Decision of the Financial and Capital Market Commission regarding the fine imposed on the bank is upheld
3 February, 2021
On January 29, the Department of Administrative Cases of the Senate upheld the judgment of the Regional Administrative Court, which rejected the application of the Applicant – the bank – for annulment of the decision of the Financial and Capital Market Commission (hereinafter – FCMC). The above-mentioned decision of the FCMC establishes that the Applicant is responsible for the execution of payment order of the Applicant's client in accordance with Section 99, Paragraph nine of the Law on Payment Services and Electronic Money, and the Applicant is instructed to inform the FCMC about the solution regarding the execution of the said transaction. The Applicant is also instructed to assess the need to make changes to the internal control system and procedure, determining its conduct in cases where it is not possible to execute the payment order given by the payment service user. A fine was also imposed on the Applicant.
The Senate examined the case under the cassation procedure due to the Applicant's cassation complaint against the judgment of the Administrative Regional Court. The Senate had stayed the proceedings and referred questions to the Court of Justice of the European Union for a preliminary ruling. Having received the answers of the Court of Justice of the European Union to the questions of the Senate, the Senate resumed the proceedings in the case.
The Senate resolved a dispute as to whether the Regional Court, in establishing the Applicant's liability in accordance with Section 99, Paragraph nine of the Law on Payment Services and Electronic Money, had violated its area of authority by resolving a civil dispute between the Applicant and the client.
The Senate generally agreed that Section 99 of the said Law regulates the mutual legal relations – rights and obligations and limits of liability of the payer’s payment service provider and the payee’s payment service provider. At the same time, the Senate acknowledged that the wording of the norm in itself could not be the basis for the presumption that the Regional Court (but primarily the FCMC), applying this norm and verifying whether it had been complied with, had settled a civil dispute. The Senate, also taking into account the observations of the Court of Justice of the European Union, noted that Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (hereinafter Directive 2007/64/EC), which has been transposed into the provisions of the Law on Payment Services and Electronic Money, provides for two types of procedures: complaint procedures (Articles 80 to 82 of the Directive) and out-of-court redress procedures (Article 83 of the Directive). In case of complaint procedures, the competent authority is entitled to verify, inter alia, compliance with Article 75 of Directive 2007/64/EC (respectively Section 99 of the Law on Payment Services and Electronic Money), as well as to impose sanctions for violations of the provisions contained in this Article.
At the same time, the Senate, referring to the Court of Justice of the European Union, acknowledged that the same competent authority is not entitled to settle a dispute or apply an out-of-court redress procedure, as well as to apply a complaint procedure within the same procedure. However, no such circumstances were found in the present case. Section 105, Paragraph two of the Law on Payment Services and Electronic Money envisages the competence of the FCMC to review applications of payment service users in connection with non-compliance with the provisions of the Law, including Section 99. Pursuant to Paragraph five of Section 105 of the Law, which includes the complaint procedures provided for in Articles 80-82 of Directive 2007/64/EC, the FCMC is entitled to adopt a decision instructing the payment service provider to terminate non-compliance with Chapter XIV of the Law or eliminate violations and set a deadline for the completion of the actions required for that purpose. Considering the essence of the legal norms included in Section 99 of the Law, the examination of whether these norms have been complied with inevitably includes an examination of the compliance of the actions of each person involved in the execution of the payment order with these norms and conclusions on each person's liability. Thus, the mere fact that the FCMC and, consequently, the Regional Court, have examined whether the Applicant has complied with the norms of Section 99 of the Law, does not indicate that a civil dispute has been resolved. The FCMC has only fulfilled its public-law goal set by law to ensure that payment service providers comply with the provisions of said Law.
The Senate also acknowledged that the arbitration judgment, which concluded that the Applicant was not responsible for non-execution of the payment order and rejected the client's claim for recovery from the Applicant, was not a preliminary ruling in the present case, as it is not provided by procedural rules: the exceptions provided for in Section 487, Paragraph One, Clauses 1 and 2 of the Civil Procedure Law indicate that the arbitration judgement is binding only on the parties to the arbitration agreement, as well as the facts established in the arbitration judgement and their legal assessment cannot be grounds for restricting the rights of state or local government institutions. As well as, the facts established in the arbitration judgement cannot serve as evidence in an administrative case in the context of Section 153 of the Administrative Procedure Law, as the term “court” used in Paragraph two does not apply to arbitration courts, as they do not belong to the court system defined in Chapter 6 and the Law “On Judicial Power”. Therefore, similarly as acknowledged by the Senate in a civil case in connection with Section 96, Paragraph two of the Civil Procedure Law, Section 153, Paragraph two of the Administrative Procedure Law cannot be interpreted as applying to arbitration judgements (cf. Senate Judgment of 24 January 2013 No SKC-7/2013 Item 11). Furthermore, the fact that an arbitration court does not form part of the court system of a Member State of the European Union means that its judgements are not subject to the kind of mechanisms that ensure the full effectiveness of European Union law. Namely, Article 267 of the Treaty on the Functioning of the European Union, which regulates issues of the obligation to apply to the Court of Justice of the European Union in connection with the interpretation and validity of European Union law (cf., for example, Judgment of the Court of Justice of 6 March 2018 in Case C-284/16 Achmea, ECLI: EU: C: 2018: 158), does not apply to arbitration court. Consequently, even in that regard, the Regional Court cannot be bound by the assessment of the factual and legal context of the arbitration judgement, since otherwise, it would be required to rely on the interpretation of such a judgement and its provisions where the institution which adopted it is not entitled to address the Court of Justice of the European Union, thus not guaranteeing uniform interpretation of European Union law and its coherence and effectiveness. The Senate also pointed out that the FCMC has independent supervisory functions over the compliance of credit institutions with the laws applicable to them, and the arbitration judgement must not restrict the powers granted to the FCMC, the autonomy of competencies, or harm the objectives of the complaint procedure.
Information prepared by Baiba Kataja, the Press Secretary of the Supreme Court
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