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The battle between Malacalza and the European Central Bank
brought a case before the General Court of the European Union (the “Court”), seeking compensation for unlawful conduct of the European Central Bank (“ECB”) in exercise of its supervisory functions of Banca Carige. The Applicants claimed that the Court should order the European Union (“EU”) to pay them a sum of circa EUR 880,000,000 for the harm they suffered as a result of the actions taken by the ECB.
Under Article 340 of the Treaty of Functioning of the European Union (the “TFEU”), the EU is to make good of any damage caused by its institutions in cases of non-contractual liability since it is subject to review of the conformity of their acts. Moreover, under the third paragraph of this article[1], it is the ECB that must make good of any damages that an individual may have suffered from its conduct.
Facts of the case
Banca Carige is an Italian credit institution listed on the stock exchange and has been subject to supervision by the ECB since 2014. Between 2015 and 2019, the ECB adopted a series of supervisory actions.
The Applicants are shareholders of the bank, where Malacalza Investimenti, an investment company and Mr. Malacalza held a considerable amount of the bank’s capital. Mr. Malacalza was also a member and vice president of the bank’s board of directors between 2016 and 2018.
In 2015, the ECB noted that the bank did not fulfil its own fund requirements and therefore, stepped in to adopt an early intervention measure. In 2019, the bank was placed under temporary administration until a new board was elected in 2020. Since the Applicants held considerable shares in Banca Carige, they viewed that the actions taken by the ECB were detrimental to their rights and interests as shareholders of the bank.
In the Applicants’ view, the decisions taken by the ECB were against their duties associated with their supervisory functions and claimed that the EU incurred non-contractual liability on the basis of eight instances of unlawful conduct which will be explained below.
Findings of the Court
The Court noted that for the EU to incur non-contractual liability, applicants must first cumulatively satisfy the following three conditions:
Author: Simay Cilingir
Footnotes [1] The third paragraph of Article 340 TFEU states: “Notwithstanding the second paragraph, the European Central Bank shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by it or by its servants in the performance of their duties���. [2] Article 4 sets out the tasks conferred onto the ECB while Article 16 sets out its supervisory powers. [3] This article states that the ECB is the designated authority in the Member States to carry out its tasks conferred on it in this Regulation. [4] Referring to Article 56 of the Consolidated Law on Baking. Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘The Malta Independent’ on 24/07/2024.
- Unlawfulness of the conduct attributable to the institution confers rights on individuals;
- the fact of the damage; and
- the existence of a causal link between the alleged conduct and the damage complained of.
Author: Simay Cilingir
Footnotes [1] The third paragraph of Article 340 TFEU states: “Notwithstanding the second paragraph, the European Central Bank shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by it or by its servants in the performance of their duties���. [2] Article 4 sets out the tasks conferred onto the ECB while Article 16 sets out its supervisory powers. [3] This article states that the ECB is the designated authority in the Member States to carry out its tasks conferred on it in this Regulation. [4] Referring to Article 56 of the Consolidated Law on Baking. Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘The Malta Independent’ on 24/07/2024.