JUDGMENT OF THE COURT (Grand Chamber)

19 July 2016 ( *1 ) ( 1 )

[Text rectified by order of 30 September 2016]

(Reference for a preliminary ruling — Validity and interpretation of the Banking Communication from the Commission — Interpretation of Directives 2001/24/EC and 2012/30/EU — State aid to banks in the context of the financial crisis — Burden-sharing — Writing off equity capital, hybrid capital and subordinated debt — Principle of protection of legitimate expectations — Right to property — Protection of the interests of shareholders and others — Reorganisation and winding up of credit institutions)

In Case C‑526/14,

REQUEST for a preliminary ruling under Article 267 TFEU from the Ustavno sodišče (Constitutional Court, Slovenia), made by decision of 6 November 2014, received at the Court on 20 November 2014, in the proceedings

Tadej Kotnik and Others,

Jože Sedonja and Others,

Fondazione cassa di risparmio di Imola,

Andrej Pipuš and Others,

Tomaž Štrukelj,

Luka Jukič,

Angel Jaromil,

Franc Marušič and Others,

Stajka Skrbinšek,

Janez Forte and Others,

Državni svet Republike Slovenije,

Varuh človekovih pravic Republike Slovenije,

Igor Karlovšek,

Marija Karlovšek,

Janez Gosar

v

Državni zbor Republike Slovenije,

intervening parties:

Vlada Republike Slovenije,

Banka Slovenije,

Okrožno sodišče v Ljubljani,

THE COURT (Grand Chamber),

composed of K. Lenaerts, President, A. Tizzano, Vice-President, R. Silva de Lapuerta, T. von Danwitz, J.L. da Cruz Vilaça (Rapporteur), A. Arabadjiev, C. Toader and D. Šváby, Presidents of Chambers, M. Safjan, M. Berger, E. Jarašiūnas, C.G. Fernlund and C. Vajda, Judges,

Advocate General: N. Wahl,

Registrar: M. Aleksejev, Administrator,

having regard to the written procedure and further to the hearing on 1 December 2015,

after considering the observations submitted on behalf of:

–

Mr Kotnik and Others, by M. Kunič and J. Sladič, odvetniki,

–

Mr Sedonja and Others, by T. Kek, odvetnica,

–

the Fondazione cassa di risparmio di Imola, by U. Ilić, M. Jan, B. Ilić, A. Arko, odvetniki, P. Trifoni, C.G. Sinatra and G. Altomare, avvocati,

–

Mr Pipuš and Others, by Mr Pipus himself, avocat,

–

Mr Jukič, by himself,

–

Mr Marušič and Others, by B. Rejc, odvetnik,

–

Mrs Skrbinšek, by T. Bromše, odvetnik,

–

Mr Forte and Others, by Z. Fritz,

–

the Državni svet Republike Slovenije, by M. Bervar, H. Butolen, odvetnica, and B. Kekec, J. Slivšek and D. Štrus,

–

Mr and Mrs Karlovšek, by Mr I. Karlovšek, odvetnik,

–

Mr Gosar, by Mr Gosar himself,

–

the Državni zbor Republike Slovenije, by M. Brglez,

–

the Banka Slovenije, by B. Jazbec, R. Grilc, odvetnik, and T. Lübbig, Rechtsanwalt,

–

the Slovenian Government, by V. Klemenc, T. Mihelič Žitko, acting as Agents,

–

[as rectified by order of 30 September 2016] Ireland, by E. Creedon, L. Williams and A. Joyce, acting as Agents, and by E. McCullough, Senior Counsel, and A. O’Neill, Barrister-at-Law,

–

the Spanish Government, by A. Rubio González, acting as Agent,

–

the Italian Government, by G. Palmieri, acting as Agent, and by P. Gentili, avvocato dello Stato,

–

the European Commission, by L. Flynn, P.J. Loewenthal, K.-Ph. Wojcik and M. Žebre, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 18 February 2016,

gives the following

Judgment

1This request for a preliminary ruling concerns the validity and interpretation of points 40 to 46 of the Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’) ( OJ 2013, C 216, p. 1 ), and the interpretation of Articles 29, 34, 35 and 40 to 42 of Directive 2012/30/EU of the European Parliament and of the Council of 25 October 2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent ( OJ 2012 L 315, p. 74 ), and of the seventh indent of Article 2 of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions ( OJ 2001 L 125, p. 15 ).

2The request has been made in proceedings for review of the constitutionality of certain provisions of the Zakon o bančništvu (law on the banking sector) of 23 November 2006), in the version applicable to the main proceedings (Uradni list RS, No 99/10) (‘the law on the banking sector’), which provide for exceptional measures designed to ensure the recovery of the banking system.

Legal context

EU law

Directive 2001/24

3Recitals 5 and 6 in the preamble to Directive 2001/24 read as follows:

‘(5)

The adoption of Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes [( OJ 1994, L 135, p. 5 )], which introduced the principle of compulsory membership by credit institutions of a guarantee scheme in their home Member State, brings out even more clearly the need for mutual recognition of reorganisation measures and winding-up proceedings.

(6)

The administrative or judicial authorities of the home Member State must have sole power to decide upon and to implement the reorganisation measures provided for in the law and practices in force in that Member State. Owing to the difficulty of harmonising Member States’ laws and practices, it is necessary to establish mutual recognition by the Member States of the measures taken by each of them to restore to viability the credit institutions which it has authorised.’

4Under the seventh indent of Article 2 of Directive 2001/24, ‘reorganisation measures’ are to mean ‘measures which are intended to preserve or restore the financial situation of a credit institution and which could affect third parties’ pre-existing rights, including measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims.’

Directive 2012/30

5Recitals 3 and 5 in the preamble to Directive 2012/30 are worded as follows:

‘(3)

… in order to ensure minimum equivalent protection for both shareholders and creditors of public limited liability companies, the coordination of national provisions relating to their formation and to the maintenance, increase or reduction of their capital is particularly important;

…

(5)

Union provisions are necessary for maintaining the capital, which constitutes the creditors’ security, in particular by prohibiting any reduction thereof by distribution to shareholders where the latter are not entitled to it and by imposing limits on the company’s right to acquire its own shares.’

6Article 29(1) of that directive provides:

‘Any increase in capital must be decided upon by the general meeting ...’

7The first paragraph of Article 34 of that directive states:

‘Any reduction in the subscribed capital, except under a court order, must be subject at least to a decision of the general meeting …’

8Article 35 of Directive 2012/30 provides: ‘Where there are several classes of shares, the decision by the general meeting concerning a reduction in the subscribed capital shall be subject to a separate vote, at least for each class of shareholders whose rights are affected by the transaction.’

9Article 40(1) of that directive provides:

‘Where the laws of a Member State may allow companies to reduce their subscribed capital by compulsory withdrawal of shares, they shall require that at least the following conditions are observed:

...

(b)

where the compulsory withdrawal is merely authorised by the statutes or instrument of incorporation, it shall be decided upon by the general meeting unless it has been unanimously approved by the shareholders concerned.’

10Article 41(1) of that directive states:

‘In the case of a reduction in the subscribed capital by the withdrawal of shares acquired by the company itself or by a person acting in his own name but on behalf of the company, the withdrawal must always be decided on by the general meeting.’

11Article 42 of that directive provides:

‘In the cases covered by …, point (b) of Article 40(1) …, when there are several classes of shares, the decision by the general meeting concerning redemption of the subscribed capital or its reduction by withdrawal of shares shall be subject to a separate vote, at least for each class of shareholders whose rights are affected by the transaction.’

Directive 2014/59/EU

12Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council ( OJ 2014 L 173, p. 190 ) was adopted on 15 May 2014.

13Article 117 of Directive 2014/59 amended, inter alia, the definition of ‘reorganisation measures’ set out in the seventh indent of Article 2 of Directive 2001/24. As amended, ‘reorganisation measures’ are to mean ‘measures which are intended to preserve or restore the financial situation of a credit institution or an investment firm as defined in Article 4(1), point (2) of Regulation (EU) No 575/2013 and which could affect third parties’ pre-existing rights, including measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims; those measures include the application of the resolution tools and the exercise of resolution powers provided for in Directive 2014/59/EU’.

14Article 130(1) of Directive 2014/59 provides:

‘Member States shall adopt and publish by 31 December 2014 the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those measures.

Member States shall apply those measures from 1 January 2015.

However, Member States shall apply provisions adopted in order to comply with Section 5 of Chapter IV of Title IV from 1 January 2016 at the latest.’

The Banking Communication

15Points 2 and 3 of the Banking Communication state:

‘2.

The Crisis Communications provide a comprehensive framework for coordinated action in support of the financial sector so as to ensure financial stability while minimising distortions of competition between banks and across Member States in the single market. They spell out the conditions for access to State aid and the requirements which need to be ensured to find such aid compatible with the internal market in light of State aid principles set out in the Treaty. Through the Crisis Communications, State aid rules governing public assistance to the financial sector have been regularly updated where necessary to adapt to the evolution of the crisis. Recent developments require a further update of the Crisis Communications.

3.The Crisis Communications, as well as all individual decisions on aid measures and schemes falling within the scope of those Communications, were adopted on the basis of Article 107(3)(b) of the Treaty, which exceptionally allows for aid to remedy a serious disturbance in the economy of a Member State.’

16Point 15 of that communication reads as follows:

‘The Crisis Communications clearly spell out that even during the crisis the general principles of State aid control remain applicable. In particular, in order to limit distortions of competition between banks and across Member States in the single market and address moral hazard, aid should be limited to the minimum necessary and an appropriate own contribution to restructuring costs should be provided by the aid beneficiary. The bank and its capital holders should contribute to the restructuring as much as possible with their own resources. State support should be granted on terms which represent an adequate burden-sharing by those who invested in the bank.’

17Point 17 of that communication states:

‘In the first phases of the crisis, Member States did not generally go beyond the minimum requirements set by State aid rules with regard to burden-sharing ex ante , and creditors were not required to contribute to rescuing credit institutions for reasons of financial stability.’

18Part 3 of the Banking Communication relates to recapitalisation and impaired asset measures. Section 3.1.2. of Part 3, headed ‘Burden-sharing by the shareholders and the subordinated creditors’ contains points 40 to 46 of that notice.

19Points 40 to 46 of that communication state:

‘40.

State support can create moral hazard and undermine market discipline. To reduce moral hazard, aid should only be granted on terms which involve adequate burden-sharing by existing investors.

Slovenian law

20Article 253(3) of the law on the banking sector provides that ‘the exceptional measures shall form part of the reorganisation measures provided for by Directive 2001/24/EC.’

21Article 261a of that law states:

‘(1) By its decision requiring exceptional measures, the Bank of Slovenia shall provide that:

1.eligible liabilities shall be written off or written down, or

2.a bank’s eligible liabilities … shall be converted in whole or in part into new ordinary shares in the bank following an increase of that bank’s share capital by means of the transfer of consideration in kind in the form of the claims of creditors, which claims shall constitute eligible liabilities.

...

(5) In writing off or converting a bank’s eligible liabilities, the Bank of Slovenia must satisfy itself that individual creditors do not incur, as a result of the writing off or conversion of the bank’s eligible liabilities, greater losses than they would have done in the event of the bank’s insolvency.

(6) A bank’s eligible liabilities are represented by:

1.the bank’s share capital (Class I liabilities),

2.liabilities in relation to holders of hybrid capital ... (Class II liabilities),

3.liabilities in relation to holders of financial instruments, which, …, must be taken into account in calculating the bank’s additional capital, unless such liabilities are already included in the definitions set out at points 1 or 2 of this paragraph (Class III liabilities),

4.liabilities not included in the definitions set out in points 1, 2 or 3 of this paragraph, which, in the event of insolvency proceedings in respect of the bank, would be paid after the payment of ordinary debentures (Class IV liabilities).’

22Article 261c of the law on the banking sector provides:

‘(1) In its decision concerning the writing off of eligible liabilities …, the Bank of Slovenia shall require the bank’s eligible liabilities to be written off to the extent necessary to cover the bank’s losses, in the light of the valuation of the net assets as referred to in the preceding article ...’

The dispute in the main proceedings and the questions referred for a preliminary ruling

23After the global financial crisis, which began in 2007 and which deepened in the years that followed, the Banka Slovenije (the Bank of Slovenia) determined, in September 2013, that five Slovenian banks, namely Nova Ljubljanska banka d.d., Nova Kreditna banka Maribor d.d., Abanka Vipa d.d., Probanka d.d. and Factor banka d.d., were showing capital shortfalls. Given the scale of those shortfalls, those banks did not have sufficient assets to satisfy their creditors and to cover the value of deposits.

24On 17 December 2013 the Bank of Slovenia adopted decisions putting in place exceptional measures to effect the recapitalisation of the first two banks, the rescue of the third, and the winding up of the last two banks (‘the contested measures’).

25On 18 December 2013 the Commission authorised the granting of State aid to the five banks concerned, prior notice of that aid having been given by the Slovenian authorities.

27It is apparent from the file submitted to the Court that subordinated rights are constituted by financial instruments which share certain characteristics with debt products and certain characteristics with shares in equity capital. In the event of the insolvency or winding up of the issuing entity, the holders of subordinated rights (‘subordinated creditors’) are paid after the holders of ordinary debentures, but before shareholders. In exchange for the financial risk thus assumed by their holders, those financial instruments offer a higher rate of return.

28A number of applications for review of constitutionality were brought before the Ustavno sodišče (Constitutional Court, Slovenia) by, on the one hand, private individuals and, on the other, by the Državni svet Republike Slovenije (the National Council, Slovenia) and the Varuh človekovih pravic Republike Slovenije (the Slovenian Ombudsman). Those applications related to whether provisions of the law on the banking sector, on the basis of which the contested measures were adopted, were compatible with the Slovenian Constitution, and in particular with the principle of non-retroactivity, the principles of protection of legitimate expectations and proportionality, and the right to property.

29It is stated in the order for reference that the objective of the provisions of the law on the banking sector was to transpose the Banking Communication into national law, in order to enable the national authorities to grant to undertakings in that sector State aid that was compatible with the internal market. Consequently, according to the referring court, while the objections of the applicants in the main proceedings are directed against those provisions, their actual target is the Banking Communication. Those applicants consider that that communication is contrary not only to the Slovenian Constitution, but also to Article 17 of the Charter of Fundamental Rights of the European Union (‘the Charter’) and to Directives 2012/30 and 2001/24. The referring court considers that it has jurisdiction to assess the constitutionality of provisions of national law which implement a directive. However, the referring court believes that it does not have jurisdiction when a question is raised as to the interpretation or validity of a rule of EU law which represents the legal basis for the provision of national law whose constitutionality is challenged. In that situation, it considers that the Court has exclusive jurisdiction to answer questions as to the validity and interpretation of that rule, so that it can thereafter assess, in the case pending before it, the constitutionality of the provisions at issue of the national legislation.

30In those circumstances, the Ustavno sodišče (Constitutional Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘(1)

Having regard to the legal effects actually produced by the Banking Communication, and given that the European Union has exclusive competence in relation to State aid, in accordance with Article 3(1)(b) [TFEU], and the Commission has competence to give decisions relating to State aid, pursuant to Article 108 [TFEU], must the Banking Communication be regarded as binding on Member States seeking to remedy a serious disturbance in the economy by granting State aid to credit institutions, where such aid is intended to be permanent and cannot be easily revoked?

(2)

Are points 40 to 46 of the Banking Communication — which make the possibility of granting State aid intended to remedy a serious disturbance in the national economy conditional upon compliance with the requirement to write off equity capital, [and subordinated rights] and/or to convert [subordinated rights] into equity, in order to limit the amount of aid to the minimum necessary in the light of the need to take account of moral hazard — incompatible with Articles 107 to 109 [TFEU], in so far as they exceed the Commission’s competence, as defined in the provisions of the [FEU] Treaty relating to State aid?

(3)

If Question 2 is answered in the negative, are points 40 to 46 of the Banking Communication — which make the possibility of granting State aid conditional on the requirement of writing off and/or converting into equity capital, in so far as that requirement relates to shares (equity capital), and [subordinated rights] issued before the publication of the Banking Communication and which, at the time of issue, could have been written off or written down without full compensation only in the event of the bank’s insolvency — compatible with the principle of the protection of legitimate expectations enshrined in EU law?

(4)

If Question 2 is answered in the negative and Question 3 in the affirmative, are points 40 to 46 of the Banking Communication — which make the possibility of granting State aid conditional on the requirement to write off equity capital, [and subordinated rights] and/or to convert [subordinated rights] into equity, without the initiation and conclusion of an insolvency procedure by which the debtor’s assets may be liquidated by means of judicial proceedings in which the holders of subordinated financial instruments would have the opportunity to participate as parties to the proceedings — compatible with the right to property enshrined in Article 17(1) of the Charter?

(5)

If Question 2 is answered in the negative and Questions 3 and 4 in the affirmative, are points 40 to 46 of the Banking Communication — which make the possibility of granting State aid conditional on the requirement to write off equity capital, and/or to convert [subordinated rights] into equity, in so far as the implementation of those measures calls for a reduction and/or increase in the share capital of a public limited liability company on the basis of the decision of a competent administrative body, not that of the general meeting of shareholders of that company — contrary to Articles 29, 34, 35 and 40 to 42 of Directive 2012/30 …?

(6)

With regard to point 19 of the Banking Communication, in particular the requirement laid down in that provision to respect fundamental rights, to point 20, and to the affirmation of the requirement, as a matter of principle, laid down in points 43 and 44 of the communication, to convert or write down [subordinated rights] before granting State aid, may the Banking Communication be interpreted as meaning that those measures do not compel Member States that seek to remedy a serious disturbance in their economy by granting State aid to credit institutions to impose an obligation to adopt such conversion and writing down measures as a condition for the grant of State aid on the basis of Article 107(3)(b) [TFEU], or as meaning that, in order to be able to grant State aid, it is sufficient that the conversion or writing down measure should merely operate in a manner that is proportionate?

(7)

May the seventh indent of Article 2 of [Directive 2001/24] be interpreted as meaning that the measures requiring burden-sharing by shareholders and subordinated creditors provided for in points 40 to 46 of the Banking Communication (write-down of equity capital [and subordinated rights] and the conversion into equity of [subordinated rights] may also be classified as reorganisation measures?’

Consideration of the questions referred for a preliminary ruling

Preliminary observation

The first question referred

35By its first question, the referring court seeks, in essence, to ascertain whether the Banking Communication must be interpreted as meaning that it is binding on the Member States.

41That said, the Commission cannot waive, by the adoption of guidelines, the exercise of the discretion that Article 107(3)(b) TFEU confers on it (see, to that effect, judgment of 8 March 2016, Greece v Commission, C‑431/14 P , EU:C:2016:145 , paragraph 71 ). The adoption of a communication such as the Banking Communication does not therefore relieve the Commission of its obligation to examine the specific exceptional circumstances relied on by a Member State, in a particular case, for the purpose of requesting the direct application of Article 107(3)(b) TFEU, and to provide reasons for its refusal to grant such a request (judgment of 8 March 2016, Greece v Commission, C‑431/14 P , EU:C:2016:145 , paragraph 72 ).

42In this case, it is apparent from points 41, 43 and 44 of the Banking Communication that the adequate burden-sharing which is stated by that communication to be a prerequisite for the grant of State aid entails, first, that losses are absorbed by equity, then, as a general rule, by a contribution from subordinated creditors. An exception to the requirements stated in points 43 and 44 of that communication may be made, under point 45 thereof, where such a contribution ‘might endanger financial stability or lead to disproportionate results’.

43It follows from the foregoing, on the one hand, that the effect of the adoption of the guidelines contained in that communication is equivalent to the effect of a limitation imposed by the Commission on itself in the exercise of its discretion, so that, if a Member State notifies the Commission of proposed State aid which complies with those guidelines, the Commission must, as a general rule, authorise that proposed aid. On the other hand, the Member States retain the right to notify the Commission of proposed State aid which does not meet the criteria laid down by that communication and the Commission may authorise such proposed aid in exceptional circumstances.

44It follows that the Banking Communication is not capable of imposing independent obligations on the Member States, but does no more than establish conditions, designed to ensure that State aid granted to the banks in the context of the financial crisis is compatible with the internal market, which the Commission must take into account in the exercise of the wide discretion that it enjoys under Article 107(3)(b) TFEU.

45In the light of the foregoing, the answer to the first question referred is that the Banking Communication must be interpreted as meaning that it is not binding on the Member States.

The second question referred

46By its second question, the referring court seeks, in essence, to ascertain whether Articles 107 to 109 TFEU must be interpreted as precluding points 40 to 46 of the Banking Communication in so far as those points lay down a condition of burden-sharing by shareholders and subordinated creditors as a prerequisite to the authorisation of State aid.

The third and fourth questions referred

The fifth question

The sixth question

95By its sixth question, the referring court seeks, in essence, to ascertain whether the Banking Communication must be interpreted as meaning that the measures for conversion of subordinated rights or write-down of the principal thereof, as provided for in point 44 of that communication, constitute a necessary and sufficient condition for State aid falling within the scope of that communication to be declared to be compatible with the internal market or whether it is sufficient, for that aid to be authorised, that the subordinated rights are converted or written down in a proportionate manner.

96It is apparent from the order for reference that, by that question, the Ustavno sodišče (Constitutional Court) wants to know whether, in the event that a bank does not meet the minimum regulatory capital requirements, within the meaning of point 44 of the Banking Communication, measures to ensure the writing down of subordinated rights are to be undertaken in such a way that they offset in full all the identified losses of the bank or whether those measures may be applied partially, in a proportionate manner.

97Under point 44 of that communication, in the event that a bank does not meet the minimum capital requirements, which means that its capital is not sufficient, in itself, to absorb the bank’s losses, subordinated debt must be converted, or the principal thereof must be written down, as a general rule, before the grant of State aid to that bank. Further, again under point 44, State aid must not be granted before equity and subordinate debt have fully contributed to offset any losses of the bank.

98As stated in paragraphs 40 and 41 of this judgment, in adopting guidelines and announcing by publishing them that they will apply to the cases to which they relate, the Commission imposes a limit on the exercise of its discretion and cannot depart from those guidelines, if it is not to be found, where appropriate, to be in breach of general principles of law, such as equal treatment or the protection of legitimate expectations. Further, the adoption of such guidelines does not relieve the Commission of its obligation to examine specific exceptional circumstances that are relied on by a Member State.

101It may be added that the Banking Communication provides, in point 45 thereof, that an exception to the requirements of, inter alia, point 44 of that communication may be made where the implementation of measures for converting debt or writing down its principal ‘would endanger financial stability or lead to disproportionate results’. Accordingly, an obligation to effect the conversion, or write-down, of subordinate rights in their entirety before the granting of State aid cannot be imposed on a bank if, inter alia, the conversion, or write-down, of a part of the subordinate rights would have been sufficient to overcome the capital shortfall of the bank concerned.

The seventh question

103By its seventh question, the referring court seeks, in essence, to ascertain whether the seventh indent of Article 2 of Directive 2001/24 must be interpreted as meaning that the burden-sharing measures involving both shareholders and subordinated creditors, as provided for in points 40 to 46 of the Banking Communication, fall within the scope of the concept of ‘reorganisation measures’, within the meaning of that provision of Directive 2001/24.

105That objective entails that the reorganisation measures taken by the administrative or judicial authorities of the home Member State, that is, the Member State in which a credit institution has been authorised, must have, in all the other Member States, the effects which the law of the home Member State confers on them (see, to that effect, judgment of 24 October 2013, LBI, C‑85/12 , EU:C:2013:697 , paragraph 22 ).

106In accordance with the seventh indent of Article 2 of Directive 2001/24, the concept of ‘reorganisation measures’ is to be regarded as meaning measures ‘which are intended to preserve or restore the financial situation of a credit institution and which could affect third parties’ pre-existing rights, including measures involving the possibility of a suspension of payments, suspension of enforcement measures or reduction of claims’.

107As argued by all the parties to the main proceedings who have expressed a view on this question, it follows from the very wording of that provision, and from the broad definition of the concept of ‘reorganisation measures’ stated therein, that burden-sharing measures such as those provided for in points 40 to 46 of the Banking Communication can be included within the concept of ‘reorganisation measures’, within the meaning of Directive 2001/24.

108First, given that the aim of the burden-sharing measures is to restore the financial position of credit institutions and to overcome their capital shortfall, as set out in point 43 of the Banking Communication, the purpose of those measures is to preserve or re-establish the financial situation of a credit institution.

109Second, the burden-sharing measures, in particular the conversion of the principal of subordinated rights into equity or the write-down of the principal, are, by their very nature, likely adversely to affect the pre-existing rights of third parties and, accordingly, to lead to a reduction of creditors’ claims.

111In addition, the referring court has doubts as to whether the fact that the seventh indent of Article 2 of Directive 2001/24 was amended by Article 117 of Directive 2014/59, so as expressly to include, in the concept of ‘reorganisation measures’, the resolution instruments provided for by Directive 2014/59 — which are comparable to the burden-sharing measures involving both shareholders and subordinated creditors –, allows the inference that, at the material time, those latter measures did not fall within the scope of the concept of ‘reorganisation measures’, within the meaning of Directive 2001/24.

112Such an interpretation cannot be accepted.

114The answer therefore to the seventh question is that the seventh indent of Article 2 of Directive 2001/24 must be interpreted as meaning that burden-sharing measures such as those provided for in points 40 to 46 of the Banking Communication fall within the scope of the concept of ‘reorganisation measures’, within the meaning of that provision of that directive.

Costs

115Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Grand Chamber) hereby rules:

1.The Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (‘Banking Communication’) must be interpreted as meaning that it is not binding on the Member States.

2.Articles 107 to 109 TFEU must be interpreted as not precluding points 40 to 46 of the Banking Communication in so far as those points lay down a condition of burden-sharing by shareholders and holders of subordinated rights as a prerequisite to the authorisation of State aid.

3.The principle of the protection of legitimate expectations and the right to property must be interpreted as not precluding points 40 to 46 of the Banking Communication in so far as those points lay down a condition of burden-sharing by shareholders and holders of subordinated rights as a prerequisite to the authorisation of State aid.

4.Articles 29, 34, 35 and 40 to 42 of Directive 2012/30/EU of the European Parliament and of the Council of 25 October 2012 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 54 of the Treaty on the Functioning of the European Union, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent, must be interpreted as not precluding points 40 to 46 of the Banking Communication in so far as those points lay down a condition of burden-sharing by shareholders and holders of subordinated rights as a prerequisite to the authorisation of State aid.

5.The Banking Communication must be interpreted as meaning that the measures for converting hybrid capital and subordinate debt or writing down their principal, as provided for in point 44 of that communication, must not exceed what is necessary to overcome the capital short-fall of the bank concerned.

6.The seventh indent of Article 2 of Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions must be interpreted as meaning that burden-sharing measures such as those provided for in points 40 to 46 of the Banking Communication fall within the scope of the concept of ‘reorganisation measures’, within the meaning of that provision of that directive.

[Signatures]

( *1 ) Language of the case: Slovenian.

( 1 ) The wording of paragraph 28 of this document has been modified after it was first put online.