Banking Communication Non-binding and Burden-sharing Approved: Kotnik

Abstract

Case note on Judgment of the Court (Grand Chamber) 19 July 2016, Tadej Kotnik and Others v Državni zbor Republike Slovenij (526/14)

On 19 July 2016, the CJEU decided the Kotnik case concerning State aid, EU soft law, corporate law and insolvency law. The wide spectre of legal subjects touched upon shows that the case is important not only for constitutional and State aid law, but also for the research field on regulatory private law. It impacts banking contracts throughout the EU. The importance of the case is underlined by the fact that the CJEU decided the case in the Grand Chamber. In short, the CJEU ruled that the Commission’s Banking Communication from 2013 is not binding on Member States. It considered the Banking Communication’s provisions on burden-sharing to comply with EU primary law including State aid provisions, the right to property and the principle of protection of legitimate expectations. The CJEU also found that the burden-sharing regime is compatible with Directive 2012/30/EU which generally requires that a capital alteration be decided by the general shareholder meeting. However, the burden- sharing regime is limited by the principle of proportionality since it may not exceed what is necessary to counter the capital shortfall. After a short outline of the facts and legal background, this case note will address each of the CJEU’s findings and discuss their implications for other areas of EU law.

Keywords: EU Commission; Banking Communication; Burden-sharing; Bail-in; BRRD; EU Banking Regulation

JEL Classification: K12, K21, K22, K23, K42