JUDGMENT OF THE GENERAL COURT (Third Chamber, Extended Composition)

1 June 2022 ( *1 )

(Economic and monetary union – Banking Union – Single Resolution Mechanism for credit institutions and certain investment firms (SRM) – Resolution procedure applicable where an entity is failing or is likely to fail – Adoption by the SRB of a resolution scheme in respect of Banco Popular Español – Right to be heard – Delegation of power – Right to property – Obligation to state reasons – Articles 18 and 20 and Article 21(1) of Regulation (EU) No 806/2014)

In Case T‑510/17,

Antonio Del Valle Ruíz, residing in Mexico (Mexico), and the other applicants whose names are listed in the annex, ( 1 ) represented by J. Pobjoy, Barrister, B. Kennelly QC, and S. Walker, Solicitor,

applicants,

v

European Commission, represented by L. Flynn and A. Steiblytė, acting as Agents,

and

Single Resolution Board (SRB), represented by J. King and M. Fernández Rupérez, acting as Agents, and by B. Meyring, S. Schelo, F. Fernández de Trocóniz Robles, T. Klupsch and S. Ianc, lawyers,

defendants,

supported by

Kingdom of Spain, represented by L. Aguilera Ruiz and J. Rodríguez de la Rúa Puig, acting as Agents,

by

European Parliament, represented by L. Visaggio, J. Etienne, M. Menegatti, M. Sammut, L. Stefani and M. Martínez Iglesias, acting as Agents,

by

Council of the European Union, represented by A. de Gregorio Merino, J. Bauerschmidt, A. Westerhof Löfflerová and H. Marcos Fraile, acting as Agents,

and by

Banco Santander, SA, established in Santander (Spain), represented by J. Rodríguez Cárcamo, A. Rodríguez Conde, D. Sarmiento Ramírez-Escudero, lawyers, and G. Cahill, Barrister,

interveners,

APPLICATION based on Article 263 TFEU for annulment of Decision SRB/EES/2017/08 of the Executive Session of the SRB of 7 June 2017 concerning the adoption of a resolution scheme in respect of Banco Popular Español, SA, and for annulment of Commission Decision (EU) 2017/1246 of 7 June 2017 endorsing the resolution scheme for Banco Popular Español S.A. (OJ 2017 L 178, p. 15),

THE GENERAL COURT (Third Chamber, Extended Composition),

composed of M. van der Woude, President, M. Jaeger, V. Kreuschitz, G. De Baere (Rapporteur) and G. Steinfatt, Judges,

Registrar: P. Cullen, Administrator,

having regard to the written part of the procedure and further to the hearing on 21 June 2021,

gives the following

Judgment

Legal framework

1 Following the 2008 financial crisis, it was decided that a banking union should be set up in the European Union, underpinned by a comprehensive and detailed single rulebook for financial services, valid for the internal market as a whole and composed of a single supervisory mechanism and new frameworks for deposit insurance and resolution.

2 The first stage towards setting up the banking union consisted of the establishment of a single supervisory mechanism (SSM) by Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ 2013 L 287, p. 63). According to recital 12 of that regulation, an SSM should ensure that the European Union’s policy relating to the prudential supervision of credit institutions is implemented in a coherent and effective manner, that the single rulebook for financial services is applied in the same manner to credit institutions in all Member States concerned and that those credit institutions are subject to supervision of the highest quality, unfettered by other, non-prudential considerations. To that end, Regulation No 1024/2013 confers specific tasks on the European Central Bank (ECB) concerning policies relating to the prudential supervision of credit institutions with a view to contributing to the safety and soundness of credit institutions and the stability of the financial system within the European Union and each Member State.

3 Thereafter, 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 (OJ 2014 L 173, p. 190) was adopted. Recital 1 of that directive states the following: ‘The financial crisis has shown that there is a significant lack of adequate tools at Union level to deal effectively with unsound or failing credit institutions and investment firms … Such tools are needed, in particular, to prevent insolvency or, when insolvency occurs, to minimise negative repercussions by preserving the systemically important functions of the institution concerned. During the crisis, those challenges were a major factor that forced Member States to save institutions using taxpayers’ money. The objective of a credible recovery and resolution framework is to obviate the need for such action to the greatest extent possible.’

4 The objective of Directive 2014/59 is to establish common rules for minimum harmonisation of national provisions governing the resolution of banks in the European Union and provides for cooperation between resolution authorities for deficiencies in cross-border banks. In that regard, Directive 2014/59 provides, inter alia, in Article 3(1), that each Member State is to designate one or, exceptionally, more resolution authorities that are empowered to apply the resolution tools and exercise the resolution powers.

5 However, given that, first, Directive 2014/59 did not lead to the centralisation of decision making in the field of resolution, that it essentially made resolution tools and common resolution powers available to the national authorities of each Member State, and that it left them a margin of discretion as regards the use of those tools and the use of national financing arrangements for resolution, and that, second, that directive did not completely avoid the taking of separate and potentially inconsistent decisions by Member States regarding the resolution of cross-border groups, it was decided to put in place a Single Resolution Mechanism (SRM).

6 Thus, the second stage towards the creation of the banking union consisted in the adoption of Regulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ 2014 L 225, p. 1).

7 Recital 12 of Regulation No 806/2014 states: ‘Ensuring effective resolution decisions for failing banks within the Union, including on the use of funding raised at Union level, is essential for the completion of the internal market in financial services. Within the internal market, the failure of banks in one Member State may affect the stability of the financial markets of the Union as a whole. Ensuring effective and uniform resolution rules and equal conditions of resolution financing across Member States is in the best interests not only of the Member States in which banks operate but also of all Member States in general as a means of ensuring a level competitive playing field and improving the functioning of the internal market. Banking systems in the internal market are highly interconnected, bank groups are international and banks have a large percentage of foreign assets. In the absence of the SRM, bank crises in Member States participating in the SSM would have a stronger negative systemic impact also in non-participating Member States. The establishment of the SRM will ensure a neutral approach in dealing with failing banks and therefore increase stability of the banks of the participating Member States and prevent the spill-over of crises into non-participating Member States and will thus facilitate the functioning of the internal market as a whole. The mechanisms for cooperation regarding institutions established in both participating and non-participating Member States should be clear, and no Member State or group of Member States should be discriminated against, directly or indirectly, as a venue for financial services.’

8 Under the first paragraph of Article 1 of Regulation No 806/2014, the purpose of that regulation is to establish uniform rules and a uniform procedure for the resolution of the entities defined in Article 2, which are established in the participating Member States, namely banks whose home supervisor is the ECB or the national competent authority in Member States whose currency is the euro or in Member States whose currency is not the euro which have established a close cooperation in accordance with Article 7 of Regulation No 1024/2013 (see recital 15 of Regulation No 806/2014).

9 The second paragraph of Article 1 of Regulation No 806/2014 provides that those uniform rules and that uniform procedure are to be applied by the Single Resolution Board (SRB) established in accordance with Article 42 of that regulation, together with the Council of the European Union and the European Commission, and the national resolution authorities, within the framework of the SRM established by that regulation. It is also provided that the SRM is to be supported by a single resolution fund (SRF).

10 Pursuant to Article 16(1) of Regulation No 806/2014, the SRB is to decide on a resolution action in relation to a financial institution established in a participating Member State, where the three conditions laid down in Article 18(1) of that regulation are satisfied.

11 The first condition requires that the entity is failing or is likely to fail. The assessment of that condition is carried out by the ECB, after consulting the SRB, or by the SRB, and is deemed to be satisfied if the entity is in one or more of the situations listed in Article 18(4) of Regulation No 806/2014.

12 The second condition requires there to be no reasonable prospect that any alternative private sector measures or supervisory action would prevent its failure within a reasonable time frame.

13 The third condition requires that a resolution action is necessary in the public interest, that is to say that it is necessary in order to achieve one or more of the resolution objectives, and winding up of the entity under normal insolvency proceedings would not meet those resolution objectives to the same extent.

14 Article 14 of Regulation No 806/2014 defines the resolution objectives as follows: to ensure the continuity of critical functions; to avoid significant adverse effects on financial stability, in particular by preventing contagion; to protect public funds by minimising reliance on extraordinary public financial support; to protect depositors and investors; and to protect client funds and client assets.

15 Article 20(1) of Regulation No 806/2014 provides that, before deciding on resolution action or the exercise of the power to write down or convert relevant capital instruments, the SRB must ensure that a fair, prudent and realistic valuation of the assets and liabilities of the entity concerned is carried out by a person independent from any public authority, including the SRB and the national resolution authority, and from the entity concerned.

16 According to Article 20(15) of Regulation No 806/2014, the valuation is to be an integral part of the decision on the application of a resolution tool or on the exercise of a resolution power or the decision on the exercise of the write-down or conversion power of capital instruments.

17 Where the conditions laid down in Article 18(1) of Regulation No 806/2014 are satisfied, the SRB is to adopt a resolution scheme.

18 When acting under the resolution procedure, the SRB, the Council and the Commission must ensure that the resolution action is taken in accordance with certain principles set out in Article 15 of Regulation No 806/2014, which include the principle that the shareholders of the institution under resolution are to bear first losses and the principle that no creditor is to incur greater losses than would have been incurred if the entity covered by the resolution action had been wound up under normal insolvency proceedings.

19 In the resolution scheme, the SRB is to determine the application of the resolution tools. Article 22(2) of Regulation No 806/2014 lists the various resolution tools available, namely the sale of business tool, the bridge institution tool, the asset separation tool and the bail-in tool.

20 In the resolution scheme, the SRB may also exercise the power to write down or convert the capital instruments in the entity concerned in accordance with the conditions laid down in Article 21 of Regulation No 806/2014. Under Article 19 of Regulation No 806/2014, a resolution action may also involve the grant of State aid or use of the SRF.

21 According to Article 18(7) of Regulation No 806/2014, immediately after its adoption, the SRB is to transmit the resolution scheme to the Commission. Within 24 hours from the transmission of the resolution scheme by the SRB, the Commission must either endorse the resolution scheme, or object to it with regard to the discretionary aspects of the resolution scheme in the cases not covered in the third subparagraph, namely compliance with the public interest criterion or a material modification of the amount of the SRF. As regards those discretionary aspects, within 12 hours from the transmission of the resolution scheme by the SRB, the Commission may propose to the Council to object to the resolution scheme adopted by the SRB on the ground that it does not fulfil the criterion of public interest or to approve or object to a material modification of the amount of the SRF provided for in the resolution scheme by the SRB. The resolution scheme may enter into force only if no objection has been expressed by the Council or by the Commission within a period of 24 hours after its transmission by the SRB.

22 Article 18(9) of Regulation No 806/2014 states that the SRB is to ensure that the necessary resolution action is taken to carry out the resolution scheme by the relevant national resolution authorities. The resolution scheme is to be addressed to those authorities and must instruct them to take all necessary measures to implement the scheme in accordance with Article 29 of that regulation by exercising resolution powers.

23 After a resolution action has been adopted, under Article 20(16) of Regulation No 806/2014, the SRB is to ensure that a valuation is carried out by an independent person in order to determine whether the shareholders and creditors would have received better treatment if the institution under resolution had entered into normal insolvency proceedings. Pursuant to Article 76(1)(e) of Regulation No 806/2014, that valuation may lead to the payment of compensation to shareholders or creditors if they have incurred greater losses under the resolution than they would have incurred in a winding up under normal insolvency proceedings.

Background to the dispute and events subsequent to the action being brought

24 The applicants, Mr Antonio Del Valle Ruíz and the other natural and legal persons whose names are listed in the annex, were shareholders or held bonds in Banco Popular Español, SA (‘Banco Popular’) before a resolution scheme was adopted in respect of Banco Popular.

The situation of Banco Popular before the resolution scheme was adopted

25 The Banco Popular group, of which Banco Popular was the parent company, was the sixth largest banking group in Spain at the time of the resolution.

26 In 2016, Banco Popular undertook a capital increase of EUR 2.5 billion.

27 On 5 December 2016, the Executive Session of the SRB adopted a resolution plan for the Banco Popular group (‘the 2016 resolution plan’). The preferred resolution tool in the 2016 resolution plan was the bail-in tool provided for in Article 27 of Regulation No 806/2014.

28 On 3 February 2017, Banco Popular published its 2016 annual report in which it disclosed the need for extraordinary provisions in the sum of EUR 5.7 billion, leading to consolidated losses of EUR 3.485 billion, and the appointment of a new chairman.

29 On 10 February 2017, DBRS Ratings Limited (DBRS) (now DBRS Morningstar) downgraded Banco Popular’s rating, with a negative outlook, in view of Banco Popular’s weakened capital position following a net loss which was higher than that anticipated in its annual report, mentioned in paragraph 28 above, and the bank’s struggle to reduce its elevated stock of non-performing assets.

30 On 3 April 2017, Banco Popular announced the results of internal audits, indicating that corrections to its 2016 annual report might be required. Those adjustments were made in Banco Popular’s financial report for the first quarter of 2017.

31 At the general shareholders’ meeting of Banco Popular on 10 April 2017, the Chairman of the Board of Directors announced that the bank envisaged either a further capital increase or a corporate transaction to address the group’s capital position and its level of non-performing assets. The Chief Executive Officer (CEO) of Banco Popular was replaced after less than one year in his position.

32 Following the announcement of 3 April 2017 on the need to adjust the financial results of 2016, DBRS, on 6 April, downgraded Banco Popular’s rating, again with a negative outlook. On 7 April, Standard & Poor’s, and on 21 April 2017, Moody’s Investors Service (‘Moody’s’) also downgraded Banco Popular’s rating with a negative outlook.

33 In April 2017, Banco Popular initiated a private sale process with a view to achieving its sale to a strong competitor, which would restore its financial situation. The deadline for potential purchasers interested in acquiring Banco Popular to submit their bids was initially set at 10 June 2017 and then delayed until the end of June 2017.

34 On 5 May 2017, Banco Popular presented its financial report for the first quarter of 2017, reporting losses of EUR 137 million.

35 On 12 May 2017, the liquidity coverage requirement of Banco Popular dropped below the minimum threshold of 80% set by Article 460(2)(c) 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 (OJ 2013 L 176, p. 1).

36 By letter of 16 May 2017, Banco Santander, SA informed Banco Popular that it could not make a concrete bid in the context of the private sale process.

37 On 16 May 2017, in a communication of a relevant fact to the Comisión nacional del mercado de valores (CNMV) (National Securities Market Commission (CNMV), Spain), Banco Popular stated that potential purchasers had expressed an interest in the private sale process, but that it had not received any concrete bids.

38 On 19 May 2017, FITCH downgraded Banco Popular’s long-term rating.

39 On 23 May 2017, the Chair of the SRB, Ms Elke König, granted an interview to the television channel Bloomberg, in which she was questioned, inter alia, on the situation of Banco Popular.

40 In May 2017, several press articles reported on the difficulties faced by Banco Popular. By way of example, it is worth mentioning an article of 11 May 2017, published on the website elconfidencial.com, entitled ‘Saracho orders the urgent sale of Popular to JP Morgan and Lazard due to risk of insolvency’ (Saracho encarga la venta urgente del Popular a JP Morgan y Lazard por riesgo de Quiebra). That article states that the Chairman of the bank had instructed JP Morgan and Lazard to organise the urgent sale of the bank due to a risk of insolvency, as a result of the massive outflow of deposits by private and institutional clients, and that he considered that the only way of ensuring the viability of the bank was the complete and imminent sale of the entire group. The article states that, ‘in view of persistent deposit outflows and the closure of external sources of financing, the bank ran a serious risk of insolvency and that [its Chairman] was therefore forced to activate the most drastic measure and gradually refrain from selling its assets in order to improve its own fund ratios and meet the requirements of the ECB’.

41 On 15 May 2017, an article published on the website elconfidencial.com, entitled ‘The ECB inspects Banco Popular for two months in full sales process’ (El BCE inspecciona a Banco Popular durante dos meses en pleno proceso de venta), reported that the sales plan for Banco Popular, implemented by its chairman, took place after the ECB’s inspection, which had confirmed the gap in provisions. According to that article, the ECB inspectors had concluded that Banco Popular’s difficulties were associated with its stock deficit to cover its property exposure and that it was necessary to avoid occasional withdrawals of deposits. The inspectors also expressed their dissatisfaction with the presentation of the 2016 accounts.

42 On 31 May 2017, Reuters news agency published an article entitled ‘EU warned of wind-down risk for Spain’s Banco Popular’. That article states inter alia that, according to an EU official who remained anonymous, one of Europe’s top bank watchdogs had warned EU officials that Banco Popular may need to be wound down if it failed to find a buyer. According to that article, that official also stated that the Chair of the SRB had recently issued an ‘early warning’ and had declared that the SRB was following the (Banco Popular) procedure with particular attention with a view to a possible intervention.

43 On the same day, the SRB published a press release disputing the content of that article.

44 In the first days of June 2017, Banco Popular had to face massive liquidity outflows.

45 On the morning of 5 June 2017, Banco Popular submitted an initial request for emergency liquidity assistance to Banco de España (Bank of Spain), then a second request, in the afternoon, containing an extension of the amount requested on account of extremely acute liquidity movements. On the basis of a request from the Bank of Spain and following the ECB’s assessment on the same day as Banco Popular’s request for emergency liquidity assistance, the Governing Council of the ECB did not raise any objections to urgent liquidity assistance to Banco Popular for the period up to 8 June 2017. Banco Popular received part of that emergency liquidity assistance, then the Bank of Spain stated that it was not in a position to provide additional emergency liquidity assistance to Banco Popular.

46 On 6 June 2017, DBRS and Moody’s downgraded Banco Popular’s rating.

Other facts prior to the adoption of the resolution scheme

47 On 23 May 2017, the SRB hired Deloitte as an independent expert to carry out a valuation of Banco Popular in accordance with Article 20 of Regulation No 806/2014.

48 On 24 May 2017, on the basis of Article 34 of Regulation No 806/2014, the SRB asked Banco Popular to supply the information required in order to carry out its valuation. On 2 June 2017, Banco Popular was also asked to supply information about the private sale process and to be ready to provide access to the secure virtual data room that it had established in the context of that process.

49 On 3 June 2017, the Executive Session of the SRB adopted Decision SRB/EES/2017/06, addressed to the Fondo de Reestructuración Ordenada Bancaria (FROB) (Fund for Orderly Bank Restructuring (FROB), Spain), concerning the marketing of Banco Popular. The SRB approved the immediate launching of the marketing of Banco Popular by the FROB and informed the latter of the requirements concerning the sale, in accordance with Article 39 of Directive 2014/59. In particular, the SRB instructed the FROB to contact the five potential purchasers which had been invited to present non-binding offers in the context of the private sale process.

50 Of the five potential purchasers, two decided not to participate in the marketing process and one was excluded by the ECB for prudential reasons.

51 On 4 June 2017, the two potential purchasers which had decided to participate in the marketing process, Banco Santander and Banco Bilbao Vizcaya Argentaria, SA (BBVA), signed a non-disclosure agreement and on 5 June 2017 were given access to the virtual data room.

52 On 5 June 2017, the SRB adopted a first valuation (‘valuation 1’), pursuant to Article 20(5)(a) of Regulation No 806/2014, which had the objective of informing the determination whether the conditions for resolution, as defined in Article 18(1) of Regulation No 806/2014, were met.

53 On 6 June 2017, the ECB made a ‘failing or likely to fail’ assessment of Banco Popular, after consulting the SRB, in accordance with the second subparagraph of Article 18(1) of Regulation No 806/2014.

54 In that assessment, the ECB stated that over the preceding months, Banco Popular had experienced a substantial deterioration of its liquidity position, primarily driven by a significant depletion of its deposit base. Banco Popular was confronted with material cash outflows across all customer segments. The ECB listed the events which had led to the liquidity problems faced by Banco Popular.

55 In that regard, the ECB noted that, in February 2017, when presenting its annual accounts, Banco Popular had disclosed the need for extraordinary provisions in the sum of EUR 5.7 billion, leading to losses of EUR 3.485 billion for 2016, and replaced its long-standing chairman who had initiated a revision of the bank’s strategy. The announcement of additional provisions and year-end losses led to Banco Popular’s rating being downgraded by DBRS on 10 February 2017 and caused significant concerns on the part of Banco Popular’s customer base, which were reflected by significant unexpected deposit withdrawals and a high frequency of customer visits to the bank’s branches.

56 The ECB also stated that the release by Banco Popular of an ad hoc disclosure on 3 April 2017, reporting on the outcome of several internal audits with a potentially significant impact on the bank’s financial statements, and the confirmation that the bank’s CEO would be replaced after less than one year in office, triggered another wave of deposit outflows. The ECB noted that that wave was also fuelled by: – a downgrade of Banco Popular’s rating by Standard & Poor’s on 7 April 2017; – an announcement by Banco Popular, on 10 April 2017, that it would not pay dividends and that a capital increase or corporate transaction could be required due to its tight capital position and the necessary alignment of the non-performing assets’ coverage to its peers; – a downgrade of Banco Popular’s rating by Moody’s on 21 April 2017; – the disclosure of worse-than-expected results for the first quarter of 2017; – continuous negative media coverage such as the articles of 11 May and 15 May 2017, referred to in paragraphs 40 and 41 above, suggesting that the Chairman of Banco Popular had mandated an urgent sale of the bank due to the imminent risk of bankruptcy or illiquidity, and that the bank was facing a significant additional need for provisioning resulting from an on-site inspection by the supervisor.

57 The ECB also found that deposits lost since 31 May 2017 were particularly relevant, after disclosure in the media of the fact that the bank could face wind-down if the current sale process was not successful within a very short period.

58 In addition, the ECB noted that, while Banco Popular had developed various additional liquidity generating measures over the preceding weeks and started to implement them, the magnitude of the realised and still expected inflows was insufficient to remedy the depletion of Banco Popular’s liquidity position on the date of the assessment. The ECB also stated that, even with the recourse to the emergency liquidity assistance in respect of which the Governing Council of the ECB had not raised any objections on 5 June 2017, the liquidity situation on that date did not suffice to ensure Banco Popular’s ability to meet its liabilities by 7 June 2017 at the latest.

59 The ECB considered that the measures put in place by Banco Popular had not been sufficient to reverse the deterioration of its liquidity position. It stated that, as an alternative measure to ensure its capacity to meet all liabilities as they fell due, Banco Popular was trying to implement a corporate transaction, namely its sale to a stronger competitor. However, the ECB considered that, in view of the deterioration of Banco Popular’s liquidity position and the lack of evidence of its capacity to turn around its liquidity situation in the near future, together with the fact that negotiations had so far not led to a positive outcome, confirmation of such a private transaction was not foreseeable in a time frame that would allow Banco Popular to be able to pay its debts or other liabilities as they fell due.

60 The ECB considered that, at the same time, there were no available supervisory or early intervention measures that could immediately restore the liquidity position of Banco Popular and allow it sufficient time to implement a corporate transaction or other solution. The measures available to the ECB as the competent authority under the national transposition of Article 104 of 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), and of Articles 27 to 29 of Directive 2014/59, or of Article 16 of Regulation No 1024/2013, could not ensure that Banco Popular would be in a position to pay its debts or other liabilities as they fell due, given the extent and pace of the liquidity deterioration observed.

61 In conclusion, taking into account, in particular, the excessive deposit outflows, the speed at which liquidity had been lost from the bank and the inability of the bank to generate further liquidity, the ECB considered that there were objective elements indicating that Banco Popular was likely, in the near future, to be unable to pay its debts or other liabilities as they fell due. The ECB concluded that Banco Popular was deemed to be failing, or in any case likely to fail in the near future, in accordance with Article 18(1)(a) and (4)(c) of Regulation No 806/2014.

62 On 6 June 2017, the Board of Directors of Banco Popular informed the ECB that it had reached the conclusion that the bank was likely to fail.

63 On the same day, the FROB issued a letter containing information on the marketing process setting the deadline for the submission of bids at midnight on 6 June 2017.

64 Still on the same date, BBVA, one of the two potential buyers of Banco Popular, informed the FROB that it would not be making a bid.

65 Also on 6 June 2017, Deloitte submitted a second valuation (‘valuation 2’) to the SRB, drawn up pursuant to Article 20(10) of Regulation No 806/2014. The purpose of valuation 2 was to estimate the value of Banco Popular’s assets and liabilities, to provide an evaluation of the treatment that shareholders and creditors would have received if Banco Popular had entered into normal insolvency proceedings, and to inform the decision to be taken on the shares and instruments of ownership to be transferred and the SRB’s understanding of what constitutes commercial terms for the purposes of the sale of business tool. That valuation, inter alia, estimated the economic value of Banco Popular at EUR 1.3 billion in the best-case scenario, at minus EUR 8.2 billion in the worst-case scenario and at minus EUR 2 billion for the best estimate.

66 On 7 June 2017, Banco Santander submitted a concrete bid.

67 By letter of 7 June 2017, the FROB informed the SRB that Banco Santander had submitted a bid at 3.12 a.m. on 7 June and that the price offered by Banco Santander for the sale of Banco Popular shares was EUR 1. The FROB stated that its governing committee had selected Banco Santander as awardee of the competitive sale process of Banco Popular and had decided to propose to the SRB to designate Banco Santander as buyer in the SRB’s decision on the adoption of a resolution scheme in respect of Banco Popular.

The resolution scheme for Banco Popular of 7 June 2017

68 On 7 June 2017, the Executive Session of the SRB adopted Decision SRB/EES/2017/08 concerning a resolution scheme in respect of Banco Popular (‘the resolution scheme’) on the basis of Regulation No 806/2014.

69 According to Article 1 of the resolution scheme, given that the conditions provided for in Article 18(1) of Regulation No 806/2014 had been met, the SRB decided to place Banco Popular under resolution as of the resolution date.

70 Accordingly, the SRB considered, first, that Banco Popular was failing or was likely to fail, second, that there were no alternative measures that could prevent the failure of Banco Popular within a reasonable time frame and, third, that resolution action in the form of a sale of business tool in respect of Banco Popular was necessary in the public interest. In that regard, the SRB stated that the resolution was a necessary and proportionate way to meet the two objectives referred to in Article 14(2) of Regulation No 806/2014, namely to achieve the continuity of the bank’s critical functions and to avoid significant adverse effects on financial stability.

71 In Article 5.1 of the resolution scheme, the SRB decided the following: ‘The resolution tool to be applied to [Banco Popular] shall consist in the sale of business pursuant to Article 24 of [Regulation No 806/2014] for transferring shares to a purchaser. The write-down and conversion of capital instruments will be exercised immediately before the application of the sale of business tool.’

72 Article 6 of the resolution scheme concerns the write-down of capital instruments and the sale of business tool. In Article 6.1, the SRB set out the measures which it had adopted pursuant to its write-down power provided for in Article 21 of Regulation No 806/2014.

73 Accordingly, in Article 6.1 of the resolution scheme, the SRB decided: – first, to write down the nominal amount of Banco Popular’s share capital in an amount of EUR 2098429046, resulting in the cancellation of 100% of Banco Popular’s share capital; – subsequently, to convert all the principal amount of the additional Tier 1 instruments issued by Banco Popular and outstanding as at the date of the decision relating to the resolution scheme into newly issued shares of Banco Popular (‘the New Shares I’); – subsequently, to write down to zero the nominal amount of the ‘New Shares I’, resulting in the cancellation of 100% of those ‘New Shares I’; – lastly, to convert all the principal amount of the Tier 2 capital instruments issued by Banco Popular and outstanding as at the date of the resolution decision into newly issued shares of Banco Popular (‘the New Shares II’).

74 Article 6.3 of the resolution scheme provides that those write-down and conversion measures are based on valuation 2, as corroborated by the results of an open and transparent marketing process conducted by the Spanish resolution authority (the FROB).

75 In Article 6.5 of the resolution scheme, the SRB stated that it was exercising the powers conferred on it by Article 24(1)(a) of Regulation No 806/2014 concerning the sale of business tool, and ordered that the ‘New Shares II’ be transferred to Banco Santander free and clear of any rights or liens of any third party, in consideration of a purchase price of EUR 1. It was specified that the purchaser had already consented to the transfer.

76 The SRB also stated that the transfer of the ‘New Shares II’ should be made on the basis of the purchaser’s binding offer of 7 June 2017 and implemented by the FROB under Ley 11/2015 de recuperación y resolución de entidades de crédito y empresas de servicios de inversión (Law 11/2015 on the recovery and resolution of credit institutions and investment firms) of 18 June 2015 (BOE No 146 of 19 June 2015, p. 50797).

77 The resolution scheme was submitted to the Commission for endorsement at 5.13 a.m. on 7 June 2017.

78 On 7 June 2017, at 6.30 a.m., the Commission adopted Decision (EU) 2017/1246 endorsing the resolution scheme for [Banco Popular] (OJ 2017 L 178, p. 15) and notified it to the SRB. Consequently, the resolution scheme entered into force on the same day.

79 Recital 4 of Decision 2017/1246 states the following: ‘The Commission agrees with the resolution scheme. In particular, it agrees with the reasons provided by the SRB of why resolution is necessary in the public interest in accordance with Article 5 of Regulation (EU) No 806/2014.’

80 On the same day, the FROB adopted the necessary measures to implement the resolution scheme in accordance with Article 29 of Regulation No 806/2014. In that context, the FROB approved the transfer of Banco Popular’s new shares resulting from the conversion of the Tier 2 instruments (‘the New Shares II’) to Banco Santander.

Facts subsequent to the adoption of the resolution decision

81 On 14 June 2018, Deloitte sent to the SRB the valuation of difference in treatment, provided for in Article 20(16) to (18) of Regulation No 806/2014, carried out in order to determine whether the shareholders and creditors would have received better treatment if Banco Popular had entered into normal insolvency proceedings (‘valuation 3’). On 31 July 2018, Deloitte sent to the SRB an addendum to that valuation, correcting some formal errors.

82 On 28 September 2018, following a merger by acquisition, Banco Santander became the universal successor of Banco Popular.

83 On 17 March 2020, the SRB adopted decision SRB/EES/2020/52 determining whether compensation needed to be granted to the shareholders and creditors in respect of which the resolution actions concerning Banco Popular had been effected. A communication concerning that decision was published on 20 March 2020 in the Official Journal of the European Union (OJ 2020 C 91, p. 2). In that decision, the SRB considered that the shareholders and creditors who were affected by the resolution of Banco Popular were not entitled to compensation from the SRF under Article 76(1)(e) of Regulation No 806/2014.

Procedure and forms of order sought

84 By application lodged at the Court Registry on 4 August 2017, the applicants brought the present action.

85 By document lodged at the Court Registry on 31 October 2017, the SRB requested the Court, pursuant to Article 92(3) of the Rules of Procedure of the General Court, to order measures of inquiry concerning the production of certain documents referred to in the annex. By decision of 6 December 2017, the Court decided not to grant that request for a measure of inquiry at that stage in the proceedings.

86 By documents lodged at the Court Registry on 6 and 21 November 2017, and on 5 and 13 December 2017, respectively, Banco Santander, the Council, the Kingdom of Spain and the European Parliament applied for leave to intervene in the present proceedings in support of the form of order sought by the Commission and the SRB. By order of 12 April 2019, the President of the Eighth Chamber of the General Court granted Banco Santander leave to intervene and, by decision of 17 April 2019, granted the Council, the Kingdom of Spain and the Parliament leave to intervene. The Kingdom of Spain, the Parliament, the Council and Banco Santander submitted their statements in intervention, and the applicants and the SRB submitted their observations on those statements within the prescribed time limits.

87 On 13 February 2018, in the context of measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, the Court requested the SRB to lodge the latest, non-confidential version of the resolution scheme, as well as a non-confidential version of valuation 2 which were published on the SRB’s website. The SRB lodged the documents within the prescribed time limit.

88 On 6 July 2018, in the context of the measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, the Court put written questions to the main parties. The applicants and the SRB complied with that request within the prescribed time limit.

89 By letter lodged at the Court Registry on 9 October 2018, the applicants requested the Court to order the Commission and the SRB, by way of a measure of organisation of procedure on the basis of Article 88 of the Rules of Procedure, to produce a certain number of documents, the list of which was annexed to the request. The Commission and the SRB submitted their observations on that request within the prescribed time limit.

90 Following a change in the composition of the Chambers of the General Court, in accordance with Article 27(5) of the Rules of Procedure, the Judge-Rapporteur was assigned to the Third Chamber, to which the present case was, accordingly, allocated.

91 By letter lodged at the Court Registry on 7 October 2019, the applicants produced new evidence pursuant to Article 85(3) of the Rules of Procedure. The Commission, the SRB, the Kingdom of Spain, the Parliament and the Council lodged observations on that new evidence within the prescribed time limits.

92 Acting on a proposal from the Third Chamber, the Court decided, pursuant to Article 28 of the Rules of Procedure, to refer the case to a Chamber sitting in extended composition.

93 On 15 March 2021, the Court, in the context of the measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, requested the Commission and the SRB to produce various documents. By letter of 30 March 2021, the SRB replied that the requested documents were in part confidential and that they could be produced if the Court adopted a measure of inquiry. By letter of 30 March 2021, the Commission replied that it did not have the requested document and that, therefore, it could not produce it.

94 On 15 April 2021, the Court, in the context of the measures of organisation of procedure provided for in Article 89 of the Rules of Procedure, requested the SRB to produce a document. By letter of 20 April 2021, the SRB stated that the requested document was confidential and that it could be produced if the Court adopted a measure of inquiry.

95 By order of 21 May 2021, the Court ordered the SRB, on the basis, first, of the first paragraph of Article 24 of the Statute of the Court of Justice of the European Union and, second, of Article 91(b), Article 92(3) and Article 103 of the Rules of Procedure, to produce the full versions of the resolution scheme, valuation 2, the ECB’s assessment of 6 June 2017 that Banco Popular was failing or was likely to fail, Banco Popular’s letter of 6 June 2017 to the ECB, including the annex to that letter, and the ECB’s letter of 18 May 2017 to Banco Popular. The Court also ordered the SRB to produce non-confidential versions of Banco Popular’s letter of 6 June 2017 to the ECB, including the annex to that letter, and of the ECB’s letter of 18 May 2017 to Banco Popular.

96 By order of 16 June 2021, the Court removed from the file the confidential versions of the documents produced by the SRB pursuant to the order of 21 May 2021, and sent to the applicants, the Commission, the Kingdom of Spain, the Parliament, the Council and Banco Santander the letter of 6 June 2017 from Banco Popular to the ECB without the annex to that letter.

97 Since two members of the Third Chamber, Extended Composition were unable to sit, the President of the General Court designated two other Judges to complete the Chamber.

98 The parties presented oral argument and answered oral questions put to them by the Court at the hearing on 21 June 2021.

99 The applicants claim that the Court should: – annul the resolution scheme and Decision 2017/1246 (together, ‘the contested decisions’); – order the SRB and the Commission to pay the costs.

100 The SRB and the Commission contend that the Court should: – dismiss the action; – order the applicants to pay the costs.

101 Banco Santander, the Kingdom of Spain and the Council contend that the Court should: – dismiss the action; – order the applicants to pay the costs.

102 The Parliament contends that the Court should: – dismiss the action in so far as it is based on the pleas of illegality raised against Regulation No 806/2014; – order the applicants to pay the costs.

Law

103 In support of their action, the applicants raise nine pleas in law. The first plea alleges that Article 18 of Regulation No 806/2014 is unlawful in so far as it infringes the right to be heard and the right to an effective remedy enshrined in Articles 41 and 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and the principle of proportionality. The second plea alleges infringement of Articles 41 and 47 of the Charter. The third plea alleges infringement of the right to property. The fourth plea alleges infringement of Article 20 of Regulation No 806/2014. The fifth plea alleges infringement of Article 18(1)(a) and (b) of Regulation No 806/2014. The sixth plea alleges infringement of Article 21(1) of Regulation No 806/2014. The seventh plea alleges infringement of the obligation to state reasons. The eighth plea alleges infringement of the principle of proportionality and of the principle of the protection of legitimate expectations. The ninth plea alleges that Articles 18 and 22 of Regulation No 806/2014 are unlawful in so far as they infringe the principles relating to the delegation of powers.

104 As a preliminary point, it must be noted that, as regards the scope of the review carried out by the Court, the applicants rely on the judgment of 18 July 2013, Commission and Others v Kadi (C‑584/10 P, C‑593/10 P and C‑595/10 P, EU:C:2013:518), in order to argue that the Court must carry out a full review and, in particular, determine whether the facts alleged are made out in the light of the relevant information or evidence and assess the probative value of that information or evidence in the circumstances of the particular case and in the light of any observations submitted by the person concerned. That requirement is reinforced where, as in the present case, the applicants have not been heard during the resolution procedure.

105 The SRB submits that the scope of the judicial review carried out by the Court is that established by the case-law applicable to a legal act based on provisions which confer discretionary power on the authority concerned and relate to economic and highly technical issues.

106 In that regard, it must be noted that the case-law has defined the scope of the review carried out by the Court both in situations in which the contested act is based on an assessment of highly complex scientific and technical facts and where there are complex economic assessments.

107 First, with regard to situations in which the EU authorities have a broad discretion, in particular as to the assessment of highly complex scientific and technical facts in order to determine the nature and scope of the measures which they adopt, review by the EU Courts is limited to verifying whether there has been a manifest error of assessment or a misuse of powers, or whether those authorities have manifestly exceeded the limits of their discretion. In such a context, the EU judicature cannot substitute its assessment of scientific and technical facts for that of the EU authorities on which alone the FEU Treaty has placed that task (judgments of 21 July 2011, Etimine, C‑15/10, EU:C:2011:504, paragraph 60, and of 7 March 2013, Bilbaína de Alquitranes and Others v ECHA, T‑93/10, EU:T:2013:106, paragraph 76; see, also, judgment of 11 May 2017, Deza v ECHA, T‑115/15, EU:T:2017:329, paragraph 163 and the case-law cited).

108 Second, as regards the review by the EU Courts of the complex economic assessments made by the EU authorities, that review is necessarily limited and confined to verifying whether the rules on procedure and on the statement of reasons have been complied with, whether the facts have been accurately stated and whether there has been any manifest error of assessment or a misuse of powers. When conducting such a review, the EU Courts must also not substitute their own economic assessment for that of the competent EU authority (see, to that effect, judgments of 11 July 1985, Remia and Others v Commission, 42/84, EU:C:1985:327, paragraph 34; of 10 December 2020, Comune di Milano v Commission, C‑160/19 P, EU:C:2020:1012, paragraph 100 and the case-law cited; and of 16 January 2020, Iberpotash v Commission, T‑257/18, EU:T:2020:1, paragraph 96 and the case-law cited).

109 Since the decisions which the SRB is required to adopt in the context of a resolution procedure are based on highly complex economic and technical assessments, it must be held that the principles resulting from the case-law referred to in paragraphs 107 and 108 above apply to the review which the Court is called upon to carry out.

110 However, although the SRB has discretion with regard to economic and technical matters, that does not mean that the EU Courts must refrain from reviewing the SRB’s interpretation of information of an economic nature which forms the basis of its decision. As the Court of Justice has held, even in the case of complex assessments, the EU judicature must not only establish whether the evidence relied on is factually accurate, reliable and consistent but also ascertain whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of supporting the conclusions drawn from it (see judgments of 22 November 2007, Spain v Lenzing, C‑525/04 P, EU:C:2007:698, paragraph 57 and the case-law cited; of 26 March 2019, Commission v Italy, C‑621/16 P, EU:C:2019:251, paragraph 104 and the case-law cited, and of 10 December 2020, Comune di Milano v Commission, C‑160/19 P, EU:C:2020:1012, paragraph 115 and the case-law cited).

111 In that regard, in order to establish that the SRB committed a manifest error in assessing facts so as to justify the annulment of the resolution scheme, the evidence adduced by the applicants must be sufficient to render the factual assessments adopted in that scheme implausible (see, by analogy, judgments of 14 June 2018, Lubrizol France v Council, C‑223/17 P, not published, EU:C:2018:442, paragraph 39; of 12 December 1996, AIUFFASS and AKT v Commission, T‑380/94, EU:T:1996:195, paragraph 59; and of 13 December 2018, Comune di Milano v Commission, T‑167/13, EU:T:2018:940, paragraph 108 and the case-law cited).

112 The Court considers it appropriate to examine, first of all, the pleas of illegality raised in the first and ninth pleas in law, then the fourth, fifth and sixth pleas in law and, lastly, the second, third, seventh and eighth pleas in law.

The first plea in law, alleging that Article 18 of Regulation No 806/2014 infringes the right to be heard and the right to an effective remedy enshrined in Articles 41 and 47 of the Charter and infringes the principle of proportionality

113 On the basis of Article 277 TFEU, the applicants claim that Article 18 of Regulation No 806/2014 is unlawful. This plea is divided into three parts, alleging that the procedure laid down in that article infringes, first, the right to be heard enshrined in Article 41(2)(a) of the Charter, second, the right to an effective remedy enshrined in Article 47 of the Charter and, third, the principle of proportionality.

114 According to settled case-law, Article 277 TFEU gives expression to a general principle conferring upon any party to proceedings the right to challenge, for the purpose of obtaining the annulment of a decision of direct and individual concern to that party, the validity of previous acts of the institutions which form the legal basis of the decision which is being attacked, if that party was not entitled under Article 263 TFEU to bring a direct action challenging those acts by which it was thus affected without having been in a position to ask that they be declared void (see judgment of 17 December 2020, BP v FRA, C-601/19 P, not published, EU:C:2020:1048, paragraph 26 and the case-law cited).

115 Since the purpose of Article 277 TFEU is not to allow a party to contest the applicability of any act of general application in support of any action whatsoever, the act the legality of which is called in question must be applicable, directly or indirectly, to the issue with which the action is concerned (see judgment of 8 September 2020, Commission and Council v Carreras Sequeros and Others, C‑119/19 P and C‑126/19 P, EU:C:2020:676, paragraph 68 and the case-law cited).

116 Thus, in an action for annulment brought against individual decisions, the Court of Justice has accepted that the provisions of an act of general application that constitute the basis of those decisions or that have a direct legal connection with such decisions may legitimately form the subject matter of a plea of illegality. By contrast, the Court of Justice has held that a plea of illegality covering an act of general application in respect of which the individual decision being challenged does not constitute an implementing measure is inadmissible (see judgment of 8 September 2020, Commission and Council v Carreras Sequeros and Others, C‑119/19 P and C‑126/19 P, EU:C:2020:676, paragraphs 69 and 70 and the case-law cited).

The first part, alleging that Article 18 of Regulation No 806/2014 infringes the right to be heard

117 The applicants submit that the resolution procedure laid down in Article 18 of Regulation No 806/2014 does not comply with the right to be heard enshrined in Article 41(2)(a) of the Charter, in that it does not provide for the possibility, for the shareholders and creditors of the entity whose rights have been affected to make their views known before the resolution scheme is adopted.

118 The SRB and the Parliament submit that, if the shareholders of an institution subject to a resolution procedure have a right to be heard enshrined in Article 41(2)(a) of the Charter, that right is recognised even in the absence of any express provision in Regulation No 806/2014. The absence of an express provision in Article 18 of Regulation No 806/2014 providing for a hearing of shareholders does not render that regulation unlawful, since there is no provision prohibiting such a hearing.

119 It must be noted that Article 41(2)(a) of the Charter provides that the right to good administration includes, inter alia, the right of every person to be heard, before any individual measure which would affect him or her adversely is taken.

120 The right to be heard guarantees every person the opportunity to make known his or her views effectively during an administrative procedure and before the adoption of any decision liable to affect his or her interests adversely. In addition, it should be stated that the right to be heard pursues a dual objective. First, to enable the case to be examined and the facts to be established in as precise and correct a manner as possible, and, secondly, to ensure that the person concerned is in fact protected. The right to be heard is intended, inter alia, to guarantee that any decision adversely affecting a person is adopted in full knowledge of the facts, and its purpose is to enable the competent authority to correct an error or to enable the person concerned to submit such information relating to his or her personal circumstances as will argue in favour of the adoption or non-adoption of the decision, or in favour of its having a specific content (see judgment of 4 June 2020, EEAS v De Loecker, C‑187/19 P, EU:C:2020:444, paragraphs 68 and 69 and the case-law cited).

121 It should be noted that the Court of Justice has affirmed the importance of the right to be heard and its very broad scope in the EU legal order, considering that that right must apply in all proceedings which are liable to culminate in a measure adversely affecting a person. In accordance with the case‑law of the Court of Justice, observance of the right to be heard is required even where the applicable legislation does not expressly provide for such a procedural requirement (see judgments of 22 November 2012, M., C‑277/11, EU:C:2012:744, paragraphs 85 and 86 and the case-law cited; of 18 June 2020, Commission v RQ, C‑831/18 P, EU:C:2020:481, paragraph 67 and the case-law cited; and of 7 November 2019, ADDE v Parliament, T‑48/17, EU:T:2019:780, paragraph 89 and the case-law cited).

122 Therefore, in the light of its character as a fundamental general principle of EU law, the application of the principle of the rights of the defence, which include the right to be heard, cannot be excluded or restricted by any legislative provision. Respect for that principle must therefore be ensured both where there is no specific legislation and also where legislation exists which does not itself take account of that principle (see judgment of 18 June 2014, Spain v Commission, T‑260/11, EU:T:2014:555, paragraph 62 and the case-law cited).

123 The scope of the right to be heard, as a principle and fundamental right of the EU legal order, is afforded when the administration plans to adopt a measure adversely affecting a person, that is, a measure which may have a negative effect on the interests of the individual or Member State concerned, since its application does not depend on the existence of an express rule to that effect laid down by subordinate legislation (judgment of 18 June 2014, Spain v Commission, T‑260/11, EU:T:2014:555, paragraph 64).

124 In that regard, it should be noted, first, that, according to recital 121 of Regulation No 806/2014, that regulation respects the fundamental rights and observes the rights, freedoms and principles recognised in particular by the Charter, including the right of defence, and should be implemented in accordance with those rights and principles. Second, no provision of Regulation No 806/2014 expressly excludes or restricts the right of the shareholders and creditors of the entity concerned to be heard during the resolution procedure.

125 Thus, contrary to what the applicants submit, the absence of a specific provision in Article 18 of Regulation No 806/2014 providing for a hearing of the shareholders of the entity which is the subject of a resolution action before the adoption of a decision cannot be interpreted as an absolute denial of the right to be heard in all circumstances, undermining the essence of that right. The applicants are wrong in arguing that Article 18 of Regulation No 806/2014 excludes the right to be heard in all cases, and not only where there is urgency.

126 In addition, it should be noted, as the Commission, the Council and the Parliament have submitted, that a resolution action adopted by the SRB following the procedure laid down in Article 18 of Regulation No 806/2014 concerns the resolution of an entity. The entity subject to resolution must be regarded as the person in respect of whom an individual measure is adopted and to whom the right to be heard is guaranteed by Article 41(2)(a) of the Charter.

127 Thus, account should be taken of the fact that the shareholders and creditors of that entity are not addressees of a resolution action, which is not an individual decision taken against them.

128 However, it must be noted that, according to Article 21(1) of Regulation No 806/2014, the SRB may exercise the power to write down or convert the capital instruments of the entity covered by a resolution action by acting under the procedure laid down in Article 18 of that regulation.

129 Thus, even if the procedure laid down in Article 18 of the regulation does not constitute an individual procedure initiated against the shareholders and creditors of the entity concerned, it may lead to the adoption of a resolution action liable to affect their interests adversely.

130 The case-law of the Court of Justice cited in paragraph 121 above adopted a broad interpretation of the right to be heard as being guaranteed to every person during proceedings which are liable to culminate in a measure adversely affecting that person. Therefore, it cannot be ruled out that the shareholders of an institution which is the subject of a resolution action may rely on the right to be heard in a resolution procedure.

131 However, the exercise of the right to be heard may be subject to limitations in accordance with Article 52(1) of the Charter, according to which: ‘Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.’

132 It is therefore necessary to examine whether the absence, in Regulation No 806/2014, of a provision expressly providing for a hearing of the shareholders and creditors of the entity concerned in the context of the procedure referred to in Article 18 of that regulation constitutes a limitation on the exercise of the right to be heard that complies with Article 52(1) of the Charter.

133 The Court of Justice has held that fundamental rights, such as observance of the rights of the defence, do not constitute unfettered prerogatives and may be restricted, provided that the restrictions in fact correspond to objectives of general interest pursued by the measure in question and that they do not constitute, with regard to the objectives pursued, a disproportionate and intolerable interference which infringes upon the very substance of the rights guaranteed (see judgments of 10 September 2013, G. and R., C‑383/13 PPU, EU:C:2013:533, paragraph 33 and the case-law cited, and of 20 December 2017, Prequ’Italia, C‑276/16, EU:C:2017:1010, paragraph 50 and the case-law cited).

134 In that regard, the SRB, the Kingdom of Spain, the Parliament and the Council submit that the limitation of the right of shareholders to be heard is justified, first, by the objective of ensuring the stability of the financial markets and, second, by the need to ensure the effectiveness of resolution decisions, which must be adopted quickly.

135 In the first place, it must be noted that several recitals of Regulation No 806/2014, in particular recitals 12, 58 and 61, state that the stability of financial markets is one of the objectives pursued by the resolution mechanisms established by that regulation.

136 Furthermore, in accordance with Article 18(5) of Regulation No 806/2014, a resolution action is to be treated as in the public interest if it is necessary for the achievement of, and is proportionate to one or more of the resolution objectives referred to in Article 14 of that regulation, and winding up of the entity under normal insolvency proceedings would not meet those resolution objectives to the same extent. The resolution objectives referred to in Article 14 of Regulation No 806/2014 include, inter alia, the objective of ‘[avoiding] significant adverse effects on financial stability, in particular by preventing contagion, including to market infrastructures, and by maintaining market discipline’, and that of ‘[protecting] public funds by minimising reliance on extraordinary public financial support’.

137 In that regard, the Court of Justice has stated that financial services play a central role in the economy of the European Union. Banks and credit institutions are an essential source of funding for businesses that are active in the various markets. In addition, the banks are often interconnected and a number of them operate internationally. That is why the failure of one or more banks is liable to spread rapidly to other banks, either in the Member State concerned or in other Member States. That is likely, in turn, to produce negative spill-over effects in other sectors of the economy (judgments of 19 July 2016, Kotnik and Others, C‑526/14, EU:C:2016:570, paragraph 50; of 20 September 2016, Ledra Advertising and Others v Commission and ECB, C‑8/15 P to C‑10/15 P, EU:C:2016:701, paragraph 72; and of 25 March 2021, Balgarska Narodna Banka, C‑501/18, EU:C:2021:249, paragraph 108).

138 The Court of Justice has held that the objective of ensuring the stability of the financial system while avoiding excessive public spending and minimising distortions of competition constitutes an overriding public interest (judgment of 19 July 2016, Kotnik and Others, C‑526/14, EU:C:2016:570, paragraph 69).

139 In addition, the European Court of Human Rights (‘the ECtHR’) held, in its decision of 1 April 2004, Camberrow MM5 AD v. Bulgaria (CE:ECHR:2004:0401DEC005035799, § 6), that, in delicate economic areas such as the stability of the banking system, the States enjoyed a wider margin of appreciation and that, therefore, the impossibility for a shareholder to participate in the proceedings leading to the sale of the bank was not disproportionate to the legitimate aims of protecting the rights of creditors and safeguarding the proper administration of the bank’s bankruptcy estate.

140 Reference should also be made to the judgment of 8 November 2016, Dowling and Others (C‑41/15, EU:C:2016:836), delivered in response to a request for a preliminary ruling concerning the interpretation of Articles 8, 25 and 29 of Second Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of [the second paragraph of Article 54 TFEU], in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent (OJ 1977 L 26, p. 1). That case concerned an exceptional measure by the national authorities aimed at preventing, by means of an increase in capital, the failure of a company which, according to the referring court, threatened the financial stability of the European Union. The Court of Justice held that the protection conferred by Second Directive 77/91 on the shareholders and creditors of a public limited liability company, with respect to its share capital, did not extend to a national measure of that kind that is adopted in a situation where there is a serious disturbance of the economy and financial system of a Member State and that is designed to overcome a systemic threat to the financial stability of the European Union, due to a capital shortfall in the company concerned (judgment of 8 November 2016, Dowling and Others, C‑41/15, EU:C:2016:836, paragraph 50). The Court of Justice added that the provisions of Second Directive 77/91 did not therefore preclude an exceptional measure affecting the share capital of a public limited liability company taken by the national authorities where there was a serious disturbance of the economy and financial system of a Member State, without the approval of the general meeting of that company, with the objective of preventing a systemic risk and ensuring the financial stability of the European Union (see judgment of 8 November 2016, Dowling and Others, C‑41/15, EU:C:2016:836, paragraph 51 and the case-law cited).

141 Those considerations apply, by analogy, to the situation of former shareholders of a bank which has been placed under resolution pursuant to Regulation No 806/2014.

142 Furthermore, it should be noted that another objective of the resolution, referred to in Article 14(2)(a) of Regulation No 806/2014, namely to ensure the continuity of the critical functions of the entity concerned by a resolution action, also contributes to the public interest objective of protecting the stability of the financial markets.

143 Under Article 2(1)(35) of Directive 2014/59, the critical functions of an institution are defined as ‘activities, services or operations the discontinuance of which is likely in one or more Member States, to lead to the disruption of services that are essential to the real economy or to disrupt financial stability due to the size, market share, external and internal interconnectedness, complexity or cross-border activities of an institution or group, with particular regard to the substitutability of those activities, services or operations’.

144 In that regard, Article 6(1) of Commission Delegated Regulation (EU) 2016/778 of 2 February 2016 supplementing Directive 2014/59 with regard to the circumstances and conditions under which the payment of extraordinary ex post contributions may be partially or entirely deferred, and on the criteria for the determination of the activities, services and operations with regard to critical functions, and for the determination of the business lines and associated services with regard to core business lines (OJ 2016 L 131, p. 41), lays down the criteria for determining critical functions. It is a function provided by an institution to third parties who are not affiliated to the institution or group, the sudden disruption of which would likely have a material negative impact on those third parties, would give rise to contagion or would undermine the general confidence of market participants due to the systemic relevance of the function for third parties and the systemic relevance of the institution or group in providing that function.

145 Thus, the objective of ensuring the continuity of the critical functions of the entity concerned by a resolution action, provided for in Article 14(2)(a) of Regulation No 806/2014, is intended to prevent a break in those functions which could lead to disruption, not only on the market concerned, but also for the overall financial stability of the European Union.

146 Accordingly, since resolution action is intended to preserve or restore the financial situation of a credit institution, in particular in so far as it constitutes an alternative to its liquidation, it must be regarded as effectively meeting an objective of general interest recognised by the European Union (see, by analogy, judgment of 25 March 2021, Balgarska Narodna Banka, C‑501/18, EU:C:2021:249, paragraph 108).

147 It follows from the foregoing that the resolution procedure established by Regulation No 806/2014 and described in Article 18 of that regulation pursues an objective of general interest, within the meaning of Article 52(1) of the Charter, namely the objective of ensuring the stability of the financial markets, capable of justifying a limitation on the right to be heard.

148 In the second place, a number of recitals in Regulation No 806/2014 imply that, when a resolution action becomes necessary, it must be adopted quickly. Those are, inter alia, recitals 26, 31 and 53, and especially recital 56 of that regulation which states that, in order to minimise disruption to the financial market and to the economy, the resolution process should be accomplished in a short time.

149 In that regard, the Court of Justice has held that the objective of Regulation No 806/2014 is to establish, in accordance with recital 8, more efficient resolution mechanisms, which must be an essential instrument to avoid damage that has resulted from failures of banks in the past and that that objective presupposes a speedy decision-making process, as the short time limits laid down in Article 18 of that regulation illustrate, so that financial stability is not jeopardised (judgment of 6 May 2021, ABLV Bank and Others v ECB, C‑551/19 P and C‑552/19 P, EU:C:2021:369, paragraph 55).

150 Thus, Article 18(1) of Regulation No 806/2014 states, inter alia, that, where the ECB considers that an entity is failing or is likely to fail, it is to communicate that assessment without delay to the Commission and the SRB. According to paragraph 2 of that article, where the SRB itself carries out an assessment, it is to be communicated to the ECB without delay. If the conditions laid down in paragraph 1 are met, the SRB must adopt a resolution scheme which, pursuant to Article 18(7) of Regulation No 806/2014, is to be transmitted to the Commission immediately after its adoption. The Commission then has 24 hours in which to endorse a resolution scheme or raise objections.

151 It follows that once the entity satisfies the conditions for the adoption of a resolution action, that is to say, first, that it is failing or is likely to fail, second, that there is no reasonable prospect that any alternative private sector measures or supervisory action would prevent its failure within a reasonable time frame and, third, that its resolution is necessary to achieve one or more of the objectives referred to in Article 14 of Regulation No 806/2014, Article 18 of that regulation provides that a decision must be adopted within a very short time frame.

152 That rapid decision is aimed, in particular, at ensuring the continuity of the critical functions of the entity concerned and at avoiding the effects of the entity’s failure on financial stability. Speed in taking a decision is therefore a condition for its effectiveness.

153 Thus, the Court of Justice has already ruled that the urgency requiring immediate action by the competent authority justified a limitation of the right to be heard of the persons concerned by measures adopted in the field of environmental liability (see, to that effect, judgment of9 March 2010, ERG and Others, C‑379/08 and C‑380/08, EU:C:2010:127, paragraph 67) and in the field of agriculture (see, to that effect, judgment of 15 June 2006, Dokter and Others, C‑28/05, EU:C:2006:408, paragraph 76).

154 Moreover, in the field of fund-freezing measures, the Court of Justice has held that the communication of the grounds on which the initial inclusion of the name of a person or entity in the list of persons subject to restrictive measures is based, prior to that inclusion, would be liable to jeopardise the effectiveness of the freezing of funds and economic resources imposed by EU law. In order to attain the objective pursued by the applicable regulation, such measures must, by their very nature, take advantage of a surprise effect and apply with immediate effect (see, to that effect, judgments of 3 September 2008, Kadi and Al Barakaat International Foundation v Council and Commission, C‑402/05 P and C‑415/05 P, EU:C:2008:461, paragraphs 338 to 340; of 21 December 2011, France v People’s Mojahedin Organization of Iran, C‑27/09 P, EU:C:2011:853, paragraph 61; and of 12 February 2020, Amisi Kumba v Council, T‑163/18, EU:T:2020:57, paragraph 51).

155 Nor are the EU authorities bound to hear the applicants before their names are included for the first time in the list of persons subject to restrictive measures, for reasons also connected to the objective pursued by EU law and to the effectiveness of the measures provided by that law (see, to that effect, judgments of 3 September 2008, Kadi and Al Barakaat International Foundation v Council and Commission, C‑402/05 P and C‑415/05 P, EU:C:2008:461, paragraph 341, and of 25 April 2013, Gbagbo v Council, T‑119/11, not published, EU:T:2013:216, paragraph 103).

156 That is all the more true in cases where the restriction on the right to be heard concerns not the entity covered by the resolution procedure, but its shareholders or creditors.

157 It should also be noted that, in its decision of 1 April 2004, Camberrow MM5 AD v. Bulgaria (CE:ECHR:2004:0401DEC005035799), the ECtHR found that the sale of the bankrupt bank as a going concern had been effected in order to achieve the prompt and more certain satisfaction of its creditors, who had been waiting for years to receive their dues, and the quick completion of the bankruptcy proceedings. Therefore, the need for simplicity and speed in the procedure leading to the sale of the bank was of paramount importance. If the law provided that the bankruptcy court was under an obligation to consult with all shareholders and creditors of the bank, that would have led to a substantial slowing down of the proceedings and, consequently, to a further delay in the payment of the creditors’ dues and in the completion of the bankruptcy proceedings.

158 In the judgment of 24 November 2005, Capital Bank AD v. Bulgaria (CE:ECHR:2005:1124JUD004942999, §136), the ECtHR held that, in such a sensitive economic area as the stability of the banking system and in certain situations, there may be a paramount need to act expeditiously and without advance notice in order to avoid irreparable harm to the bank, its depositors and other creditors, or the banking and financial system as a whole.

159 Furthermore, the fact that the resolution action may lead to an interference with the right to property of the shareholders and creditors of the entity concerned cannot justify an obligation to grant them a right to be heard before it is adopted.

160 In that regard, the General Court has already highlighted in paragraph 282 of the judgment of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others (T‑680/13, EU:T:2018:486) that the applicable provisions must offer the person concerned a reasonable opportunity of putting his or her case to the competent authorities. In order to ensure compliance with that requirement, which constitutes a requirement inherent in Article 1 of Protocol No 1 to the Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’), a comprehensive view must be taken of the applicable procedures (see, to that effect, judgments of 3 September 2008, Kadi and Al Barakaat International Foundation v Council and Commission, C‑402/05 P and C‑415/05 P, EU:C:2008:461, paragraph 368 and the case-law cited; of 25 April 2013, Gbagbo v Council, T‑119/11, not published, EU:T:2013:216, paragraph 119; and ECtHR, 20 July 2004, Bäck v. Finland, EC:ECHR:2004:0720JUD003759897, § 56). Therefore, that requirement cannot be interpreted as meaning that the interested person must, in all circumstances, be able to make his or her views known to the competent authorities prior to the adoption of measures infringing his or her right to property (see, to that effect, ECtHR, 19 September 2006, Maupas and Others v. France, EC:ECHR:2006:0919JUD001384402, §§ 20 and 21).

161 The General Court considered that that was the case, in particular where, as with a resolution action, the measures at issue did not constitute a penalty and were implemented in a context of particular urgency. On that last point, the General Court noted that it concerned prevention of an imminent risk of collapse of the banks concerned in order to protect the stability of the financial system of a Member State and, therefore, to prevent contagion to other Member States of the euro area. The establishment of a prior consultation procedure, in the context of which the thousands of depositors and shareholders of the banks concerned could have usefully made their views known prior to the adoption of the harmful provisions, would inevitably have delayed the application of measures seeking to prevent such a collapse. The achievement of the objective consisting in protecting the stability of the financial system of that Member State and, therefore, preventing contagion to other Member States of the euro area would have been exposed to serious risks (see judgment of 13 July 2018, K. Chrysostomides & Co. and Others v Council and Others, T‑680/13, EU:T:2018:486, paragraph 282 and the case-law cited).

162 That assessment was confirmed by the Court of Justice which held that the General Court had correctly based its reasoning on the judgment of the ECtHR of 21 July 2016, Mamatas and Others v. Greece (CE:ECHR:2016:0721JUD006306614), from which it is clear that the requirement that any restriction on the right to property must be provided for by law cannot be interpreted as meaning that the persons concerned should have been consulted before the adoption of that law, in particular where such prior consultation would inevitably have delayed the application of the measures designed to prevent the collapse of the banks concerned (judgment of 16 December 2020, Council and Others v K. Chrysostomides & Co. and Others, C‑597/18 P, C‑598/18 P, C‑603/18 P and C‑604/18 P, EU:C:2020:1028, paragraph 159).

163 Furthermore, it must be concluded that the need to act swiftly without informing the shareholders and creditors of an entity that a resolution procedure concerning that entity is imminent is intended to avoid the worsening of that entity’s situation which would undermine the effectiveness of the resolution action. Informing the shareholders or bondholders of the bank that it might be under resolution, and therefore that it was considered to be failing or likely to fail, could encourage them to sell their securities on the markets and also lead to a massive withdrawal of deposits, which would have the effect of exacerbating the bank’s financial situation and making it more difficult, or even impossible, to adopt a solution likely to prevent its liquidation.

164 In that respect, as is apparent from recital 116 of Regulation No 806/2014, any information provided in respect of a decision before it is taken, be it on whether the conditions for resolution are satisfied, on the use of a specific tool or on any action during the proceedings, must be presumed to have effects on the public and private interests concerned by the action.

165 It must therefore be held that the establishment, in Regulation No 806/2014, of a consultation of the shareholders and creditors of the entity concerned before the adoption of a resolution action would result in a substantial slowdown in the procedure and would compromise both the attainment of the objectives of the action and its effectiveness.

166 Furthermore, the SRB submits that rumours concerning financial institutions or financial markets can have far-reaching consequences and that it must therefore ensure the confidentiality of the procedure. Since hearing individuals potentially affected by the resolution action would entail the disclosure of information on the actions to be taken, it is foreseeable that this would have adverse effects on financial stability due to the systemic importance of that information.

167 The applicants’ assertion that the second objective of general interest relied on by the SRB is the protection of confidentiality is based on a misunderstanding of the SRB’s argument. By that argument, the SRB asserts that the confidentiality of the procedure is a necessary means of protecting the public interest consisting in ensuring the stability of the financial system.

168 In addition, the applicants claim that any concern regarding disclosure could be allayed by rigorous rules on confidentiality.

169 That argument is based on a misunderstanding of the objective pursued by the protection of the confidentiality of the procedure. Information which should not be disclosed, in particular to shareholders, concerns the implementation of the resolution procedure. It is a question of taking account of the risk that the shareholders, when informed of that procedure before a decision is adopted, might be encouraged to sell their shareholdings, which would have the effect of worsening the entity’s situation and of giving rise to a risk of insolvency and, in the case of banks of systemic importance, of leading to a risk of contagion on the market as a whole.

170 Furthermore, as the Commission submits, since the identity of the entity’s shareholders is unknown, the resolution authority would have to make a public call for them to submit their views, which would entail a risk of a bank run. As the Council also states, given that shares and bonds are traded continuously on the markets, it is impossible, in practice, to know which individual and institutional investors must be contacted.

171 Therefore, confidentiality commitments made by the shareholders, even if the latter were identifiable, could not remedy the risk to financial stability posed by the dissemination of information that an entity is under a resolution procedure.

172 At the hearing, the applicants submitted that hearing the shareholders during the preparatory stage of the resolution action, before the entity was considered to be failing or likely to fail, is conceivable, given that that stage is not constrained by urgency.

173 It must be noted that the resolution procedure provided for in Article 18 of Regulation No 806/2014 begins once the conditions laid down have been met and that the resolution planning stages do not fall within that procedure. Accordingly, the applicants’ argument cannot call into question the legality of the procedure laid down in Article 18 of Regulation No 806/2014. In any event, the considerations referred to in paragraphs 169 and 170 above preclude the consultation of the shareholders of the entity concerned not only once the procedure laid down in Article 18 of Regulation No 806/2014 has been initiated, but also during the preparatory stage of the resolution action.

174 It follows from all of the foregoing that hearing the shareholders and creditors of the entity which is the subject of a resolution action, before the adoption of that action, would undermine the objectives of the stability of the financial markets and the continuity of the entity’s critical functions, and the requirements of speed and effectiveness of the resolution procedure.

175 Therefore, the absence of any provision requiring the shareholders and creditors of the entity concerned to be heard in the context of the procedure laid down in Article 18 of Regulation No 806/2014 constitutes a limitation on the right to be heard which is justified and necessary in order to meet an objective of general interest and respects the principle of proportionality, in accordance with Article 52(1) of the Charter.

176 That conclusion is not called into question by the applicants’ other arguments.

177 First, the applicants rely on Commission Staff Working Document SWD/2012/166 final of 6 June 2012, entitled ‘Impact Assessment accompanying the document ‑ Proposal for a Directive of the European Parliament and of the Council establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directives 77/91/EEC and 82/891/EC, Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC and 2011/35/EC and Regulation (EU) No 1093/2010’ (‘the impact assessment’), in which the Commission recognised that shareholders are entitled ‘to have their grievance against the restructuring measures heard’.

178 In that regard, it is sufficient to note, as the SRB states, that the extract from the impact assessment cited by the applicants relates expressly to the right to a fair trial and the right to an effective remedy, enshrined in Articles 6 and 13 ECHR. That extract therefore relates to the right of shareholders to an effective remedy against a measure already adopted, but it cannot be interpreted as referring to a right to be heard prior to the adoption of a resolution decision.

179 Secondly, the applicants rely on the judgment of the ECtHR of 24 November 2005, Capital Bank AD v. Bulgaria (CE:ECHR:2005:1124JUD004942999). They submit that, in that case, a national authority had withdrawn banking authorisation from a bank without informing it beforehand and without giving it the possibility of bringing proceedings. The ECtHR concluded that, having regard to the prominent place held in a democratic society by the right to a fair trial, the Bulgarian court’s decision to abide by the Bulgarian National Bank’s determination without subjecting it to any criticism or discussion, coupled with the absence of any means of scrutinising that determination in direct review proceedings, was not justified.

180 As the applicants themselves submit, the fundamental element of the judgment of the ECtHR of 24 November 2005, Capital Bank AD v. Bulgaria (CE:ECHR:2005:1124JUD004942999), and of the judgment of the ECtHR of 19 June 2008, Ismeta Bačić v. Croatia (CE:ECHR:2008:0619JUD004359506), is the assertion that Article 6(1) ECHR applies to insolvency proceedings.

181 Thus, as the Commission and the SRB submit, the judgment of the ECtHR of 24 November 2005, Capital Bank AD v. Bulgaria (CE:ECHR:2005:1124JUD004942999), concerned an infringement of the right to a fair trial enshrined in Article 6(1) ECHR in the absence of any legal remedy provided for in Bulgarian law against a decision of the National Bank of Bulgaria revoking a bank’s licence and related only to the procedural rights of the financial institution concerned and not to the rights of shareholders and creditors. That judgment did not concern the right to be heard prior to the adoption of a decision and is therefore irrelevant.

182 Thirdly, the applicants also rely on the legislation of certain Member States which give creditors and shareholders the opportunity to submit observations during insolvency proceedings.

183 It is sufficient to note, as the SRB submits, that national insolvency proceedings are not comparable to a resolution procedure under Regulation No 806/2014. In the context of insolvency proceedings at national level, the creditors are heard once insolvency proceedings have been initiated. Thus, as the SRB submits, with the opening of insolvency proceedings, the harm to shareholders and creditors has already occurred and the disclosure of the insolvency cannot aggravate that harm. By contrast, as regards the resolution procedure, disclosure of information to the creditors of the entity concerned regarding a potential resolution may have serious negative effects.

184 In addition, as the SRB argues, in the decision of the ECtHR of 1 April 2004, Camberrow MM5 AD v. Bulgaria (CE:ECHR:2004:0401DEC005035799), the ECtHR held that an obligation to consult with shareholders and creditors in insolvency proceedings would result in a delay in the proceedings and that the fact that it was impossible for the majority shareholder to participate in the proceedings was not disproportionate in the light of the legitimate objectives of protecting the rights of creditors of the bank and of safeguarding the proper administration of the bank’s bankruptcy estate.

185 It follows from all of the foregoing that the plea of illegality in respect of Article 18 of Regulation No 806/2014, in so far as the procedure which it establishes infringes the right to be heard by failing to provide for a hearing of the shareholders and creditors of the entity concerned, must be rejected.

186 Accordingly, the first part of the plea must be rejected.

The second part, alleging that Article 18 of Regulation No 806/2014 infringes the right to an effective remedy

187 The applicants submit that the procedure provided for in Article 18 of Regulation No 806/2014 fails to respect the right to an effective judicial remedy in so far as there is no judicial oversight of that procedure. The fact that there is a right to bring an action for annulment before the Court cannot remedy the infringement of the right to an effective remedy, in so far as the Court does not have jurisdiction to order the relevant institution to take steps to reverse the acts implementing the resolution.

188 The applicants claim, in essence, that Article 18 of Regulation No 806/2014 infringes the right to an effective remedy in that it does not provide for the intervention of a court before the adoption of the resolution decision.

189 It should be noted that Article 47 of the Charter, which constitutes a reaffirmation of the principle of effective judicial protection, requires, in its first paragraph, that any person whose rights and freedoms guaranteed by EU law are violated should have the right to an effective remedy before a tribunal in compliance with the conditions laid down in that article. The very existence of effective judicial review designed to ensure compliance with provisions of EU law is of the essence of the rule of law (see judgment of 6 October 2020, Bank Refah Kargaran v Council, C‑134/19 P, EU:C:2020:793, paragraph 36 and the case-law cited).

190 It is sufficient to note that the applicants’ argument is based on a misinterpretation of the scope of the right to an effective remedy enshrined in Article 47 of the Charter. Article 47 of the Charter guarantees a right to an effective remedy against an act which adversely affects a person and not before the adoption of the act.

191 Following the adoption of a resolution action, the right to an effective remedy is guaranteed by the possibility of bringing an action for annulment under Article 263 TFEU against decisions adopted by the SRB, in accordance with Article 86 of Regulation No 806/2014, and against Commission decisions, and by the possibility of bringing an action for damages.

192 In an action for annulment brought against a resolution action, the Court is able to examine whether the procedure followed by the SRB complied with the requirements laid down in Article 18 of Regulation No 806/2014. The applicants cannot therefore validly maintain that the procedure laid down in Article 18 of Regulation No 806/2014 is not subject to any judicial review.

193 Furthermore, the applicants submit that the fact that there is a right to bring an action for annulment before the Court cannot remedy an infringement of the right to an effective remedy, since the Court has no jurisdiction to order the relevant institution to take measures to reverse the acts implementing the resolution.

194 It should be noted that Article 47 of the Charter is not intended to change the system of judicial review laid down by the Treaties, and particularly the rules relating to the admissibility of direct actions brought before the Courts of the European Union, as is apparent also from the Explanation on Article 47, which must, in accordance with the third subparagraph of Article 6(1) TEU and Article 52(7) of the Charter, be taken into consideration for the interpretation of the Charter (see judgments of 3 October 2013, Inuit Tapiriit Kanatami and Others v Parliament and Council, C‑583/11 P, EU:C:2013:625, paragraph 97 and the case-law cited, and of 25 February 2021, VodafoneZiggo Group v Commission, C‑689/19 P, EU:C:2021:142, paragraph 136 and the case-law cited).

195 It is sufficient to note that, although the EU Courts do not have the power to issue directions to the SRB, the latter is under an obligation, pursuant to Article 86(4) of Regulation No 806/2014 and Article 266 TFEU, to take the necessary measures to comply with a judgment of the Court of Justice of the European Union.

196 It must therefore be held that the fact that Article 18 of Regulation No 806/2014 does not provide for intervention by the courts during the procedure leading to the adoption of a resolution decision does not constitute an infringement of Article 47 of the Charter.

197 Lastly, the applicants are wrong to rely on the case-law on restrictive measures, according to which compliance with the obligation to communicate the reasons for a decision is necessary to enable the persons to whom such measures are addressed to defend their rights in the best possible conditions and to respect the right to effective judicial protection.

198 Unlike restrictive measures whereby an individual economic and financial sanction (freezing of funds) is imposed on a person, a resolution scheme is not an individual measure taken against the shareholders of the entity concerned. Therefore, the case-law cited by the applicants according to which the person subject to a restrictive measure, as the addressee of such a decision, must be informed of the reasons for that decision is not applicable in the present case.

199 It follows that the plea of illegality in respect of Article 18 of Regulation No 806/2014, in so far as it infringes the right to an effective judicial remedy, must be rejected and, therefore, the second part of this plea in law must be rejected.

The third part, alleging that Article 18 of Regulation No 806/2014 infringes the principle of proportionality

200 The applicants claim that, in so far as, for the reasons set out in the first two parts of this plea, the resolution procedure provided for in Article 18 of Regulation No 806/2014 does not respect the right to be heard and the right to an effective judicial remedy, that procedure does not comply with the principle of proportionality in that it goes beyond what is necessary to achieve the objectives set out in recital 122 of Regulation No 806/2014, namely ‘[to set] up an efficient and effective single European framework for the resolution of entities and [to ensure] the consistent application of resolution rules’.

201 It is sufficient to note, first, that it has been concluded, in the first part, that the fact that the shareholders and creditors of the entity concerned were not heard in the resolution procedure was justified by an objective of general interest and was necessary, in compliance with the principle of proportionality, in accordance with Article 52(1) of the Charter. Second, it is apparent from the analysis of the second part of the plea that the applicants have not established that the procedure laid down in Article 18 of Regulation No 806/2014 infringed the right to an effective remedy.

202 Therefore, since the first two parts have been rejected, the third part must also be rejected.

203 It follows from all of the foregoing that the plea of illegality in respect of Article 18 of Regulation No 806/2014, raised in the first plea in law, must be rejected as unfounded.

The ninth plea in law, alleging that Articles 18 and 22 of Regulation No 806/2014 are unlawful in that they infringe the principles relating to the delegation of power

204 On the basis of Article 277 TFEU, the applicants claim that Articles 18 and 22 of Regulation No 806/2014 are unlawful, on the ground that those articles infringe the principles relating to the delegation of power set out in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7).

205 The applicants submit that the SRB’s decision on whether the conditions set out in Article 18 of Regulation No 806/2014 are met entails a broad discretion. The SRB makes complex economic assessments and, in so doing, participates in the implementation of an actual economic policy. The SRB has a broad discretion to decide on the resolution tool to be adopted pursuant to Article 18(6) and Article 22 of Regulation No 806/2014. They submit that the provisions of Article 18(7) of Regulation No 806/2014, according to which the Commission is to endorse the resolution scheme within 24 hours, constitute a circumvention of the principles laid down in the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7). Given the time limit set, it is the SRB which decides on the resolution policy, with the Commission simply carrying out a ‘rubber-stamp’ function.

206 The Commission, the SRB, the Council and the Parliament submit, in essence, that the procedure established by Regulation No 806/2014 is consistent with the judgment of 13 June 1958, Meroni v High Authority (9/56, EU:C:1958:7). The EU legislature has not delegated