Regional court has to re-examine the case concerning right to receive guaranteed compensation from the deposit guarantee fund
2 December, 2015
On 27 November, the Department of Administrative Cases of the Supreme Court quashed the judgement of the Administrative regional court, which was unfavourable to the applicant, regarding right to receive guaranteed compensation from the deposit guarantee fund and transferred the case for new examination under appellate procedure. In this case, the Supreme Court addressed the Court of Justice of the European Union, whose conclusions are to be observed, when examining the case de novo.
The dispute in the case concerns the question whether the Financial and Capital Market Commission justly recognised an applicant to be such person, who is not entitled to receive guaranteed compensation from deposit guarantee fund. The applicant was vice-President in international law and financial law issues of the company, which attracted deposits (credit institution – “Latvijas Krājbanka” JSC). Both the Financial and Capital Market Commission and, when examining application filed by the applicant, the Administrative regional court considered that the applicant should be recognised as the employee, whose responsibilities included planning, management and control over significant field of operation of the company, which attracted deposits, and responding for it. Such position serves as a ground to prohibit payment of guaranteed compensation from deposit guarantee fund, in accordance with Section 17 (4) of the Deposit Guarantee Law. The applicant objects against application of the provision to him and points out that he hadn’t been the member of the Board, and he hadn’t had representation (signatory) powers, and he hadn’t had an opportunity to take decisions or to control operation of the credit institution within his powers. The applicant also points out that in similar situations in respect of other vice-Presidents of the credit institution, the Administrative regional court recognised right to receive guaranteed compensation.
To specify if the applicant is the person, who is entitled to receive guaranteed compensation from the deposit guarantee fund, the Court of Justice of the European Union in its judgement outlined possible circumstances, which could be specified: description of applicant’s job responsibilities, his factual actions, and his legal and factual relations with the Board of the Bank; the question whether the applicant is responsible for all activities carried out by the Bank or only for particular field of its operation.
Having assessed substantiation provided by the Administrative regional court, the Supreme Court recognised that the appellate instance court has assessed concordance of applicant’s job responsibility of the applicant on the ground of assumption that it is allowed not to pay deposit guarantees to persons, who, when discharging job duties, could influence activity carried out by the Bank. However, the Court of Justice of the European Union, observing the purpose of adoption of the Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994, on deposit-guarantee schemes, stressed different substantiation: the purpose of the Directive is to protect depositors in their legal relations with credit institutions, because in most cases depositors lack information or competence, which is necessary to assess real financial situation of the credit institution they deal with. Therefore, as it has been pointed out in the Directive, Therefore, as it has been pointed out in the Directive, Member State’s guarantee may not to be applied to depositors, who do not need such special protection, namely, to persons, who, due to functions being discharged by them, possess information and competence allowing them to assess real financial situation of the credit institution and risks related to operation thereof. One may assume that these persons have acquired level of competence and information about the credit institution they trusted their deposits to, which the majority of depositors do not possess.
Information prepared by Baiba Kataja, the Press secretary of the Supreme Court
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