Italian central bank prevails before European Court of Justice in State aid litigation

Client(s) Banca d'Italia

Jones Day obtained a decisive victory for Banca d’Italia, the Italian central bank, in its successful defense against the European Commission's appeal before the European Court of Justice (“ECJ”) of the General Court’s (“GC”) judgment in favor of Banca Tercas.

The ECJ upheld the GC’s annulment of the European Commission (“the Commission”) decision prohibiting, for breach of State aid rules, rescue measures provided by Fondo Interbancario (“Fondo”) in favor of Banca Tercas. Fondo is an Italian Mandatory Deposit Guarantee Scheme, or "DGS." The GC fully endorsed the arguments put forward by our client, the Italian central bank, that the Commission had misunderstood the bank’s powers of banking and financial supervision and its role in Fondo’s decision to intervene in favor of Banca Tercas. The ECJ confirmed these arguments on appeal, holding that the Commission had failed to demonstrate that the rescue measures taken by Fondo in favor of Banca Tercas could be attributed to the Italian central bank and thereby to the Italian State. The ECJ further confirmed that the Commission had misunderstood the supervisory mission played by the Italian central bank.

The challenged Commission decision sought to establish a critically important (and undesirable) precedent for the Italian central bank by preventing it from exercising its institutional supervisory role in the field of financial stability. Following the ECJ’s final annulment of the Commission’s decision, rescue measures to assist banks in distress through deposit guarantee schemes can once again be deployed across the EU, as these are no longer treated as illegal State aid.

Commission v. Italy, Fondo interbancario di tutela dei depositi, Banca d'Italia, and Banca Popolare di Bari SCpA, Case No. C-425/19 P (European Court of Justice)