1 This request for a preliminary ruling concerns the interpretation of Article 3(1) and (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ 2014 L 173, p. 349), read in conjunction with Article 34 thereof, and of Article 56 TFEU.
2 The request has been made in proceedings between Fondee a.s. and Česká národní banka (Czech National Bank, Czech Republic) concerning a fine that that bank imposed on Fondee for failing to comply with the prohibition on transmitting clients’ orders pertaining to investment instruments to a securities trader established in a Member State other than the Czech Republic. Legal context European Union law
3 As is apparent from Article 1(2)(a) thereof, Directive 2014/65 establishes requirements in relation to the authorisation and operating conditions for investment firms.
4 Article 3 of that directive, entitled ‘Optional exemptions’, provides, in paragraphs 1 and 3 thereof: ‘1. Member States may choose not to apply this Directive to any persons for which they are the home Member State, provided that the activities of those persons are authorised and regulated at national level and those persons: … (b) are not allowed to provide any investment service except the reception and transmission of orders in transferable securities and units in collective investment undertakings and/or the provision of investment advice in relation to such financial instruments; and (c) in the course of providing that service, are allowed to transmit orders only to: (i) investment firms authorised in accordance with this Directive; … 3. Persons exempt from this Directive pursuant to paragraph 1 shall not benefit from the freedom to provide services or to perform activities or to establish branches as provided for in Articles 34 and 35 respectively.’
5 Article 4 of that directive, entitled ‘Definitions’, provides, in paragraph 1 thereof: ‘For the purposes of this Directive, the following definitions apply: (1) “investment firm” means any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis. … (2) “investment services and activities” means any of the services and activities listed in Section A of Annex I relating to any of the instruments listed in Section C of Annex I. … (46) “exchange-traded fund” means a fund of which at least one unit or share class is traded throughout the day on at least one trading venue and with at least one market maker which takes action to ensure that the price of its units or shares on the trading venue does not vary significantly from its net asset value and, where applicable, from its indicative net asset value; …’
6 Article 5 of that directive, entitled ‘Requirement for authorisation’, provides, in paragraph 1 thereof: ‘Each Member State shall require that the provision of investment services and/or the performance of investment activities as a regular occupation or business on a professional basis be subject to prior authorisation in accordance with this Chapter. Such authorisation shall be granted by the home Member State competent authority designated in accordance with Article 67.’
7 Article 34 of Directive 2014/65, entitled ‘Freedom to provide investment services and activities’, provides, in paragraph 1 thereof: ‘Member States shall ensure that any investment firm authorised and supervised by the competent authorities of another Member State in accordance with this Directive, and in respect of credit institutions in accordance with 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)], may freely provide investment services and/or perform investment activities as well as ancillary services within their territories, provided that such services and activities are covered by its authorisation. Ancillary services may only be provided together with an investment service and/or activity. Member States shall not impose any additional requirements on such an investment firm or credit institution in respect of the matters covered by this Directive.’
8 It is apparent from Article 67(1) of that directive that each Member State is to designate the competent authorities which are to carry out each of the duties provided for under the directive.
9 Annex I to that directive, which establishes the list of services, activities and financial instruments, refers, in point 1 of Section A thereof, relating to investment services and activities, to the reception and transmission of orders in relation to one or more financial instruments. Section C of that annex, relating to financial instruments, refers, in point 3 thereof, to units in collective investment undertakings. Czech legislation
10 Paragraph 4(2)(a) and (e) of the zákon č. 256/2004 Sb. o podnikání na kapitálovém trhu (Law No 256/2004 on engaging in business on the capital market), in the version applicable to the dispute in the main proceedings (‘the Law on the Capital Market’), refers, among the main investment services, to the reception and transmission of orders pertaining to investment instruments and investment advice in relation to investment instruments.
11 Paragraph 5(1) of that law defines a ‘securities trader’ as a legal person authorised to provide the main investment services on the basis of an authorisation granted by the Czech National Bank. Paragraph 6(1)(b) of that law provides that the legal person holding such an authorisation is to have its registered office in the Czech Republic.
12 According to Paragraph 29(1) of the Law on the Capital Market, an ‘investment intermediary’, within the meaning of that law, is authorised to provide only the main investment services referred to in Paragraph 4(2)(a) or (e) of that law. The range of investment instruments in respect of which an investment intermediary is authorised to provide services is defined in subparagraph 3 of that paragraph. Lastly, subparagraph 4 of that paragraph states that investment intermediaries, when providing the main investment services referred to in Paragraph 4(2)(a) or (e) of the Law on the Capital Market, may transmit orders, in particular, to a securities trader, a bank or an investment company.
13 Under Paragraph 162(1)(a) of the Law on the Capital Market, a natural or legal person commits an offence if that person unlawfully carries on an activity coming within the scope of that law that requires, inter alia, authorisation or accreditation by the Czech National Bank or registration in a register kept by that bank. The dispute in the main proceedings and the questions referred for a preliminary ruling
14 Fondee carries on, in the Czech Republic, the activity of investment intermediary, within the meaning of Paragraph 29(1) of the Law on the Capital Market, on the basis of an authorisation granted by the Czech National Bank. By a decision of 18 January 2021, that bank imposed a fine on Fondee, pursuant to Paragraph 162(1)(a) of that law, on the ground that, between 7 October and 27 December 2019, it had transmitted 407 orders from its clients to a securities trader established outside the Czech Republic.
15 The Czech National Bank found that, in so doing, Fondee allowed its clients to invest in units in exchange-traded funds, within the meaning of Directive 2014/65, which, according to that bank, constitute investment instruments within the meaning of that law. According to the findings of the Czech National Bank, Fondee’s clients submitted orders on its website, which Fondee subsequently transmitted to a company established in the Netherlands. The transaction was carried out on the basis of a trilateral agreement between that company, Fondee and Fondee’s clients.
16 Fondee lodged a complaint against the decision imposing the fine on it with the Bank Board of the Czech National Bank, which rejected it by a decision of 18 March 2021. Fondee then brought an action before the referring court, seeking the annulment of the decision rejecting the complaint.
17 It is apparent from the information provided by the referring court that ‘investment intermediaries’, such as Fondee, are exempt from the application of Directive 2014/65, since the Czech Republic has made use, in respect of them, of the option provided to that end in Article 3(1) of that directive.
18 The referring court states that it is common ground between the parties to the main proceedings that Fondee does not provide investment services to clients residing or established outside the Czech Republic. It adds, however, that Fondee is involved, as an intermediary, in the provision of investment services by the investment company established in the Netherlands to clients residing or established in the Czech Republic. The referring court therefore considers that Fondee enjoys the freedom to provide services as a ‘passive recipient’ of services.
19 According to the referring court, the parties to the main proceedings are in disagreement as to whether operators covered by Article 3(3) of Directive 2014/65, such as Fondee, may rely on Article 56 TFEU. In particular, the Czech National Bank submits that the exclusion of investment intermediaries from the application of the right freely to provide services, laid down by that provision of Directive 2014/65, covers any participation by those intermediaries in the provision of such services, with the result that a Member State may prohibit those intermediaries from transmitting their clients’ orders to providers of investment services established in another Member State.
20 In those circumstances the Městský soud v Praze (Prague City Court, Czech Republic) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Does a person who is, pursuant to Article 3(1) [of Directive 2014/65], … excluded from the scope of the directive, and who does not, pursuant to Article 3(3) of the directive, enjoy the freedom to provide services as defined in Article 34 thereof, enjoy the right to freedom to provide services embodied in Article 56 [TFEU], if it itself does not provide investment services on the basis of a single European passport to a client established in another Member State, but rather receives an investment service from a foreign entity using a single European passport or otherwise takes part in its provision to the end client (acts as an intermediary)? (2) If the answer to the previous question is affirmative, does EU law, namely Article 56 [TFEU], preclude legislation prohibiting an investment [intermediary] from transmitting a client’s order to a foreign securities trader?’ Consideration of the questions referred
21 According to settled case-law, in the procedure laid down by Article 267 TFEU providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to decide the case before it. To that end, the Court should, where necessary, reformulate the questions referred to it (judgment of 6 October 2021, W.Ż. (Chamber of Extraordinary Control and Public Affairs of the Supreme Court - Appointment) , C‑487/19, EU:C:2021:798, paragraph 68 and the case-law cited).
22 In the present case, it must be noted, as the Advocate General did in point 23 of his Opinion, that Directive 2014/65 brings about full harmonisation of national legislation relating to the cross-border provision of investment services falling within its scope, which include, as is apparent from Annex I to that directive, the reception and the transmission of orders in relation to one or more financial instruments.
23 According to settled case-law, any national measure adopted in a sphere which has been the subject of exhaustive or full harmonisation at EU level must be assessed in the light of the provisions of the harmonising measure and not those of primary law (judgment of 20 April 2023, Autorità Garante della Concorrenza e del Mercato (Municipality of Ginosa) , C‑348/22, EU:C:2023:301, paragraph 36 and the case-law cited).
24 Accordingly, it is appropriate to examine the questions referred solely on the basis of the provisions of Directive 2014/65.
25 As regards, in particular, Article 34 of Directive 2014/65, it must be noted that that article concerns the provision of investment services by an investment firm authorised by the competent authorities of a Member State other than that in which the services are provided.
26 As is apparent from the order for reference, the questions referred concern persons covered by Article 3 of Directive 2014/65, who provide services only to clients residing or established in the territory of their home Member State.
27 In those circumstances, the Court considers that, by its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 3(1)(c)(i) of Directive 2014/65 must be interpreted as meaning that persons exempted by a Member State from the application of that directive are authorised to transmit, with a view to their execution, orders from clients residing or established in that Member State, to investment firms that are established in another Member State and are authorised to that end, under that directive, by the competent authority of that other Member State, and, accordingly, as precluding national legislation prohibiting such transmission.
28 In that regard, it should be noted that Article 3(1) of Directive 2014/65 authorises Member States not to apply that directive to persons for which they are the home Member State, subject to compliance with the conditions laid down in that provision, including the condition set out in Article 3(1)(c)(i).
29 Article 3(1)(c)(i) of Directive 2014/65 thus expressly provides persons exempted by a Member State from the application of that directive with the option of transmitting orders they receive to authorised investment firms.
30 In the present case, subject to the verifications to be carried out by the referring court, it is apparent from the order for reference that the Czech Republic made use of the option provided for in Article 3(1) of that directive. However, as is also apparent from that order for reference, Paragraph 29(4) of the Law on the Capital Market prohibits investment intermediaries within the meaning of that law, such as Fondee, from transmitting orders to investment firms established in other Member States.
31 As the Advocate General observed, in essence, in points 30 and 31 of his Opinion, Article 3(1)(c)(i) of Directive 2014/65 concerns the transmission of orders to any authorised investment firm and not only to those established and authorised in the home Member State of the person exempted from the application of that directive.
32 In the light of the foregoing considerations, the answer to the questions referred is that Article 3(1)(c)(i) of Directive 2014/65 must be interpreted as meaning that persons exempted by a Member State from the application of that directive are authorised to transmit, with a view to their execution, orders from clients residing or established in that Member State to investment firms that are established in another Member State and are authorised to that end, under that directive, by the competent authority of that other Member State, and, accordingly, as precluding national legislation prohibiting such transmission. Costs
33 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Fifth Chamber) hereby rules: Article 3(1)(c)(i) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU must be interpreted as meaning that persons exempted by a Member State from the application of that directive are authorised to transmit, with a view to their execution, orders from clients residing or established in that Member State to investment firms that are established in another Member State and are authorised to that end, under that directive, by the competent authority of that other Member State, and, accordingly, as precluding national legislation prohibiting such transmission. [Signatures] * Language of the case: Czech.