The Committee's Opinion on proposals for European financial supervision - Treasury Contents

Examination of Witnesses (Questions 40-54)



  Q40  Mr Fallon: Have you read Article 23?

  Professor Portes: Yes.

  Q41  Mr Fallon: It seems pretty clear to me that a Member State can appeal and then the Council acts by qualified majority as to whether to uphold the appeal or not. Is that not the position?

  Dr Alexander: I think the dispute here that Article 23 refers to is if a Member State says, "We think this decision by the European supervisory agency is impinging on our fiscal position in some way and therefore we contest that", and the ESA says, "No, it does not. We are simply adopting a rule. In the code book it says you have got to regulate your banks in this way", and so they can appeal and they can appeal to the Commission, to the Council of Ministers ultimately.

  Q42  Mr Fallon: But they could lose the appeal. The Council can decide by qualified majority to reject a Member State's appeal.

  Dr Alexander: Because the determination was that it does not impinge on the fiscal requirement for that Member State. I would say as a lawyer looking at this—

  Q43  Mr Fallon: I just want to be clear. The final say is for the Council, not for the aggrieved Member State that thinks it does impinge on its fiscal responsibility. The final decision is for the Council.

  Professor Portes: To impose any specific fiscal burden on any specific Member State. It is a decision about a regulation and, in the end, if that regulation were ultimately to be interpreted as imposing a specific fiscal burden on a specific Member State it would not apply; it could not apply in the rest of the legislation. I am sorry; we are not here talking in that Article to which you refer about the power to impose a fiscal responsibility on a Member State.

  Q44  Mr Fallon: I think you ought to look at it again. Let us come back to Article 21 that Mr Love referred to. You rather dismissed this but the European Banking Authority, once it has had the warning from the Systemic Risk Board, it says, "shall decide on the actions to be taken". There is no Article 23 safeguard for the exercise of the European Banking Authority's powers under Article 21, is there? Have you read Article 21?

  Dr Alexander: Yes; I have got it right here. What provision are you referring to, "The authority shall co-operate closely with the SRB"? Yes. "They shall provide the SRB with regular up-to-date information".

  Q45  Mr Fallon: The second paragraph of number 4, "It shall decide on the actions to be taken".

  Dr Alexander: Article 21, paragraph 2 or 4?

  Q46  Mr Fallon: Four.

  Dr Alexander: "On receipt of a warning or recommendation from the SRB addressed to the Authority, it shall convene a meeting of the Board supervisors and assess the implications of such a warning or recommendation. It shall decide by the relevant decision-making procedure the actions to be taken in accordance with the powers conferred upon it by this Regulation".

  Q47  Mr Fallon: Yes, I have just read that to you—"It shall decide on the actions to be taken". That power is not subject to the safeguards clause in Article 23.

  Dr Alexander: Why do you say that?

  Q48  Mr Fallon: Because 23 only refers to the power under Articles 10 or 11.

  Dr Alexander: Yes, and your concern is that there may be a decision here regarding fiscal responsibilities.

  Q49  Mr Fallon: It is not a question of concern. I am just asking you whether that is legally the position. As drafted at the moment the safeguards clause does not apply to an action taken under Article 21. Is that correct or not?

  Dr Alexander: I think that Article 23 safeguards can be applied to Article 21 too.

  Q50  Mr Fallon: But it does not say so.

  Dr Alexander: No, not expressly. It should be clarified. I would say that safeguards are regarding fundamental powers of Member States in the European Union regarding fiscal powers and you cannot derogate from that unless it is expressly derogated from in the EU law or in the provisions, and so this would not be interpreted to impinge on the fiscal authority of the Member State, but I think you are right for pointing it out. It should be clarified.

  Q51  Mr Fallon: There does not seem to be an appeal power at all for Article 21 decisions.

  Dr Alexander: There is an appeal power regarding all decisions made by the European Supervisory Authority to the Board of Appeal. Any Member State or a financial institution that is affected by a decision by the ESA may appeal to the Board of Appeal and then on to the Council of Ministers. In the explanatory note that is stated.

  Q52  Mr Fallon: We were talking about the Banking Authority, not the Systemic Risk Board.

  Dr Alexander: No, I am talking about the European Supervisory Authority. Every decision they make by qualified majority voting that affects either a Member State authority or a financial institution directly they can appeal to a Board of Appeal and on to the Council of Ministers. The explanatory note says that, but that is a good point.

  Q53  Mr Fallon: It might be clearer if Article 23 specifically covered Article 21.

  Dr Alexander: Yes, I agree.

  Q54  Mr Fallon: And 10 and 11.

  Dr Alexander: It should be clearer, exactly.

  Chairman: The search for clarity continues. Thank you very much.

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Prepared 16 November 2009