News and developments
CJEU deliberates on the distinction between the issuance of E-money and payment services
a preliminary ruling in the case ‘ABC Projektai UAB v Lietuvos bankas’ outlining the distinction of what qualifies as a payment service under Directive (EU) 2015/2366 (“PSD2”) and what constitutes the issuance of electronic money under Directive 2009/110/EC (“EMD2”). The request for a preliminary ruling concerned the withdrawal of the payment institution licence previously granted to ABC Projektai (“ABC”).
Background
ABC had obtained a licence from the Bank of Lithuania on 13 October 2016, to provide payment services under PSD2 as transposed under Lithuanian law. The Bank of Lithuania revoked the licence on 16 April 2020 due to, inter alia, ABC having issued electronic money despite not having the status of an e-money issuer, thereby violating EMD2 as transposed under Lithuanian law. The authority’s rationale was based on the fact that ABC had retained customer funds for longer than required to execute payment transactions, keeping funds received from customers in accounts for payments received without a specific payment purpose and retaining them without transferring the funds to the accounts of the recipients of those payments. The Bank of Lithuania relied on its previously adopted position regarding funds held in payment accounts, which stated that a payment institution may receive funds on a payment account opened with it only if such funds are accompanied by a payment order which must be executed within the time limits laid down in Lithuanian law, and that the payment institution must take sufficient measures to ensure that funds paid by third parties into a customer’s payment account are not held for longer than the time required to execute the payments. If those requirements are not met, the funds in the payment institution’s payment account are to be regarded as deposits, other repayable funds or electronic money. Accordingly, the Bank of Lithuania considered this as a de facto issuance of electronic money under EMD2.
Request for a preliminary ruling
ABC challenged the decision revoking its payment institution licence before the regional administrative court which dismissed the action. ABC appealed to the Supreme Administrative Court of Lithuania which in turn referred the below question to the ECJ:
Where a payment institution accepts funds without a specific payment order to transfer them on the same or following business day and the funds remain in the payment institution’s account intended for carrying out payment transactions for longer than the time limits for the execution of the payment service laid down by legislation, are the actions of the payment institution to be regarded as:
Author: James Debono, Neil Zahra
- a part of a payment service or a payment transaction, as defined in … Article 4(3) and (5) of PSD2, performed by the payment institution; or
- the issuance of electronic money as defined in … Article 2(2) of EMD2?
Author: James Debono, Neil Zahra