C-233/94

GERMANY v PARLIAMENT AND COUNCIL

OPINION OF ADVOCATE GENERAL LÉGER delivered on 10 December 1996 *

1. The Federal Republic of Germany has scheme exceeds the level or scope of brought an action for the annulment of cover provided in another Member State Directive 94/19/EC of the European Parlia­ must establish a deposit-guarantee ment and of the Council of 30 May 1994 on scheme which branches of credit institu­ 1 deposit-guarantee schemes (hereinafter 'the tions authorized in such other State may Directive' or 'the contested Directive'), on join in order to supplement their guaran­ the grounds, first, that Article 57(2) of the tee; and EC Treaty, on the basis of which it was adopted , is inadequate as a legal basis and , second, that the Directive does not state the reasons on which it is based, as required by — the second sentence of the first subpara­ Article 190 of the EC Treaty. graph of Article 3(1), which lays an obli­ gation on credit institutions to join a guarantee scheme.

2. In the alternative, the applicant asks the Court to annul three provisions of the Directive: 3. The Council and the Parliament, sup­ ported by the Commission, contend that the Court should reject the action.

— the second subparagraph of Article 4(1), which prohibits the 'export' of guaran­ tees by laying down that the cover pro­ I — Adoption of the Directive vided for depositors at branches set up by credit institutions in other Member States may not exceed the cover offered by the corresponding guarantee scheme 4. In the wider context of building the Euro­ of the host Member State; pean banking system and with a view to completing the structure already achieved, the Commission adopted Recommendation 2 87/63/EEC, which was intended to encour­ age Member States to set up deposit- — Article 4(2), according to which a Mem­ guarantee schemes. ber State whose deposit-guarantee

7. Directive 94/19 is one of the first to be adopted under the Article 189b procedure.

10. In substance, it argues that its own deposit-guarantee scheme allows the objec­ 3 — OJ 1992 C 163, p. 6. tives pursued by the Directive to be 4 — OJ 1993 C 115, p. 91. 5 — OJ 1993 C 178, p. 14. achieved, without having recourse to such 6 — OJ 1994 C 91, p. 85. constraints.

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II — General structure of Directive 94/19 which, in the opinion of the competent authorities, fulfils the following conditions:

11. The main purpose of the Directive is to — the system must be in existence and have introduce bank deposit-guarantee schemes in been officially recognized when this all Member States and to harmonize the rel­ Directive is adopted, evant guarantees as from a minimum amount.

quent changes in the information supplied. guarantee scheme within the territory of the The Commission shall inform the Banking host Member State. Advisory Committee thereof.

Before that date, the Commission shall draw 4. Where national law permits, and with the up a report on the basis of the experience express consent of the competent authorities acquired in applying the second subpara­ which issued its authorization, a credit insti­ graph and shall consider the need to con­ tution excluded from a deposit-guarantee tinue those arrangements. If appropriate, the scheme may continue to take deposits if, Commission shall submit a proposal for a before its exclusion, it has made alternative Directive to the European Parliament and guarantee arrangements which ensure that the Council, with a view to the extension of depositors will enjoy a level and scope of their validity. protection at least equivalent to that offered 7 by the officially recognized scheme.'

2. Where the level and/or scope, including the percentage, of cover offered by the host 13. Under Article 4(1) and (2): Member State guarantee scheme exceeds the level and/or scope of cover provided in the Member State in which a credit institution is authorized, the host Member State shall ensure that there is an officially recognized deposit-guarantee scheme within its territory '1 . Deposit-guarantee schemes introduced which a branch may join voluntarily in order and officially recognized in a Member State to supplement the guarantee which its in accordance with Article 3(1) shall cover depositors already enjoy by virtue of its the depositors at branches set up by credit membership of its home Member State institutions in other Member States. scheme.

17. The German deposit-guarantee system, as it emerges from the German Govern­ ment's pleadings and from the replies given Until 31 December 1999 Member States in to the Court at the hearing, displays the fol­ which, when this Directive is adopted, lowing characteristics. deposits are not covered up to ECU 20 000 may retain the maximum amount laid down in their guarantee schemes, provided that this amount is not less than ECU 15 000.

18. Created in 1976, the deposit-guarantee fund of the Federal Association of German Banks is a voluntary insurance body, which is not under State control and which is orga­ 3. This Article shall not preclude the reten­ nized by the Federal Association itself. There tion or adoption of provisions which offer a are also other guarantee schemes: that of the higher or more comprehensive cover for cooperative banks or that of the savings 9 deposit.' banks, for example.

15. Under Article 9, credit institutions are 19. Almost all credit institutions set up in obliged to inform depositors about the rel­ Germany belong to a guarantee scheme. In evant deposit-guarantee scheme. October 1993, only five institutions which had their head office in Germany and which were authorized to hold deposits, including 9 — My emphasis. those of small savers, were not members.

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OPINION OF MR LÉGER — CASE C-233/94

20. The protection provided by the German IV — The principal claim guarantee scheme is particularly effective, since it covers almost all deposits, making the level of protection in Germany the high­ est in the Community.

'[In order to make it easier for persons to take up and pursue activities as self- 23. The deposit-guarantee fund of the Fed­ employed persons], the Council shall, before eral Association of German Banks is autho­ the end of the transitional period, issue rized by its member companies to obtain all directives for the coordination of the provi­ the necessary information from the Bundes- sions laid down by law, regulation or admin­ aufsichtsamt für das Kreditwesen (Federal istrative action in Member States concerning Supervisory Agency for Credit Institutions) the taking-up and pursuit of activities as self- and the Deutsche Bundesbank (Federal Bank employed persons. The Council, acting of Germany), so that it is in a position to unanimously on a proposal from the Com­ check the details provided by the banks. mission and after consulting the European Moreover, it has the right to read the com­ Parliament, shall decide on directives the pany documents of the member banks and to implementation of which involves in at least check them on the spot. one Member State amendment of the existing principles laid down by law governing the professions with respect to training and con­ ditions of access for natural persons. In other cases the Council shall act in accordance with 10 the procedure referred to in Article 189b.' 24. The credit institutions must send to the national supervisory authorities the verifica­ tion reports drawn up by the guarantee scheme. 10 — My emphasis.

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26. Article 57(2) is one of the provisions, 30. Once again, therefore, in order to deter­ referred to in Article 7a, which serve as the mine the procedure for adopting a measure legal basis for measures adopted by the of Community legislation, it is necessary to Community with the aim of progressively define the respective fields of application of establishing the internal market. two provisions, each of which might serve as its legal basis.

32. To the extent that harmonization aims, 28. According to the applicant, the main by definition, to bring existing laws into objective, being consumer protection, could closer alignment, the nature of such a step be achieved only by relying on Article 235 of should be examined in order to determine the EC Treaty, given that Articles 100a and the relevant legal basis. 129a do not apply, so that Articles 57 and 235 should apply simultaneously. It con­ cludes that, in the absence of the unanimity required by Article 235 of the Treaty, the 1 Directive was not lawfully adopted. 1 33. The purpose of harmonizing national rules is both to impose similar constraints on all Member States, where these are justified, and to establish common rules or objectives. Every measure of harmonization therefore 29. The Council, the Parliament and the combines its main objective of bringing laws Commission consider, however, that the into closer alignment with the purpose of main purpose of the Directive is to complete those laws themselves. There is therefore a the single banking market, to strengthen the natural tendency for such measures to be stability of the banking system and to estab­ founded on a joint legal basis: that which lish equal competition, whereas consumer authorizes harmonization and that which protection is only an incidental effect, inher­ relates to the purpose of the legislation. At ent in that purpose.

12 — See, for example, Case 45/86 Commission v Council [1987] ECR 1493, paragraph 11, and Case C-300/89 Commission v 11 — Pages 6 to 16 of the French translation of the application. Council [1991] ECR I-2867, paragraph 10.

'Whereas, in accordance with the objectives of the Treaty, the harmonious development of the activities of credit institutions 34. The Court has ruled on how to reconcile throughout the Community should be pro­ two legal bases which are justified when a moted through the elimination of all restric­ measure pursues a dual objective. It has dis­ tions on the right of establishment and the tinguished cases in which the two aims were 13 freedom to provide services, while increasing indissociable, making it justifiable 'to the stability of the banking system and pro­ adopt the relevant measures on the basis of 16 14 tection for savers'. the two relevant provisions', from those where one of those aims must be considered incidental to the other, the latter thereby constituting the only legal basis for the 15 measure in question. It is in the light of those principles that the issue in this case should be examined. 37. It is, however, difficult, in the light of the preamble alone, to identify which of the two prevails. The presence of both in numerous recitals (see in particular the first, second, fifth, eighth, thirteenth, fourteenth, twenty- third and twenty-fifth recitals on the need for harmonization and the third, ninth, elev­ enth and sixteenth recitals on consumer pro­ 35. As regards the aim pursued, it seems that tection) suggests that a joint legal basis is freedom of establishment and freedom to necessary. provide services in the banking sector, on the one hand, and the stability of the banking system and protection for savers, on the other, clearly constitute the two objectives of the Directive. That point is not in issue between the parties, which none the less dif­ 38. The difficulty in establishing a hierarchy fer in their determination of which should between the two objectives is equally evident take precedence over the other and, as a on reading the content of the Directive. This result, serve to indicate the chosen legal can be explained by the fact that the very basis. purpose of a large number of the principles laid down by rules aimed at harmonizing bank deposit-guarantee schemes is to protect 13 — See Case C-300/89 Commission v Council, cited above, depositors. At first glance, it might be con- paragraph 13. 14 — Ibid., paragraph 17. 15 — Sec Case C-70/88 Parliament v Council [1991] ECR I-4529, paragraph 17, and Case C-187/93 Parliament v Council [1994] ECR I-2857, paragraph 25. 16 — First recital in the preamble.

42. One such example is with the level of guarantee chosen in Article 7(1) of the Directive, justified, according to the 16th 39. However, whilst the requirement as recital, by the fact that it would not be regards protection may chronologically pre­ appropriate 'to impose throughout the Com­ cede harmonization, I do not consider that munity a level of protection which might in harmonization should therefore be seen as certain cases have the effect of encouraging secondary; on the contrary, it should be con­ the unsound management of credit institu­ sidered paramount as far as Directive 94/19 tions'. Even if Member States are still free to is concerned. go beyond that minimum level, the text clearly expresses the legislature's concern to achieve, at the cost of limiting protection for depositors, a balance intended to guarantee the stability of the system as a whole, the very existence of which could otherwise be threatened by too great a desire to defend its 40. In the first place, freedom of establish­ customers. ment and freedom to provide services, which are prerequisites for a single banking market, presuppose that the taking-up and pursuit of activities as self-employed persons have been made easier by coordination of the provi­ sions laid down by law, regulation or admin­ 43. The 'export prohibition' laid down in istrative action in Member States, with a the second subparagraph of Article 4(1) is view to eliminating any differences which another illustration of the importance in the constitute unjustified obstacles. This need for Directive of the objective of ensuring the coordination is asserted by Article 57(2) of harmonization and stability of the banking

47. Article 3 of the Directive, for example, 44. The same is true of the rule set out in requires the introduction of at least one Article 4(2) of the Directive, according to guarantee scheme within the territory of which it is for the host Member State, and each Member State, which is the very least not for the home Member State, to ensure that could be done if the intention is to har­ that there is a guarantee scheme within its monize a minimum level of deposit guaran­ territory which a branch may join voluntar­ tees as part of the completion of the single ily in order to supplement the guarantee banking market. which its depositors already enjoy in the home Member State. Whilst such supple­ mentary cover does indeed improve con­ sumer protection, the fact that the host Member State, rather than the home Member State, is chosen for its implementation is unrelated to such a purpose. 48. The same is true of Article 7, laying down a minimum rate of cover which, as I have already pointed out, was adopted at an 18 intentionally intermediate level.

45. Furthermore, Article 8 places a restric­ tion on the application of the bank guarantee by specifying that the level of the guarantee applies, not to each deposit, but to aggregate 49. As a further example, the obligation on deposits with the same credit institution, credit institutions to inform, imposed by whatever the number of deposits. Article 9, amounts to a minimum general obligation which the applicant has not shown not to have already formed part of the statutory rules put in place by some of the States having had a guarantee scheme

53. I agree with the applicant and the Coun­ cil that Article 129a(1)(a) of the Treaty is not appropriate. That provision is aimed at mea­ sures taken by the Community, pursuant to 51. Moreover, it is natural that the objective Article 100a, with a view to contributing to of harmonization, achieved in some cases, as the attainment of a high level of consumer we have seen, by a limitation of the guaran­ protection in the context of the completion tee offered to certain depositors, should be of the internal market. However, whilst paralleled by an increase in protection for Article 100a and Article 57(2) of the Treaty other depositors, such as where the Directive have in common the fact that they enact provides for the obligatory creation of a sys­ rules intended to complete the internal mar­ tem of protection where none existed, or ket, the first referring to Article 7a of the establishes the minimum amount of the guar­ Treaty, in which that concept is defined, and antee. That increase in the level of protection express reference being made to the second in some Member States could be seen as a in Article 7a, Article 100a only applies 'save principle requiring a distinct legal basis if, in where otherwise provided in this Treaty'. the context of the Directive as a whole and Consequently Article 57(2), whose field of in the wider framework of the Community, application, limited to the coordination of it did not, on the contrary, appear as part of rules concerning the taking-up and pursuit of activities as self-employed persons, is more restricted, makes it impossible for 19 — According to the applicant, a similar obligation to inform Article 100a and, as a result, Article appears to exist in Germany: see the second paragraph on p. 53 of the French translation of the application. 129a(1)(a), to apply.

56. It adds that Article 129a(1)(b) can only 59. Since it is not drafted in such a way as to support and supplement the policy pursued imply the restriction imputed to it in the by the Member States. However, the condi­ German Government's reasoning, subpara­ tions for such action are lacking in this graph (b) should, on the contrary, be under­ case because two Member States have not stood as describing specific action which previously introduced a deposit-guarantee supports and supplements the policy pur­ scheme. 22 sued by the Member States as a whole in the

23 — Each of the provisions mentioned above includes the fol- 20 — My emphasis. lowing sentence: '...the Council ... shall adopt incentive 21 — Pages 12 to 14 of the French translation of the application. measures, excluding any harmonization of the laws and 22 — Pages 11 and 12 of the French translation of the reply. regulations of the Member States.'

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61. Another reason supporting the applica­ tion of Article 129a(l)(b) is that, by stating that 'The Community shall contribute to the attainment of a high level of consumer pro­ tection ...', Article 129a asserts the supple­ mentary nature of the power devolved upon the Community by the Treaty on the subject 63. As a result, it would be difficult to show of consumer protection. Reliance on Article that the provisions of the Directive, although 129a(l)(a) is not justified for the reasons they fall within one of those areas, are of 24 already elaborated. On the other hand, the such a nature as to justify having recourse to application of Article 129a(l)(b) is confirmed a stricter adoption procedure. by the fact that, according to the Commu­ nity legislature, the objective of consumer protection pursued in the field of bank deposit-guarantees has not yet been attained. The fifth recital of the Directive states that: 'the action the Member States have taken in response to Commission recommendation 87/63/EEC of 22 December 1986 concerning the introduction of deposit-guarantee schemes in the Community has not fully 25 achieved the desired result'. 64. It follows from the above that Article 129a(l)(b) allows the adoption of binding provisions and that, should a second legal 24 — Sec point 53 of this Opinion. basis be necessary for the contested Directive 25 — Recommendation 87/63, cited above. to be lawful, it would have to be that article.

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65. Since the Article 189b procedure, used to 68. The plea alleging lack of legal basis must adopt the Directive, is the same as that pre­ therefore be rejected. scribed by Article 129a, the omission of any reference to the latter amounts to a purely formal defect which cannot render the con­ 26 tested measure null and void. It is true that consultation of the Economic and Social Committee is obligatory under Article 129a, B — The requirement to state reasons whereas it is not required by Article 57(2). There is, however, no dispute that such con­ 27 sultation took place, so there is no actual irregularity which can justify the annulment of Directive 94/19.

29 — Under the second paragraph of Article 3b, in areas which do not fall within its exclusive competence, the Community 26 — Sec Case 165/87 Commission v Council [1988] ECR 5545, is to take action, in accordance with the principle of subsid- paragraph 19. iarity, only if and in so far as the objectives of the proposed 27 — Opinion of the Economic and Social Committee on the action cannot be sufficiently achieved by the Member States Proposal for a Council Directive on deposit-guarantee and can therefore, by reason of the scale or effects of the schemes of 22 October 1992 (OJ 1992 C 332, p. 13). proposed action, be better achieved by the Community. 28 — Page 13 of the French translation of the reply. 30 — Pages 16 to 19 of the French translation of the application.

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73. It notes, in the fifth recital, that the action taken by the Member States in 76. The Commission argues that the Com­ response to the 1986 recommendation 33 'has munity action concerns an area in which any concurrent competence of the Member States is excluded, so that any application of the 34 principle of subsidiarity is ruled out. 31 — Sec, in particular, Case 158/80 Rewe [1981] ECR 1805 and Case 45/86 Commission v Council, cited above, paragraph 5. 32 — Sec Case 45/86 Commission v Counal, cited above, para- graph 9. 34 — Page 4 of the French translation of the statement in inter- 33 — Recommendation 87/63, cited above. vention.

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77. By asserting that the principle of subsid­ 80. It is true that the completion of the iarity has been respected, the Council and internal market is not always a matter for the the Parliament seem to consider that compe­ exclusive competence of the Community. 35 tence is shared. The relevant provisions lay down various procedures. In Article 100a(4), for example, the legislature envisages the possibility, under certain conditions, for Member States 'to apply national provisions' after the adop­ tion of a harmonization measure.

78. The applicant, too, denies that the Com­ munity has exclusive competence in the 36 completion of the internal market.

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83. It is, indeed, logical for harmonization of been completed, the Member States can once laws to be achieved through rules common again intervene provided that they do not to the different Member States. As the Court undermine the harmonized rules; their scope 39 stated in a recent judgment, such an objec­ for action in that regard therefore depends tive necessarily implies 'Community-wide naturally on the degree of harmonization. action'.

86. It follows from the above that, in the area to which the Directive relates, the Com­ 84. It should be recalled, moreover, that in munity is acting not under subsidiary pow­ the present case, the exclusive competence of ers but in clear accordance with its exclusive the Community, as provided for in Article powers, so that the Community authorities 57(2), is principally concerned with the coor- were not required to demonstrate that the dination of laws on the taking-up and pur­ conditions laid down in the second para­ suit of activities as self-employed persons. It graph of Article 3 b were satisfied. does not cover the entire competence of the Member States as regards those laws them­ selves.

89. That being the case, considering the importance of the principle of subsidiarity in allocating powers between the Member States and the Community and taking into account the need for the Court to exercise its control over the conditions in which the A — Prohibition on exceeding the cover Community institutions have applied the offered by the guarantee scheme of the host Treaty, it does not seem excessive to expect Member State — the 'export' prohibition those institutions, in the future, systemati­ cally to state reasons for their decisions in view of the principle of subsidiarity.

92. Article 4(1) of the Directive provides that the deposit-guarantee schemes are to 90. All measures adopted by the Commu­ cover the depositors at branches set up by nity should thus indicate, either implicitly or credit institutions in other Member States explicitly, but in any event clearly, on what and that, until 31 December 1999, neither the basis the authority concerned is acting — level nor the scope of cover provided may even if only to state, where this is the case, exceed the maximum level or scope of cover that the principle of subsidiarity does not offered by the corresponding guarantee come into play. scheme within the territory of the host Member State.

V — The alternative claim

93. The German Government considers that the reasons which led the Council and the 91. In the event that the Federal Republic of Parliament to make such a prohibition are Germany is unsuccessful in its main claim not clearly expressed and that as a result this for the annulment of the Directive in its provision infringes Article 190 of the 42 Treaty.

100. Moreover, the applicant criticizes the Directive for making freedom of establish- ment more difficult, or even impossible, con­ trary to the aim, pursued by Article 57(2), of facilitating the taking-up and excercise of 97. Similarly, it is clear from the tenor of the 44 activities as self-employed persons. Directive that, by describing the 'export' prohibition as intended to avoid market dis­ turbances caused by rates of cover exceeding those offered in the host Member State, the legislature meant that it wished to avoid a situation in which depositors with banks in that State, alerted to the new potential 101. In implementing the Directive, the Fed­ offered by a credit institution from another eral Republic of Germany, whose deposit-

43 — See point 71 of this Opinion. 44 — Pages 23 to 26 of the French translation of the application.

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103. On the contrary, it is justified by the legitimate concern of avoiding over-hasty harmonization capable of weakening national schemes which, because recently 106. In the light of those considerations — established, have not had the time to achieve and even though they are far from exhaust­ any significant reduction in disparities ing the contribution made by the contested between guarantees. The Federal Republic of text — the restriction in Article 4 cannot Germany is certainly not the only Member lead to the conclusion that the Directive State to have to submit to an 'export' prohi­ restricts the taking-up and pursuit of activi­ bition. For the moment, however, more ties as self-employed persons. schemes will benefit from the rule than will not — a consideration which, in my opinion, vindicates the contested measure. 45 — Ibid., page 25, second paragraph.

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107. The German Government further 110. In addition, the Federal Republic of claims that the 'export' prohibition is incom- Germany maintains that the 'export' prohi­ patible with the objective of a high level of bition is contrary to the principle of propor- consumer protection laid down by Article tionality on the ground that, whilst it may be 46 3(s) and Article 129a of the Treaty. suitable for preventing distortions in compe­ 49 tition, it is neither essential nor reasonable.

ment in the general level of deposit- 48 guarantee schemes.

49 — Pages 28 to 37 of the French translation of the application. 50 — See, in particular, Case 265/87 Schräder [1989] ECR 2237, paragraph 21, and, more recently, Case C-84/94 United 46 — Ibid., pages 26 to 28. Kingdom v Council, cited above, paragraph 57. 47 — See point 39 et seq., of this Opinion. 51 — See, in particular, page 31 et seq. of the French translation 48 — See points 35 et seq. and 104 of this Opinion. of the application.

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113. By adopting the Directive against the appropriateness or otherwise of measures opinion of the German Government and by adopted — unless the applicant can prove a choosing a preventive prohibition, the manifest error of assessment or misuse of Council as well as the Parliament considered power, or can show that the legislature 52 that the effectiveness of that provision could clearly exceeded its discretion. justify the constraints created by the con­ tested measure.

117. Similarly, when the Community legisla­ ture is obliged, in connection with the adop­ 114. However, by its argument that the risks tion of rules, to assess their future effects, could be as effectively overcome by a protec­ which cannot be accurately foreseen, its tive system triggered on a case-by-case basis assessment is open to criticism only if it by a threat of market disturbances, the appli­ appears manifestly incorrect in the light of cant seeks to show that the objective pursued the information available to it at the time of could have been achieved without resorting 53 the adoption of the rules in question. to constraints such as that of the 'export' prohibition.

119. The German Government states the directly transposed into the field to which disadvantages of the solution put forward in the Directive applies. Their purpose is either the Directive, but does not show that a pro­ different (Article 226 of the Treaty relates to tective clause could provide a higher or even the serious deterioration in the economic a comparable guarantee. It merely claims situation of a given area and Council Regu­ that, assuming there is a real risk of deposits lation (EEC) No 3916/90 of 21 December being transferred from the banks of one 1990 concerns measures to be taken in the Member State to branches of foreign banks event of a crisis in the market in the carriage 54 offering better protection, there will be of goods by road ), or goes beyond the enough time to take protective measures to mere risk of movements of capital within the prevent any withdrawal which might territory of the same Member State (Article threaten the existence of local banks. No evi­ 73 of the Treaty and Council Directive dence whatsoever has been given for that 88/361/EEC of 24 June 1988 for the imple­ 55 theory. mentation of Article 67 of Treaty ).

120. The fact that certain Treaty articles 122. Nor do those provisions involve any allow the Member States to use protective commitment on the part of the Community measures in other situations does not imply authorities requiring them, in the future, to that there is a 'protective measures theory' in use protective measures every time a market Community law which systematically is threatened with disturbances. They only favours the use of this kind of provision apply to the cases set out and can in no way where there is a risk of disturbances in cer­ bind the Community legislature. tain markets. In the exercise of their power of assessment, the Community authorites can therefore decide, having taken account of the characteristics of the market in question and the uncertain nature of the situation to be avoided, that a more effective and methodical system is required.

'Where the level and/or scope, including the percentage, of cover offered by the host Member State guarantee scheme exceeds the level and/or scope of cover provided in the 127. However, it has not been shown that, in Member State in which a credit institution is the various texts harmonizing banking law, authorized, the host Member State shall the Community authorities have adopted ensure that there is an officially recognized that principle with the intention of applying deposit-guarantee scheme within its territory it systematically to measures which fall which a branch may join voluntarily in order within this sector in the future. to supplement the guarantee which its depositors already enjoy by virtue of its membership of its home Member State scheme.

128. Were they to have done so, moreover, they would be bound only because of the need to respect the legitimate expectations of citizens entitled to expect the application of the principle in question, which is not the The scheme to be joined by the branch shall case here. cover the category of institution to which it belongs or most closely corresponds in the host Member State.'

129. The Community authorities are there­ fore entitled to depart from the home Mem­ ber State principle. 125. The German Government maintains that the obligation this imposes on a Mem­ ber State to accommodate branches wishing 56 — Pages 37 to 49 of the French translation of the application.

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134. It should be observed that other Mem­ ber States have already exceeded the mini­ mum amount laid down by the Directive, thereby reducing accordingly the help sought from the most effective guarantee schemes. Yet more will wish to increase the level of guarantee in the future, in accord­ ance with the objective of harmonization 131. In this way it emphasizes that credit pursued by the Directive. institutions do remain subject to the home Member State principle so that the contested departure from the rule seems to be limited to the specific situation where the host Member State offers a branch a higher guar­ antee than that offered by the home Member State. 135. Secondly, if a branch considers that the difference between the guarantees is not suf­ ficient to justify membership of a supple­ mentary scheme, or if, whatever the level, the guarantee is not a decisive factor in gaining entry to the market of the host Member State, it is entitled not to join the supplemen­ tary cover scheme.

132. Moreover, the applicant questions the need for the sort of supplementary cover set out in the Directive, which, although likely to achieve its objective, infringes the rights of the host Member State's deposit-guarantee 136. Furthermore, as the Parliament schemes and could have been replaced by observes, voluntary membership of the less restrictive measures, in accordance with supplementary guarantee scheme has to be the principle of proportionality. subject to the conditions laid down by the

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host Member State's scheme, which form an 138. If the fees paid by the credit institution essential requirement in exchange for the are set on the basis of objective criteria benefits which it must guarantee should dif­ which take into account the risk presented 57 ficulties arise. by the branch — which should logically relate to the difference between the guaran­ tees or the absence of any guarantee offered by the home Member State scheme — the obligation on certain host Member States to provide supplementary cover does not seem to impose an excessive burden on their guar­ 137. This is clear from: antee scheme.

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'to cooperate in good faith' and to facilitate 142. Paragraph (a) of Annex II to Directive application of a Community-law provision, a 94/19 provides that 'the host Member State Member State must 'assist every other Mem­ scheme ... will be able to require the provi­ ber State which is under an obligation under sion of relevant information and have the 59 Community law'. right to verify such information with the home Member State's competent authorities'.

143. It is therefore recognized that the rel­ evant authorities of the host Member State 141. Article 7(1) of Directive 77/780, as have the right of access to full information amended by the second Council Directive on the credit institution of another Member 60 89/646/EEC of 15 December 1989, pro­ State, including its parent company. vides:

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provide the host Member State's scheme 150. It claims that the chosen solution of with the information necessary to carry out compelling membership of the guarantee its task as regards foreign branches belonging scheme is contrary to the national German to its scheme. scheme, which amounts to 'well-established national arrangements' in the meaning given to that phrase by the Edinburgh European 62 Council, and not to 'alternative ways' pro­ vided to the Member States, within the meaning of the same text. The introduction 147. It follows that the constraints referred of a guarantee scheme in all the Member to by the German Government do not seem States, or the harmonization of those disproportionate in view of the objective schemes which already exist, would have pursued and that, consequently, it cannot been enough and the applicant considers that reasonably be claimed that the principle of it is unnecessary to compel membership. proportionality has been infringed.

156. As a result, the compulsory member­ ship introduced by the Directive and accepted by the other Member States does 153. However, according to the text, respect not appear to amount to a real constraint for for national practices is guaranteed '[w]hile Germany capable of disrupting the opera­ respecting Community law', and the use of tions of credit institutions set up in its terri­ 'alternative ways' depends on the appropri­ tory. ateness of the cases involved. By toning down its words the Council clearly conveys its concern not to subject Community legis­ lation systematically to respect for national traditions.

157. Conversely, the option left for the Member States to choose the principle of a guarantee scheme with voluntary member­ ship would create the risk, itself difficult to quantify, that a significant proportion of 154. In this case, the adoption of the Direc­ deposits would elude any guarantee. In the tive and the absence of any objection by absence of adequate harmonization, the Member States other than the Federal national markets would not offer all the Republic of Germany, shows that the ques­ security that banks' customers are entitled to tion whether well-established national expect. arrangements are respected remains only with regard to the guarantee scheme of that one State.

158. An obligation to inform customers whether a credit institution is or is not a member of a guarantee scheme does not seem to me to provide future depositors with 155. The German Government states that, in decisive guidance in their choice of bank. October 1993, of the 300 institutions autho­ rized to accept deposits and having their head office in Germany, only five belonged to no guarantee scheme, and that the ratio of 63 — Page 36 of the French translation of the reply.

160. Finally, I should add that the system introduced by Article 3(1) of the Directive is not one of absolute constraint. It leaves the 162. In conclusion, I consider the action Member States free to introduce and recog­ instituted by the Federal Republic of Ger­ nize several deposit-guarantee schemes many to be without foundation. On the con­ within their territory, thereby allowing the trary, it seems to me that the contested credit institutions to choose the one which Directive pursues the harmonization of will suit them best. Furthermore, the Direc­ banking law by seeking a high degree of tive gives the Member States the possibility, alignment between of the laws of the Mem­ under certain conditions, of exempting a ber States, whilst allowing a respite for those credit institution from compulsory member­ States which do not yet have a deposit- ship where that credit institution belongs to guarantee scheme, or whose guarantee a system which protects the credit institution scheme does not yet offer an adequate level itself and in particular ensures its liquidity of protection, all in compliance with Com­ and solvency, thus guaranteeing protection munity rules.

Conclusions

163. Consequently , I recommend that the Court should :

— reject the application ;

— order the applicant to pay the costs .

64 — Second paragraph of Article 3(1) of the Directive.