Judging the Charter

The Charter in judicial practise with a special focus on the case of protection of refugees and asylum seekers

Ledra Advertising Ltd. and others v. European Commission and European Central Bank

Case Number: Joined Cases C 8/15 P to C 10/15 P

Relevance of Decision

The Court adjudicated on the applicability of the Charter of Fundamental Rights to acts undertaken by EU institutions in the context of the ESM treaty. Despite the fact that Member States do not implement EU law in this context, the EU Institutions, namely the Commission and the ECB, remain bound to uphold the principles and protections enshrined therein, including the provisions of article 17 (1) of the Charter on the right to property. However, measures adopted to the effect of the recapitalisation of financial institutions in the wake of the 2009 economic crisis, including the levying of uninsured deposits, are undertaken in pursuit of an objective of general interest, and meet the conditions of article 52 (1) of the Charter, constituting a permitted limitation to the appellants’ property rights.

Facts of the case

During the first few months of 2012, certain banks established in Cyprus, including Cyprus Popular Bank and Bank of Cyprus, encountered financial difficulties. The Republic of Cyprus thus considered it necessary for them to be recapitalised and submitted a request to the President of the Eurogroup for financial assistance from the EFSF or the ESM. The Eurogroup indicated that financial assistance would be provided in the framework of a macro-economic adjustment programme to be set out in the form of a memorandum of understanding which would be negotiated by the Commission, together with the ECB and the IMF, on the one hand, and by the Cypriot authorities, on the other.

The Republic of Cyprus and the other Member States whose currency is the euro reached a political agreement on a draft memorandum of understanding in March 2013. In the wake of this agreement, the Republic of Cyprus declared a bank holiday, in order to avoid a run on the banks, and adopted laws and decrees on their recapitalisation, primarily at the expense of uninsured deposits.

The appellants had funds on deposit at Bank of Cyprus or Cyprus Popular Bank. The application of the measures laid down by the relevant decrees resulted in a substantial reduction in the value of those deposits. The appellants had lodged an application with the General Court, requesting compensation for their losses and/or the annulment of certain paragraphs of the MoU signed by Cyprus, the Commission, the ECB and the IMF. The General Court dismissed the actions in their entirety as in part inadmissible and in part manifestly lacking any foundation in law. These orders of the General Court are under appeal in the present case.

Legal Questions

1. Does the MoU signed entail the exercise of power by the Commission and the ECB?

2. Is the MoU signed in conformity with EU law, in particular with article 17 (1) of the Charter?

Court Findings

In terms of the admissibility of the case, the Court first observed that, whilst the Member States do not implement EU law in the context of the ESM Treaty, the Charter is addressed to the EU institutions, including when they act outside the EU legal framework. Moreover, the Commission is bound, under both Article 17(1) TEU, which confers upon it the general task of overseeing the application of EU law, and Article 13(3) and (4) of the ESM Treaty, which requires it to ensure that the memoranda of understanding concluded by the ESM are consistent with EU law (see, to that effect, judgment of 27 November 2012, Pringle, C‑370/12, EU:C:2012:756, paragraphs 163 and 164), and the fundamental rights guaranteed by the Charter (para 67). It should, therefore, be examined whether the Commission contributed to a sufficiently serious breach of the appellants’ right to property, within the meaning of Article 17(1) of the Charter, in the context of the adoption of the Memorandum of Understanding.

To this effect, the Court recalled that that the right to property guaranteed by that provision of the Charter is not absolute and that its exercise may be subject to restrictions justified by objectives of general interest pursued by the European Union. Consequently, as is apparent from Article 52(1) of the Charter, restrictions may be imposed on the exercise of the right to property, provided that these genuinely meet objectives of general interest and do not constitute, in relation to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of the right guaranteed.

In this particular case, the adoption of a memorandum of understanding corresponds to an objective of general interest pursued by the European Union, namely the objective of ensuring the stability of the banking system of the euro area as a whole. Indeed, 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 some 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 liable, in turn, to produce negative spill-over effects in other sectors of the economy.

In view of the objective of ensuring the stability of the banking system in the euro area, and having regard to the imminent risk of financial losses to which depositors with the two banks concerned would have been exposed if the latter had failed, the measures adopted do not constitute a disproportionate and intolerable interference impairing the very substance of the appellants’ right to property. Consequently, they cannot be regarded as unjustified restrictions on that right (paras 68-74).


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