:C:1990:71, paragraph 15, and of 8 November 2001, Silos, C‑228/99, EU:C:2001:599, paragraph 28). Similarly, the publication by the defendant institution of the methodology which it intends to use when exercising its decision-making power may lessen its obligation to state reasons for its individual decisions, to the extent that it applies that methodology. 139 However, in the present case, the contested decision was not adopted by way of an extension of an opinion of the Administrative Board of Review and there is no prior practice of the ECB with regard to the imposition of an administrative pecuniary penalty pursuant to Article 18(1) of Regulation No 1024/2013. In addition, the ECB did not make public the methodology which it intended to apply for the purposes of determining the amount of the penalties imposed pursuant to that provision. 140 Therefore, the question of whether the reasons for the contested decision were adequately stated must be assessed solely on the basis of the reasons appearing in that decision. 141 It is in the light of those considerations that it is necessary to verify whether the ECB complied, in the present case, with its obligation to state reasons. 142 Paragraph 4.1.2 of the contested decision, headed ‘Amount of the penalty’, is worded as follows: ‘In order to determine the administrative penalty to be imposed, the ECB has considered the following circumstances: 4.1.2.1. As regards the severity of the breach, the ECB takes into account that the Supervised Entity incorrectly classified capital instruments as CET 1 instruments for a total amount of EUR 2 088 million, which represents 67 basis points of the Supervised Entity’s CET 1 ratio on a consolidated basis as of 30 June 2016. The fact that most of the capital instruments incorrectly classified as CET 1 were issued following the distribution of scrip dividends to the shareholders and therefore were similar to the ordinary shares generating such dividends is also considered in the assessment of the severity of the breach. 4.1.2.2. Furthermore, the ECB takes into account that the breach occurred during five consecutive quarterly reporting periods and three consecutive pillar 3 public disclosures in 2015 and 2016. 4.1.2.3. As regards the severity of misconduct of the Supervised Entity, the ECB considers that the breach was committed at least negligently. In particular, the wrongfulness of the misbehaviour is determined by the circumstances described in section 3.3. The Supervised Entity was given sufficient time to adapt its operations to the regulatory requirements of Regulation (EU) No 575/2013 and was warned by the ECB (JST) of the need to obtain prior permission of the ECB before classifying capital instruments as CET 1 instruments. However, despite the knowledge of such requirements, the Supervised Entity continued classifying the instruments without the necessary permission. 4.1.2.4. As a mitigating factor, the ECB takes into account the fact that, following the application of the Supervised Entity, the ECB granted permission to classify the issuances as CET 1 instruments … Therefore, in the light of all the elements set out above, including the arguments raised by the Supervised Entity in its written observations, and taking into account the principle of proportionality that guides the ECB in the exercise of its sanctioning powers, the administrative penalty is set at EUR 4 300 000, which represents around 0.0015% of the total annual turnover in 2017 of the supervised group to which the Supervised Entity belongs and ensures credible and effective deterrence to prevent such breaches from being committed in the future.’ 143 In paragraph 4.2.4 of the contested decision, the ECB added that ‘the administrative penalty imposed d[id] not exceed 10% of the total annual turnover of the supervised group to which the [applicant] belong[ed] relating to the year preceding the date of the [contested] decision’. 144 It must be found that that passage of the contested decision does not provide details of the methodology applied by the ECB for the purposes of determining the amount of the penalty imposed, but merely highlights some considerations relating to the severity of the breach, its duration, the severity of the applicant’s alleged failure and the assurance that a mitigating factor was taken into account. 145 Worded as they are, paragraphs 4.1.2.1 to 4.1.2.4 of the contested decision neither allow the applicant to understand the methodology chosen by the ECB nor allow the Court to review the legality of the penalty imposed. 146 The fact that the ECB set out in detail, in its defence, then at the hearing, the methodology which it applied in the present case cannot remedy that inadequacy, since, according to the case-law cited in paragraph 131 above, the ECB could not remedy a failure to adequately state reasons by communicating the reasons for the decision during proceedings before the Court. In addition, the applicant had the right to know the method for calculating the amount of the penalty which was imposed on it, without being obliged, in order to achieve that, to bring an action before the Court. 147 Moreover, paragraphs 4.1.2.1 to 4.1.2.4 of the contested decision do not provide the minimum information which could have made it possible to understand and verify the relevance and weighting of the factors taken into account by the ECB in determining the amount of the penalty. 148 Whilst, in paragraph 4.1.2.1 of the contested decision, relating to the severity of the breach, the ECB emphasises that the capital instruments classified without permission represented 67 basis points of the applicant’s CET 1 ratio, it does not provide any further explanation of the degree of severity of such a failure from the point of view of compliance with the prudential obligations incumbent on the applicant. 149 In the same paragraph of the contested decision, the ECB highlights the fact that most of the capital instruments which were incorrectly classified were issued following the distribution of scrip dividends to the shareholders and emphasises that that factor was considered in the assessment of the severity of the breach. However, in that regard too, no explanation is provided of the impact of that finding on the determination of the amount of the penalty imposed on the applicant. 150 Finally, whilst, in paragraph 4.1.2.4 of the contested decision, the ECB gives an assurance that it took into account, as a mitigating factor, the fact that it had ultimately granted the applicant permission to classify the instruments at issue as CET 1 instruments, no indication is given of the weighting which it gave that factor in determining the final amount of the penalty. 151 In addition, it should be pointed out that the ECB mentioned only the size of the group to which the applicant belonged, and not the size of the applicant, even though the breach was imputed only to the applicant. 152 It must be found that, by not including, in the contested decision, the size of the credit institution which committed the breach at issue, the ECB failed to mention a factor which, according to its own statements before the Court, was particularly relevant for the determination of the amount of the penalty. 153 The fact that the size of the credit institution concerned is not mentioned prevents the Court from reviewing the ECB’s assessment of the criteria of effectiveness, proportionality and dissuasion appearing in Article 18(3) of Regulation No 1024/2013. 154 Before the Court, the ECB maintained that it had taken into account the size of the institution concerned, when determining the amount of the penalty, in the form of the total amount of its assets under management. However, according to the case-law cited in paragraph 131 above and for reasons analogous to those set out in paragraph 146 above, an explanation provided at that stage cannot be taken into account for the purposes of assessing compliance, by the ECB, with the obligation to state reasons which is incumbent on it. 155 In addition, the fact, highlighted by the ECB at the hearing, that it is allegedly an ‘objective’ matter does not excuse the ECB from clearly setting out that factor in the contested decision, if only for the purposes of explaining how and on the basis of what weighting it was taken into account in determining the amount of the penalty imposed on the credit institution at issue. 156 It follows from the foregoing that the penalty imposed on the applicant is vitiated by an inadequate statement of reasons and must, therefore, be annulled, without its being necessary to rule on the other claims raised in that regard. 157 As the ECB’s assessment relating to the amount of the administrative pecuniary penalty is severable from the remainder of the contested decision, that decision must be annulled only to the extent that it imposes an administrative pecuniary penalty on the applicant of EUR 4 300 000. Costs 158 Under Article 134(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, the parties shall bear their own costs. 159 In the present case, the applicant has been unsuccessful in part and succeeded in part, since the contested decision is to be annulled only to the extent that it imposes on the applicant an administrative pecuniary penalty of EUR 4 300 000. In view of those factors, on a fair assessment of the circumstances of the case, each party should be ordered to bear its own costs. On those grounds, THE GENERAL COURT (Second Chamber, Extended Composition) hereby: 1. Annuls Decision ECB/SSM/2018-FRCAG-75 of the European Central Bank (ECB) of 16 July 2018 in so far as it imposes on Crédit agricole SA an administrative pecuniary penalty of EUR 4 300 000; 2. Dismisses the action as to the remainder; 3. Orders Crédit agricole to bear its own costs; 4. Orders the ECB to bear its own costs. Papasavvas Tomljenović Schalin Škvařilová-Pelzl Nõmm Delivered in open court in Luxembourg on 8 July 2020. E. Coulon Registrar President Table of contents * Language of the case: French.