ACT III OF THE BERLUSCONI SAGA: FARCE OR TRAGEDY?
Act III Of The Berlusconi Saga: Farce Or Tragedy?
Filippo Annunziata & Thomaz de Arruda 1
1. Introduction
On 19 September 2024, the Court of Justice issued its eagerly awaited judgment in Joined Cases C-512/22 P and C-513/22 P,2 thereby ending the Berlusconi saga, whose other rulings have become highly consequential in the history of the Single Supervisory Mechanism (‘SSM’). The judgment, which could have marked a new definitive chapter in the case-law on the complex application of national laws by the European Central Bank (‘ECB’) pursuant to Article 4(3) of Council Regulation (EU) No 1024/2013 (‘SSMR’),3 delivered, instead, a problematic reasoning that will most likely rekindle discussions on several aspects of the Banking Union (BU), notwithstanding the significant contribution that the jurisprudence of EU Courts has provided over time to the field, with numerous landmark decisions shaping its very pillars.4
1. Filippo Annunziata is Professor of Financial Markets Law at Bocconi University and Ca’Foscari (Venice) and Academic Board Member of the European Banking Institute. Thomaz de Arruda is a lawyer, Academic Fellow at Bocconi University, Research Fellow at Ca’Foscari (Venice) and Coordinator of the European Banking Institute’s Young Researchers’ Group.
2. Judgment of the Court of Justice of 19 September 2024, Fininvest and Berlusconi v ECB (Joined Cases C-512/22 P and C-513/22 P).
3. 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. 63-89.
4. See, recently, Christos Gortsos, ‘10 Years of Banking Union Case-Law: How did CJEU judgments shape supervision and resolution practice in the Banking Union?’, European Parliament Committee on Economic and Monetary Affairs, 2024; Judith Arnal, Costanza A. Russo, Apostolos Thomadakis, ‘The Judicial Scrutiny of the SSM and the SRB: A missed chance or a success story?’, European Parliament Committee on Economic and Monetary Affairs, 2024; Concetta Brescia Morra, Filippo Annunziata, ‘The Banking Union and the Decisions of the CJEU: Towards a Complete Legal Order?’, European Parliament Committee on Economic and Monetary Affairs, 2024; Bart Joosen, Juana Pulgar Ezquerra, Tobias H. Tröger, ‘10 years of Banking Union case law: How did CJEU judgments shape supervision and resolution practice in the Banking Union’, European Parliament Committee on Economic and Monetary Affairs, 2024; Rosa Lastra, Sara Dietz, ‘Accountability of the European Banking Union: Accountability in Banking Supervision and Banking Resolution under Review’, European Parliament Committee on Economic and Monetary Affairs, 2024. See also Marco Lamandini, David Ramos Muñoz, ‘10 years of Banking Union’s case-law: How did European courts shape supervision and resolution practice in the Banking Union?’, European Parliament Committee on Economic and Monetary Affairs, 2024; Marco Lamandini, ‘SSM ten years since. Where are we’, Banca d’Italia, Quaderni di Ricerca Giuridica della Consulenza Legale No. 101, 2024.
2. Background to the dispute: a series of misconceptions
2.1. Status quo ante
Even though facts of the case are well known and have also been discussed in a previous contribution on these same pages, a brief recapitulation is in any case appropriate.5 In 2013, Fininvest S.p.A., a holding company controlled by Mr. S. Berlusconi, owned 30.1% of shares in Mediolanum S.p.A., which in turn fully owned Banca Mediolanum. Following a conviction for tax fraud against Mr. Berlusconi, the Bank of Italy and the Italian insurance authority (IVASS) deemed him no longer fit to meet the reputation standards required under the Capital Requirements Directive (CRD) IV. As a result, the Bank of Italy ordered Fininvest to reduce its stake in Mediolanum in excess of 9.99%, suspending the voting rights on those shares pending the sale. Berlusconi and Fininvest challenged this decision, ultimately securing its annulment by the Consiglio di Stato in 2016, just after Mediolanum was absorbed by its subsidiary Banca Mediolanum in a reverse merger, thereby making Fininvest the direct holder of 30.1% of the credit institution’s capital.
Following the merger and the judgment of the Consiglio di Stato, the Bank of Italy and the ECB understood that Fininvest and Mr. Berlusconi had acquired a qualifying holding in Banca Mediolanum and, by the decision of 25 October 2016, the ECB formally opposed such an acquisition. This led to two parallel legal actions: one before national courts in Italy, resulting in a preliminary reference to the Court of Justice in the well-known Case C-219/17,6 and another before the General Court in Case T-913/16,7 directly challenging the ECB’s decision. While the first case –concerning the issue of judicial competence in relation to the SSM’s composite procedures– was finally settled with the decision of the Court of 19 December 2018, the second case was first decided by the General Court in 2022, ruling in favour of the ECB, and then appealed in Joined Cases C-512/22 P and C-513/22 P.
5. See Filippo Annunziata, ‘Qualifying shareholders and the fit and proper assessment. A new chapter in Fininvest-Berlusconi v ECB (Case T-913/16)’, Op-Ed, EU Law Live, May 2022.
6. Judgment of the Court of Justice of 19 December 2018, Silvio Berlusconi and Fininvest v Banca d’Italia and IVASS (Case C-219/17). See Andrea Magliari, ‘Composite procedures and judicial protection: in Fininvest and Silvio Berlusconi v. European Central Bank (T913/16) the General Court delivers a ‘Pilate’s judgment’, Review of European Administrative Law, September 2022. Regarding composite procedures in the EU Banking Union, see Filipe Brito Bastos, ‘Composite procedures in the SSM and SRM – an analytical overview’, in Chiara Zilioli, Karl-Philipp Wojcik (eds.), Judicial Review in the European Banking Union, Edward Elgar, 2021.
7. Judgment of the General Court of 11 May 2022, Fininvest and Berlusconi v ECB (Case T-913/16). See, also Olina Capolino, Michele Cossa, ‘Judgment 11 May 2022 of the General Court of the European Union (T-913/16). Dismissal of the appeal against the ECB’s decision opposing the acquisition of a qualifying holding in Banca Mediolanum’, Quaderno di Ricerca Giuridica della Consulenza Legale della Banca d’Italia, December 2022.
2.2. The judgment of the General Court: getting the facts straight
The first aspects of the General Court’s decision, as identified by the Court of Justice when judging the appeal, concern the misrepresentation of the facts of the case. According to the Court of Justice, the General Court misread the relevant documents at hand and erred in several of its assumptions, i.e.: (i) that following the decision of the Bank of Italy, the appellants’ indirect holding in Banca Mediolanum had been brought to 9.99% and, consequently, the appellants had lost the shareholding that they had previously owned in that credit institution (para 72); and (ii) that the effect of the annulment of the decision of 7 October 2014 by the judgment of the Consiglio di Stato of 3 March 2016, Fininvest became the direct owner of 30.16% of the shares in Banca Mediolanum and had therefore acquired a qualifying holding (para. 76).
In the Court of Justice’s view, the decision of the Bank of Italy did not, in itself, lead to the reduction of the appellants’ holdings, but provided instead that the sale had to take place within 30 months through a trust responsible for the sale. Thus ‘[…] the General Court manifestly misinterpreted the scope of the decision of the Bank of Italy of 7 October 2014 by confusing its order to the appellants to sell their shares in Mediolanum in excess of 9.99% with the sale itself of those shares’ leading to an assessment ‘vitiated by distortion’.
In particular, the General Court’s assumption that the judgment of the Consiglio di Stato resulted in the appellant’s reacquiring a qualifying holding in Banca Mediolanum was also considered to be incorrect. This, in turn, led to a critical error of law: irrespective of the scope of the decision of the Bank of Italy, the annulment of that decision by the Consiglio di Stato had the effect of placing them in the same position as before that decision, that is, of owning a stake in Banca Mediolanum, and not in acquiring such a shareholding by virtue of the ruling itself. The question of whether an ‘acquisition’ of a qualifying holding occurred by other means, however, is much less straightforward.
The General Court’s assumption that the judgment of the Consiglio di Stato resulted in the appellant’s reacquiring a qualifying holding in Banca Mediolanum was also considered to be incorrect.
3. Act III and the reversal by the Court of Justice.
3.1 Did an ‘acquisition’ occur? The relevance of national law, and the conundrum of Article 4(3) SSMR
To answer that question, in one of the most controversial parts of its judgment, the Court supported the thesis raised by the General Court that the concept of acquisition of a qualifying holding under Article 15 SSMR and Article 22(1) of the CRD IV, should be regarded as an ‘autonomous concept of EU law’, holding that ‘[…] as the General Court was correct to observe in paragraph 49 of the judgment under appeal, the concept of acquisition of a qualifying holding in a credit institution is an autonomous concept of EU law. This is apparent from the fact that neither the definition of ‘qualifying holding’ in point 36 of Article 4(1) of Regulation No 575/2013, nor Article 15 of the SSM Regulation nor Article 22 of the CRD IV Directive laying down the mechanism for reviewing the acquisition of such a holding contain a reference to national law. […]’ (para. 48). Consequently, the Court held, the matter is not to be assessed the light of the applicable national law, but in the light of a concept of EU law as interpreted by the General Court.
However, this reading (already clear from the General Court’s decision, albeit based on an allegedly erroneous interpretation of the facts) misses the point: while the term ‘qualifying holding’ is itself currently defined under the CRD and the SSMR (by reference to the CRR), the provision governing the acquisition of such holdings, in particular Article 22(1) CRD, which has been transposed into national laws, should be taken into consideration when interpreting the legislation and facts at hand. The point was thoroughly ignored by the Court of Justice, which, while ratifying the notion an ‘autonomous concept of EU law’ –a vague and undefined notion, moreover–did so in a single paragraph of its judgment, without clarifying any aspect of this highly problematic stance.
In its ruling, the General Court had alluded to the settled case-law of the CJEU providing that the terms of a provision of EU law which makes no ‘express reference’ to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Union, citing Vapenik8 , Tarola9 and, by analogy, State Street Bank International10 .
Nevertheless, all such rulings (including their respective case-law) differ fundamentally from the case in Berlusconi: in none of such cases, the applicable legal regime foresees a mechanism such as Article 4(3) SSMR, which mandates the ECB to ‘[…] apply all relevant Union law, and where this Union law is composed of Directives, the national legislation transposing those Directives’ and ‘[w]here the relevant Union law is composed of Regulations and where currently those Regulations explicitly grant options for Member States, the ECB shall apply also the national legislation exercising those options’. To argue, as the General Court did –and was now endorsed by the Court of Justice –that ‘although that provision contains a general reference to national law adopted in order to implement relevant provisions of EU law, it cannot be understood as making an express reference […] to the law of the Member States’ (para. 47), seems to contradict the wording and the purpose of Article 4(3) SSMR.
8. Judgment of the Court of Justice of 5 December 2013, Walter Vapenik v Josef Thurner (Case C-508/12).
9. Judgment of the Court of Justice of 11 April 2019, Neculai Tarola v Minister for Social Protection (Case C-483/17).
10. Judgment of the Court of Justice of 14 November 2019, State Street Bank International GmbH v Banca d’Italia (Case C-255/18).
In its current design, the CRD, in relation to the issues at stake, is not intended to stand autonomously from national laws, but rather to integrate with them in order to form, alongside second- and third-level legal acts at EU and national spheres, a Single Rulebook. Where the EU co-legislators wish to establish a concept exclusively regulated by provisions of EU law, they explicitly do so by making use of Regulations, such as the CRR, or delegated and implementing Regulations of the Commission, which are essential parts of the regime (which, in any case, may also contain options). However, the provisions laid down in the CRD concerning (among others) the assessment of qualifying holdings are meant to be transposed and further regulated by national legislators, as they often intersect with other pre-existing national laws –at times pertaining to corporate law or civil law spheres.
The questions that arise from the misapplication of Article 4(3) SSMR by the CJEU in Berlusconi II are not trivial. If national legislation is not to be applied for a matter as fundamental as the assessment of qualifying holdings in credit institutions, what legal value does it hold? Should all terms of the CRD now be regarded as carrying ‘autonomous concepts of EU law’?
The questions that arise from the misapplication of Article 4(3) SSMR by the CJEU in Berlusconi II are not trivial. If national legislation is not to be applied for a matter as fundamental as the assessment of qualifying holdings in credit institutions, what legal value does it hold? Should all terms of the CRD now be regarded as carrying ‘autonomous concepts of EU law’? If an explicit provision such as Article 4(3) SSMR, combined with the wording of Article 22(1) CRD, which begins with ‘Member States shall require […]’ are not enough to constitute ‘an express reference’ to national legislation, what precisely is required for national law to be applied? Even more broadly, what is the concrete difference between a Directive and a Regulation, if the provisions of the former are to be understood as ‘autonomous’ and directly applicable?
Regardless of the above, while the judgment identifies ‘acquisition’ as an autonomous notion of EU law, it falls short from providing sufficient clarification as to its meaning or content. That notion, therefore, remains too vague to be of any concrete usefulness.
In the judgment, the Court reached the conclusion that Fininvest and Berlusconi were already owners of indirect qualifying holdings in Banca Mediolanum before the reverse merger. Thus, it held that it is irrelevant for the purposes of the assessment of qualifying holdings under the CRD regime whether this holding became direct after the merger. The ruling of the Consiglio di Stato, in this regard, did not alter the quantum of the shareholding, which remained invariably the same (30.16%) throughout the entire process. In this sense, according to the Court, there was no ‘acquisition’ of a qualified holding, capable of triggering the obligations set out in Article 22(1) CRD IV. While the Court concluded that ‘the appellants did not acquire a qualifying holding in Banca Mediolanum after the date of entry into force of the provisions transposing the CRD IV Directive, but merely retained such a holding that had been acquired previously’ (para. 121), it reached such outcome through a line of reasoning that completely excludes national law from the equation, ignoring Article 4(3) SSMR altogether. More alarmingly, however, is the fact that applying national laws would actually lead to a different outcome.
In fact, should both Courts have applied national legislation, the matter would have been solved in much clearer terms
3.2 A deafening silence: why did national law disappear from the judgments?
In fact, should both Courts have applied national legislation, the matter would have been solved in much clearer terms.
Based on the national legislation ratione temporis applicable, the appellants did not hold indirect qualifying holdings in Banca Mediolanum before the reverse merger. At the time, Articles 22 and 23 of the Italian Consolidated Law on Banking (Decree-Law No. 385/1993) defined indirect qualifying holdings as participations ‘acquired or held in any way through subsidiaries, trust companies or agents’ and established that where the holding chain did not sustain a relationship of exclusive control between the parent company and the subsidiary, there was no indirect qualifying holding. Thus, while the appellants indeed held 30.16% of stake in Mediolanum S.p.A., a similar shareholding was also held by a different entity – Fin. Prog. Italia– ultimately controlled by a separate shareholder, pertaining to the Doris family. In this sense, given that, under the national law applicable at the time, there was no ‘exclusive control’ over Mediolanum S.pA., the appellants’ did not qualify as indirect qualifying holders of the bank.
With the reverse merger, therefore, and regardless of the ruling of the Consiglio di Stato, the appellants became owners of direct qualifying holdings in Banca Mediolanum, which would indeed trigger an application of the procedure for assessment of proposed acquisitions of qualifying holdings under Article 22(1) CRD IV, by then already in force. Although a discussion could be held with regard to the exact scope of the term ‘acquisition’ and its meaning in the context of the regime for qualifying holdings, which should be examined also taking into account the national legislation transposing the CRD IV, the fact is that not a single aspect of the legal elements above was examined by the Court of Justice’s ruling. The silence of the CJEU in this regard is deafening.
4. The repercussions on the future of the application of Art 4(3) SSMR.
The Court of Justice’s ruling in Berlusconi II does not exist in a vacuum: it should articulate with the existing case-law on Article 4(3) SSMR, including Crédit Agricole,11 Crédit Mutuel Arkea,12 Corneli,13 AAB I14 and II,15 Sberbank16 and BAWAG.17 Despite the inconsistent approach adopted throughout these decisions, in none of such cases the CJEU has abstained from referring to the applicable national laws, and from confirming the clear mandate established by Union legislators under Article 4(3) SSMR. In Crédit Agricole, for instance, the CJEU held that ‘pursuant to Article 4(3) of Regulation No 1024/2013, the ECB was required to apply not only Article 13(1) of Directive 2013/36 but also the provision of national law transposing it […]’,18 and that ‘thus, Article 4(3) of Regulation No 1024/2013 necessarily requires the Court to assess the legality of the contested decisions in the light of both Article 13(1) of Directive 2013/36 and the second paragraph of Article L. 511-13 of the [French] CMF.’19 In Corneli, EU Courts established that Article 4(3) SSMR determined that ‘where EU law involves directives, it is the national law transposing those directives that must be applied’.20 What justifies a different treatment of Article 4(3) SSMR in Berlusconi II? There is no apparent ‘express reference’ to national laws in the CRD provisions discussed in those cases, any more than there is in Berlusconi II. Is the entire jurisprudence to be reversed?
What justifies a different treatment of Article 4(3) SSMR in Berlusconi II? There is no apparent ‘express reference’ to national laws in the CRD provisions discussed in those cases, any more than there is in Berlusconi II
11. Judgment of the General Court of 24 April 2018, Caisse régionale de crédit agricole mutuel Alpes Provence et al v ECB (Joined Cases T-133/16 to T-136/16). See Christos Gortsos, ‘The Crédit Agricole cases: banking corporate governance and application of national law by the ECB’ in Chiara Zilioli, Karl-Philipp Wojcik (eds.) Judicial Review in the European Banking Union, cit.
12. Judgment of the Court of Justice of 2 October 2019, Crédit mutuel Arkéa v ECB (Joined Cases C-152/18 P and C-153/18 P).
13. Judgment of the General Court of 12 October 2022, Francesca Corneli v ECB (Case T-502/19). See, in this regard, Filipo Annunziata, Thomaz De Arruda, ‘The Corneli Case (T-502/19): Challenges and Issues in the Application of National Law by the ECB and EU Courts’, EU Law Live Weekend Edition No. 131, 2023.
14. Judgment of the General Court of 22 June 2022, Anglo Austrian AAB AG and Belegging-Maatschappij ‘Far East’ BV v ECB (Case T-797/19).
15. Judgment of the Court of Justice of 12 September 2024, AAB v ECB (Case C-579/22 P).
16. Judgment of the General Court of 28 February 2024, Sber Vermögensverwaltungs AG vs ECB (Joined Cases T- 647/21 and T-99/22).
17. Judgment of the General Court of 28 February 2024, BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG vs ECB (Case T- 667/21).
18. Judgment of the General Court, Crédit Agricole, par. 48.
19. Judgment of the General Court, Crédit Agricole, par. 49.
20. Judgment of the General Court, Corneli, par. 112.
It now becomes evident that there is a pressing need to rationalise the hermeneutical process and to find a common approach for the application of national laws under Article 4(3)
The core underlying issue, in reality, now aggravated with the Berlusconi II judgment, is that the criteria for the application of Article 4(3) SSMR must urgently be clarified. One begins to notice too many oscillating stances by EU Courts in relation to one of the most topical and fundamental rules in the context of the BU: in each new judgment, the CJEU seems to adopt a different approach, invoking a specific thesis or doctrine that is subsequently abandoned in the following ruling or left unexplained. It now becomes evident that there is a pressing need to rationalise the hermeneutical process and to find a common approach for the application of national laws under Article 4(3) SSMR. The Single Rulebook, which governs banking regulation and supervision in the Union, heavily relies on the interplay between national and EU laws, and without legal certainty as to which rules apply and how, the entire system suffers.
The matter, indeed, is even more consequential when one considers that the CJEU judgments on the matter not only affect the BU, but also other institutional models inspired by the latter and that are now being implemented in other sectors, such as the European Anti-Money Laundering Authority (AMLA) and its centralised system of supervision: Article 5(6) of the so-called AMLA Regulation,21 in effect, while contained in a wider set of provisions that deal with the application of national laws by the EU authority, is a verbatim reproduction of Article 4(3) SSMR. The jurisprudence accumulated thus far is already applicable by analogy to AMLA and similar arrangements that can be established in the future, and they draw a very uncertain picture.
After a decade since the full application of the SSMR, and a series of inconsistent decisions on its Article 4(3), there is certainly no more room for mistakes, tragedies or farces. Defined standards and clarity are urgently needed.
21. Regulation (EU) 2024/1620 of 31 May 2024 establishing the Authority for Anti-Money Laundering and Countering the Financing of Terrorism, OJ 2024 L 1620.