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Decision no. 2011-200 QPC of 2 DECEMBER 2011

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Banque Populaire Côte d'Azur [Disciplinary power of the Banking Commission]

On 23 September 2011 the Constitutional Council, in the conditions provided for by Article 61-1 of the Constitution, received an application for a priority preliminary ruling on the issue of constitutionality raised by the Conseil d'État (decision no. 336839 of 23 September 2011) on behalf of Banque Populaire Côte d'Azur raising the conformity of Article L. 6131, Articles L. 6134, L. 6136 and L. 613 21 and paragraph I of Article L. 61323 of the Monetary and Financial Code, as in force prior to Ordinance no. 201076 of 21 January 2010 merging the approval and control authorities for banks and insurers, with the rights and freedoms guaranteed by the Constitution.

THE CONSTITUTIONAL COUNCIL,

Having regard to the Constitution;

Having regard to Ordinance no. 581067 of 7 November 1958 as amended, concerning organic law on the Constitutional Council;

Having regard to the Monetary and Financial Code;

Having regard to Ordinance no. 201076 of 21 January 2010 merging the approval and control authorities for banks and insurers;

Having regard to the Regulation of 4 February 2010 on the procedure applicable before the Constitutional Council with respect to applications for priority preliminary rulings on the issue of constitutionality;

Having regard to the observations of the Prime Minister, registered on 17 October 2011;

Having regard to the observations made on behalf of the applicants by SCP Defrénois et Levis, Attorneys at the Conseil d'État and the Cour de Cassation, registered on 2 November 2011;

Having regard to the observations made on behalf of the Autorité de Contrôle Prudentiel [Prudential Control Authority], representing the rights of the Banking Commission, by SCP Rocheteau et UzanSarano, Attorneys at the Conseil d'État and the Cour de Cassation, registered on 7 November 2011;

Having regard to the documents produced and appended to the case files;

Having heard Marc Levis, Esq. on behalf of the applicant and Mr Xavier Pottier, appointed by the Prime Minister, at the public hearing on 22 November 2011;

Having regard to the post-hearing submissions filed by the Autorité de Contrôle Prudentiel, registered on 28 November 2011;

Having regard to the written statement in response to the post-hearing submissions, filed by the applicant company and registered on 29 November 2011;

Having heard the Rapporteur;

1. Considering that pursuant to the first subparagraph of Article L. 6131 of the Monetary and Financial Code, as in force prior to the aforementioned Ordinance of 21 January 2010: "The Banking Commission shall be responsible for overseeing compliance by credit institutions with the legislative and regulatory provisions applicable to them and for punishing any breaches ascertained";

2. Considering that pursuant to Article L. 6134 of that Code: "The resolutions of the Banking Commission when acting in a judicial capacity shall be valid if an absolute majority of its members is present or represented. Except in case of urgency, its resolutions as an administrative authority shall only be valid if all of its members are present or represented";

3. Considering that pursuant to Article L. 613-6 of that Code: "The Secretary General of the Banking Commission shall carry out documentary controls and investigations in situ on the instructions of the Banking Commission. The Commission shall adopt regular resolutions on the programme for controls in situ.

"The Secretary General of the Banking Commission may summon and hear any person in order to obtain information";

4. Considering that pursuant to Article L. 613-21 of that Code: "I. If a credit institution, a payment institution or one of the persons mentioned in the first subparagraph of Article L. 6132 has breached a legislative or regulatory provision relating to its activities, has not acted on a recommendation or has not heeded a warning or has not complied with the special conditions imposed or the commitments made in relation to an application for approval or an authorisation or an exemption provided for under legislative or regulatory provisions applicable to credit institutions, payment institutions and investment companies, the Banking Commission may, without prejudice to the powers of the Financial Markets Authority, impose one of the following disciplinary penalties:

"1. a warning;

"2. a reprimand;

"3. a temporary or definitive ban on carrying out certain transactions or any other restrictions on the exercise of the activity;

"4. the temporary suspension of one or more of the persons referred to under Article L. 51113, the eighth subparagraph of paragraph II of Article 5226 and Article L. 5322, with or without the appointment of a provisional director;

"5. the resignation ex officio of one or more of such persons, with or without the appointment of a provisional director;

"6. The removal of the credit institution, payment institution or investment company from the list of approved credit institutions, payment institutions or investment companies, with or without the appointment of a liquidator. The removal of a payment institution may be ordered in particular if it represents a threat for the stability of payment systems.

"Without prejudice to the powers of the Financial Markets Authority, the Banking Commission may also impose the disciplinary penalties referred to above unless it has issued an order under Article L. 61316.

"The Banking Commission may also impose a fine either instead of or in addition to these penalties which may not exceed ten times the minimum capital level which the legal person punished is required to hold. The amounts paid shall be recovered by the Treasury and paid into the State budget.

"II. The Banking Commission may also rule either instead of or in addition to these penalties to ban or limit the payment of a dividend to shareholders or of remuneration to partners of the persons referred to in subparagraph I.

"If one of the disciplinary penalties specified above is issued against a provider of investment services, the Banking Commission shall inform the Financial Markets Authority.

"III. The Banking Commission may decide that the penalties adopted in accordance with this Article shall be published in newspapers or publications as ordered by the Commission at the expense of the legal person punished, unless such publication would risk causing serious disruption to the financial markets or disproportionate harm to the parties involved";

5. Considering that pursuant to paragraph I of Article L. 613-23 of that Code: "When the Banking Commission rules pursuant to Article L. 613-21, it has the status of an administrative court";

6. Considering that, according to the applicant company, by not providing for any separation between the power to initiate proceedings and the power to impose penalties within the Banking Commission, these provisions violate the principles of the independence and impartiality of adjudicatory bodies resulting from Article 16 of 1789 Declaration of the Rights of Man and the Citizen;

7. Considering that Article 16 of the 1789 Declaration provides: "A society in which the observance of the law is not assured, nor the separation of powers defined, has no constitution at all"; that the principles of independence and impartiality are indissociable from the exercise of judicial functions;

8. Considering that, by organising the Banking Commission without providing for any separation within it first between the initiation of proceedings for any breaches by credit institutions of the legislative and regulatory provisions which are applicable to them, and secondly the function of ruling on these breaches, which may result in disciplinary penalties, the contested provisions violate the principle of the impartiality of adjudicatory bodies and, accordingly, must be ruled unconstitutional;

9. Considering that pursuant to the second sentence of the second subparagraph of Article 62 of the Constitution, it is for the Constitutional Council to determine the conditions and limits under which the effects which the provision ruled unconstitutional has produced are to be liable to challenge; that although, as a matter of principle, a declaration of unconstitutionality should benefit the person who referred the application for a priority preliminary ruling on the issue of constitutionality and the provision declared unconstitutional cannot be applied in proceedings pending at the time the decision of the Constitutional Council is published, the provisions of Article 62 of the Constitution reserve to the Council the power to overturn the effects which the provision had before this declaration takes effect; that this declaration of unconstitutionality shall take effect on the date of publication of this decision; that it shall apply to all proceedings which have not been definitively resolved at this time,

HELD:

Article 1 . The first subparagraph of Article L. 6131, Articles L. 6134, L. 6136 and L. 61321 and paragraph I of Article L. 61323 of the Monetary and Financial Code, as in force prior to Ordinance no. 201076 of 21 January 2010 merging the approval and control authorities for banks and insurers are unconstitutional.

Article 2 The declaration of unconstitutionality of Article 1 shall take effect on the date of publication of this decision in the conditions set down by its recital 9.

Article 3. – This decision shall be published in the Journal Officiel of the French Republic and notified in the conditions provided for under Article 23-11 of the Ordinance of 7 November 1958 referred to hereinabove.

Deliberated by the Constitutional Council in its session on 1 December 2011, sat on by: Mr JeanLouis DEBRÉ, President, Mr Jacques BARROT, Ms Claire BAZY MALAURIE, Mr Guy CANIVET, Mr Michel CHARASSE, Mr Renaud DENOIX de SAINT MARC, Ms Jacqueline de GUILLENCHMIDT, Mr Hubert HAENEL and Mr Pierre STEINMETZ.

Announced on 2 December 2011.

Journal officiel of 3 December 2011, p 20496 (@ 80)