Green Ltd: A Follow Up View from Vienna

This post was contributed by Dr Fabian Schinerl, a postdoctoral researcher at the University of Vienna and Co-Coordinator of the EBI Young Researchers Group. He is also affiliated with the EBI Associate Researchers Group, the Centre for Comparative Corporate Finance Law (C³FL), and the Junior Network of the AEDBF. This is the sixth contribution to the online symposium on Mr Green Ltd.

The facts of the case and the Court’s reasoning have been set out with admirable clarity by the previous contributors, see in particular here. Rather than revisiting that ground, the following remarks focus on three points: (1) the flexibility that the EAPO Regulation affords national courts, on which I have more to add than to disagree with the previous contributors; (2) the legal status of the Commission’s application form, a point that has so far gone unremarked; and (3) and the reform debate, on which the previous contributions have said much that deserves to be underlined.

Malta, Business Interests, and the Virtues of Flexibility

The second post in this series highlighted that the European internal market is built on a simple but fundamental premise, made explicit in Article 4(3) TEU: Member States are expected to comply with their obligations under EU law. Pacta sunt servanda. That premise is particularly important where EU law relies on mutual recognition, not only under the EAPO Regulation or the Brussels Ibis Regulation, but also in many other areas of EU law, including financial regulation. Think, for instance, of the European passport for credit institutions, investment firms, fund managers and prospectuses. In each of these fields, an authorisation or approval granted in the home Member State produces legal effects in the host Member State by operation of EU law, without any need – or possibility – for substantive review.

Article 56A of the Maltese Gaming Act is a deliberate departure from that premise. By instructing Maltese courts to refuse both the recognition and enforcement of foreign judgments against MGA-licensed gaming operators on public policy grounds, Malta has done in the field of civil justice what barely any Member State would contemplate doing quite so openly in the field of financial services: it has erected, by statute, a barrier to the cross-border legal effects of decisions rendered by courts in other Member States. This is a bold and rather unprecedented move – one that deserves to be called out for what it is. What Malta has effectively done is legislate itself a carve-out from the ordinary consequences of mutual recognition, apparently on the theory that its gaming sector is too economically significant to be inconvenienced by foreign courts.

And yet the Court, in the present case, found a remarkable way to accommodate this problem within the structure of the EAPO Regulation. As Emilia Sandri rightly noted, the Regulation was plainly not designed with the possibility of Member States that are flouting the rules in mind – an omission that, with the benefit of hindsight, perhaps should not surprise us. Even so, it gives national courts sufficient flexibility to assess the debtor’s conduct in its broader context. That flexibility is welcome. It allows courts to weigh the competing interests with the care that hard cases demand.

In the present case, the referring national court should, in my view, attach considerable weight to the legislative environment created by Article 56A. And that environment is telling: it is difficult to believe that the provision was born of the legislator’s abstract affection for public policy. Instead, it is the product of a regulatory environment in which Malta-licensed operators have an obvious and direct financial interest, and which may well reflect the influence of those interests on the legislative process. To say that this alignment – whether or not it reflects deliberate lobbying – supplies the intentional conduct required under Article 7 of the EAPO Regulation (para 59) would admittedly be an argumentative stretch. Yet it is not an absurd one. At the very least, where a debtor benefits from a legal shield that exists for the evident purpose of protecting precisely that category of debtor, that context should be duly reflected in the court’s assessment.

The same flexibility is welcome when determining which acts are relevant for assessing the debtor’s behaviour. The termination of contractual relations – in the present case, the closure of a “payment account” (see Article 4(12) PSD II), not a “bank account” (see Article 4(1) and (2) EAPO Regulation) – is not unlawful per se (see the first contribution), but that is not the decisive point. The question is not whether the debtor’s conduct is independently unlawful. The question is whether it adequately indicates the debtor’s intent or the likelihood that enforcement might be hindered or rendered significantly more challenging.

This flexibility was criticised by Daryna Shykeriava and welcomed by Emilia Sandri, Denise Wiedemann, and Elena A. Ontanu. I side with the latter view. One of the virtues of civil justice, as opposed to purely regulatory intervention, is precisely its capacity to respond to the circumstances of the individual case. That is a value worth preserving, even at some cost to predictability. Perfect certainty is attractive in theory; in practice, it may often be just another word for unfairness administered efficiently.

A Form that is Out of Place

A second point deserves attention. The Court held that Article 7(1) of the EAPO Regulation contains a single condition: there must be an “urgent need” for a protective measure because there is a “real risk” that enforcement of the creditor’s claim will be impeded or made substantially more difficult (see para 45). That reading is methodologically sound, and the previous contributions have rightly welcomed it.

What has received less attention is that the Commission’s own application form – annexed to Implementing Regulation (EU) 2016/1823 and adopted under Article 52(2) of the EAPO Regulation – appears to proceed on a rather different assumption. The form gives typographical prominence to “urgent need” (in bold) and then presents the risk of frustrated enforcement as only one among several possible ways of establishing that need (see its Annex I, Point 10). In doing so, it subtly reverses the causal structure of Article 7(1): what the Regulation presents as the primary condition becomes, in the form, a mere supporting option.

Yet one should not overlook that the application form is part of an implementing act within the meaning of Article 291 TFEU. Such an act may facilitate the uniform application of the Regulation; it may not, however, amend or supplement the legislative act, even as to its non-essential elements (see C-65/13, para 45). The Commission’s form, read carefully, does precisely the former. The Court was therefore right not to follow its structure. Forms, guidelines, and Q&As are not law, even when they behave as though they are, and even when supervisory authorities and practitioners, understandably enough, treat them as though they might be.

A Brief Note on the Reform Debate

Carlos Santalo Goris, in the third contribution to this symposium, made a convincing case for a two-tier standard under the EAPO Regulation. Creditors who already hold an enforceable title should not be subject to the same requirements as creditors seeking protection before their claim has been established. A relaxed – or in some cases waived – risk requirement for judgment creditors would be both principled and practical. This post endorses that argument. The pending Commission evaluation of the EAPO Regulation (see Art 53(1) thereof) would be the natural occasion to address it.

At the same time, Denise Wiedemann rightly observed that such a legislative reform may prove difficult to achieve. As a more modest solution, the author therefore asked whether non-cooperation after the creditor’s claim has been established by an enforceable title should itself constitute relevant conduct on the part of the debtor for the purposes of Article 7(1). I agree.

Recital 14 provides only an illustrative list of conduct that may be taken into account, and expressly refers, among other things, to “the debtor’s conduct in respect of the creditor’s claim”. That language is broad enough to include post-judgment conduct – and so it should. Once a creditor has obtained an enforceable title, the debtor is no longer merely defending itself against an asserted claim; the claim has been established. At that point, persistent non-cooperation may legitimately carry greater weight in the overall assessment under Article 7(1). This is not about punishment in any strict sense – the EAPO is a protective measure, not a sanction – but the Regulation cannot afford to turn a blind eye to deliberate obstruction. A debtor who refuses to satisfy an established claim cannot plausibly insist on being treated as though nothing has been decided. In the fair balance of interests between creditor and debtor, that conduct must matter.