Judgment;Summary — ECLI:EU:C:2023:877
Date: 2023-11-16
Language of the case: Bulgarian
Court formation: Sixth Chamber
Subject matter: Right of establishment;Free movement of capital;Approximation of laws;Area of freedom, security and justice
Procedure: Reference for a preliminary ruling
Origin: Bulgaria

Summary C-427/22 – 1 
Case C-427/22  
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:  
28 June 2022 
Referring court:  
Varhoven kasatsionen sad (Bulgaria) 
Date of the decision to refer:  
21 June 2022 
Defendant:  
BG 
Representative of the Public Prosecutor:  
Varhovna kasatsionna prokuratura 
  
Subject matter of the main proceedings 
An appeal on a point of law before the Varhoven kasatsionen sad (Supreme Court 
of Cassation, Bulgaria) against a judgment of a court of second instance 
confirming a conviction handed down by a court of first instance. A natural person 
was thereby sentenced to a three-year custodial sentence and the confiscation of 
part of his assets for having committed an offence in the form of commercial 
banking transactions without the required approval (known as usury). The person 
is alleged to have granted seven loans totalling BGN 1 030 (approximately 
EUR 525) to two persons and to have received interest on them. 
Subject matter and legal basis of the request  
Request for a preliminary ruling under Article 267 TFEU concerning the 
interpretation of Article 4(1)(1) and (42) of Regulation No 575/2013. It is 
requested that the reference for a preliminary ruling be dealt with under the urgent 
procedure provided for in Article 107 of the Rules of Procedure of the Court of 
Justice. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-427/22  
 
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Questions referred for a preliminary ruling 
1. Is the definition of a credit institution in Article 4(1)(1) of 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 and amending 
Regulation (EU) No 648/2012 to be interpreted as meaning that credit is to be 
granted exclusively from funds received from the public as deposits or other 
repayable funds, or may a credit institution also grant credit from funds from other 
sources? 
2. How is the content of the ‘instrument […] in any form […] by which the 
right to carry out the business is granted’ within the meaning of Article 4(1)(42) of 
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 and amending Regulation (EU) No 648/2012 to be interpreted, and does it 
include both the authorisation scheme and the registration scheme which grant 
approval for credit operations? 
Provisions of public international law 
Convention for the Protection of Human Rights and Fundamental Freedoms, 
signed at Rome on 4 November 1950 – Article 6(1). 
Provisions of European Union law relied on 
Treaty on European Union (TEU) – Article 6(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 and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1, ‘the 
Regulation’) – Recital 5; Article 4(1)(1), (26) and (42). 
Directive 2013/36/EU of the European Parliament and of the Council of 26 June 
2013 on access to the activity of credit institutions and the prudential supervision 
of credit institutions and investment firms, amending Directive 2002/87/EC and 
repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338, ‘the 
Directive’) – Recitals 2, 42 and 97; Article 3(1)(1) and (22); Article 9(1); 
Article 34; Annex I, points 1 and 2. 
Provisions of national law relied on 
– Nakazatelno-protsesualen kodeks (Code of Criminal Procedure, ‘the NPK’) – 
Article 24(1)(1); Article 347(1); Article 348(1)(1) and Article 348(2); 
Article 354(1)(1), (2) and (4) and (2)(2). 
Nakazatelen kodeks (Criminal Code, ‘the NK’) – Articles 54(1) and 252(1). 
BG 
 
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‘Article 252. … (1) … Any person who, without the necessary approval, carries 
out, on a commercial basis, banking, insurance or other financial transactions, 
provides payment services or issues electronic money requiring such approval 
shall be punished by a term of imprisonment of between three and five years and 
confiscation up to one half of the offender’s assets.’ 
Zakon za kreditnite institutsii (Law on Credit Institutions; ‘the ZKI’) – 
Articles 2(1), 3(1)(1), (2) and (3), 3a(1) to (5), 13(1), 24(1); Dopalnitelni 
razporedbi (additional provisions), Paragraph 1(4) and (36). 
Zakon za bankite i kreditnoto delo (Law on banks and the credit sector) 
(repealed) – Article 1. 
Zakon za bankite ot 1997 (Law on banking of 1997) (repealed) – Article 1(5). 
Zakon za zadalzheniata i dogovorite (Law on obligations and contracts) – 
Article 240. 
Naredba № 26 ot 23 april 2009 g. za finansovite institutsii (Regulation No 26 of 
23 April 2009 on financial institutions) – Article 2(1). 
Succinct presentation of the facts and procedure in the main proceedings 
1 Between April 2016 and September 2017, BG was a member of the municipal 
council of Knezha, Pleven Province. There, he was known to have lent cash with 
interest to persons undergoing hardship, [it is reported as follows:] to which effect 
many witnesses, including those who had received similar loans, testified before 
the court of first instance. In the criminal case, there is nothing to indicate that 
those cases were investigated or that BG was also charged in those cases. The 
charge relates only to the loans taken out by witnesses KM and VC. 
2 KM’s child was sick and she was in financial difficulties. She learned that BG was 
granting interest-bearing cash loans. In November 2016, KM received a loan of 
BGN 100, which she had to repay within one month with BGN 50 interest. 
3 As security for the loan, BG took KM’s debit card for her bank account and the 
PIN code associated with that card. In the same month, KM repaid BGN 150 to 
BG. During the period from November to December 2016, she took out two 
further loans with BG, the first in the amount of BGN 100 with interest of 
BGN 50 and the second in the amount of BGN 30 with interest of BGN 30. 
4 On 16 December 2016, BG withdrew BGN 150 with KM’s debit card and KM 
repaid the remaining BGN 60 to him in cash. KM then blocked her debit card at 
the bank because BG refused to give it back to her as, in his opinion, she still 
owed him money. 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-427/22  
 
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5 VC was also in financial difficulties. She learned that BG was granting interest-
bearing cash loans and contacted him. In April 2016, VS received a loan from him 
in the amount of BGN 200 with monthly interest of BGN 80. BG took the debit 
card for her bank account as security for recovering the money and interest. 
6 For eight months, VC paid BG only the monthly interest on the loan. She 
subsequently took out loans with BG in the amount of BGN 200 on three 
occasions – in December 2016, in January 2017 and in September 2017 – at the 
same monthly interest rate of BGN 80 each time. 
7 After the money had entered her account, VS travelled with BG to an automated 
teller machine, withdrew her money with the debit card, paid BG the full amount 
of the loan due for that month in cash, retained the remainder of the money 
withdrawn for herself and handed her debit card over to BG. 
8 On 5 December 2017, VC filed a complaint against BG with the Pleven City 
Public Prosecutor’s Office and blocked the debit card. 
9 By judgment of 1 October 2020, the Plevenski Okrazhen sad (Regional Court, 
Pleven, Bulgaria) found BG guilty of carrying out, between April 2016 and 
September 2017, commercial banking transactions as a natural person without the 
necessary approval under the ZKI by granting to two persons seven interest-
bearing cash loans totalling BGN 1 030 (approximately EUR 525). 
10 He was therefore sentenced, on the basis of Article 252(1) of the NK, to a three-
year custodial sentence, which was suspended for a four-year probation period, 
and the confiscation of one sixth of the two properties situated in the city of 
Knezha and the two cars owned by him. 
11 BG lodged an appeal against the sentence with the Apelativ sad – Veliko Tarnovo 
(Court of Appeal, Veliko Tarnovo, Bulgaria), which upheld that sentence by 
judgment of 15 April 2021. 
12 That judgment is being challenged by BG before the referring court. 
The essential arguments of the parties in the main proceedings 
13 On appeal, BG submitted that his conduct did not, from the outset, constitute a 
criminal offence under Article 252(1) of the NK. In his view, the ZKI contains no 
legal definition of a banking transaction. He submitted that the principal 
characteristic of the banking business is to take deposits or other repayable funds 
from the public, by means of which credits are granted, and that business is 
subject to an authorisation scheme. He further submitted that the fact of granting, 
on a commercial basis, funds which have not been taken as deposits from the 
public by financial institutions or natural persons in breach of a scheme which 
derogates from the authorisation scheme (a registration, declaration or general 
BG 
 
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scheme) cannot be regarded as carrying out banking transactions without the 
necessary approval. 
14 On appeal on a point of law, BG requested that the referring court exercise its 
jurisdiction under national law and acquit him, on the ground that it had not been 
established that he had granted interest-bearing loans. 
15 The Public Prosecutor in the appeal proceedings did not give an view on BG’s 
claim that he had not committed any offence under Article 252(1) of the NK. In 
the context of the appeal on a point of law, the Varhovna kasatsionna prokuratura 
(Public Prosecutor’s Office at the Supreme Court of Cassation) has also not given 
a view on that matter. However, it disputes the defendant’s assertion that it had 
not been established during the proceedings that an interest-bearing loan had been 
granted. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
16 In the context of the appeal on a point of law, the referring court sits as the final 
third instance for the application of the law. It is for the referring court to 
determine whether the court of second instance correctly applied the substantive 
law (the NK) on the basis of the facts which it considered to be established by the 
evidence adduced in the course of the proceedings. 
17 The referring court is entitled, under national law, to acquit the accused where the 
facts allow for the conclusion that he has not committed the conduct of which he 
stands accused or where his conduct does not, from the outset, constitute a 
criminal offence. It also has jurisdiction to vary the judgment of the appeal court 
and, on the basis of the facts on which the accused has built his defence, to 
classify his conduct as a separate offence, punishable by a penalty equal to or less 
severe than that for the offence for which he was found guilty. 
18 In order to assess whether it should exercise any of those powers – including 
abandoning its long-standing and until recently unaltered case-law that the 
commercial granting of a cash credit by a natural person (‘usury’) is a criminal 
offence under Article 252(1) of the NK, the referring court requires clarification 
of the meaning of Article 4(1)(1) and (42) of the Regulation in conjunction with 
Article 9(1) of the Directive and points 1 and 2 of Annex I to the Directive, which 
together constitute the legal framework establishing the rules governing access to 
the performance of the activities of a credit institution. 
19 In the present case, although recital 42 of the Directive leaves it to the Member 
States themselves to determine what conduct is to be pursued as a crime in the 
financial and banking sector, the interpretation of the provisions of EU law relied 
on is relevant for determining the actual content of the individual constituent 
elements of criminal offences referred to in Article 252(1) of the NK, which 
protects the harmonised framework of the banking and financial sector at national 
level against possible criminal interference. 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-427/22  
 
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20 The offence of which BG was found guilty relates to a provision which was 
included in the NK in 1995 in response to the transition to a market economy 
following democratic changes in the Republic of Bulgaria and the resulting 
changes in the economic sphere. It was introduced in order to protect the financial 
system, in particular the banking industry, against the unregulated entry on the 
market of new legal entities (known as pyramid schemes) and against activities 
which undermine its normal functioning and stability. 
21 Bulgarian criminal law does not provide for undertakings to be criminally liable, 
with the result that a criminal offence may be committed, under Article 252(1) of 
the NK, only by adult natural persons (after reaching the age of 18) or minor 
natural persons (after reaching the age of 14). In civil matters, natural persons may 
grant interest-bearing loans where they have agreed the loan in writing with the 
borrower. 
22 For offences under Article 252(1) of the NK, case-law has been developed 
according to which the grant of credits between legal persons and/or natural 
persons does not, in general, constitute a criminal offence where they are granted 
only on a one-off basis and not systematically, on a commercial basis or as a 
source of income for the person granting the credit. 
23 According to the ZKI, a bank (credit institution) is a legal person which takes 
deposits or other repayable funds from the public and grants credits or other forms 
of financing for its own account and at its own risk. Strictly speaking, reference is 
made to the typical and most characteristic transactions of every banking (credit) 
institution: taking deposits and granting credits. However, the law does not require 
banks to grant credits exclusively from the capital deposits taken. It is therefore 
assumed that, after the legislature established as an offence the carrying out of any 
banking transaction without approval, the same applies for bank credit, which, 
under the ZKI, is subject to an (authorisation) scheme that grants approval. 
24 That case-law has been abandoned in individual (previous) decisions of the 
referring court. It is assumed that the commercial granting of interest-bearing 
loans from funds which were not taken as deposits from the public (known as 
usury) cannot be defined as a ‘banking transaction’. By those decisions, the 
defendants in the relevant criminal cases are acquitted on appeal on a point of law, 
on the ground that the provision in Article 252(1) of the NK is applicable only to 
activities for which an (authorisation) scheme that grants approval is provided for. 
25 According to the ZKI, a financial institution is a person other than an institution or 
an industrial holding company whose main activity consists, inter alia, in granting 
credits from funds which have not been taken as deposits or other repayable funds 
from the public. Since the granting of credits from such funds constitutes a 
financial transaction for which the ZKI provides for a registration scheme but not 
an authorisation scheme, it is not, in that case, an offence to pursue that activity 
commercially. 
BG 
 
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26 The referring court requires an interpretation of the definition of a credit 
institution within the meaning of Article 4(1)(1) of Regulation (EU) No 575/2013 
in order to determine whether the use of the conjunction ‘and’, which links the 
activity of taking deposits or other repayable funds from the public to the activity 
of granting credits, means that credit institutions may grant credit only with funds 
taken from the public and may not grant credits from funds which they have 
received from other sources, such as bank charges, interest, etc. 
27 The doubt as to the exact scope of the definition in Article 4(1)(1) of the 
Regulation also arises from the express prohibition laid down in Article 9(1) of 
the Directive against persons or undertakings other than credit institutions from 
carrying out the business of taking deposits or other repayable funds from the 
public, and on the provisions of points 1 and 2 of Annex I to the Directive, which 
list those two activities separately. 
28 The referring court is also faced with difficulties in interpreting the definition of 
the concept of ‘authorisation’, within the meaning of Article 4(1)(42) of the 
Regulation, since that instrument grants the right to carry out the business within 
the framework defined by that Regulation and by the Directive. 
29 In accordance with Article 4(1)(26) of the Regulation and Article 34 of the 
Directive, financial institutions may pursue the activities listed in Annex I; point 2 
of that annex refers to loan transactions, in particular consumer credits. It is 
therefore essential for the referring court to ascertain whether the phrase 
‘instrument issued in any form by the authorities by which the right to carry out 
the business is granted’ in Article 4(1)(42) of the Regulation covers both the 
authorisation (under the authorisation scheme granting approval) as well as 
certification (under the registration scheme granting approval). 
30 The referring court asks the Court to deal with the request for a preliminary ruling 
under the urgent procedure provided for in Article 107 of the Rules of Procedure 
of the Court of Justice. The proceedings in the two phases of the criminal 
proceedings (investigation and court proceedings) have been ongoing for six 
years, during which time the confiscation was ordered by a prohibition on 
disposing of two immovable properties (one co-owned with a third party) and the 
seizure of BG’s two cars. That was done in order to ensure enforcement of the 
sentence provided for in Article 252(1) of the NK. There is a real risk of 
infringing the right to a fair trial provided for in Article 6(1) of the Convention for 
the Protection of Human Rights and Fundamental Freedoms with regard to the 
requirement that the duration of proceedings be reasonable and the requirement of 
legal certainty, which form part of EU law as general principles under Article 6(3) 
of the Treaty on European Union.