WEEK 6 ADMINISTRATIVE LAW AND MARKET REGULATION | Quizlet

Legal challenges for the enforcement of EU (consumer) law

1. Need for effective consumer protection, particularly in the digital age

2. Important for effective enforcement of consumer law

3. Purely 'national' solutions don't suffice

4. Neither does a purely public or private enforcement mode

Division of labour between EU and MS

- Traditionally —> regulatory standards defined by EU law, while enforcement a duty of MS

- But since late 1980s —> procedural autonomy of MS has been increasingly limited:

1. EU legislation —> general and specific provisions on enforcement (e.g. relevant institutions, remedies and sanctions, procedures)

2. Judicial dialogue between the CJEU and national courts

- Further Europeanisation after the 2007-2008 financial crisis

- In the field of consumer law, MS must ensure:

1. Public enforcement by public authorities through administrative law means

2. Private enforcement by private parties through private law means

- When designing enforcement mechanisms, MS must implement specific provisions of EU secondary law and observe 3 principles of EU law:

1. Effectiveness

2. Proportionality

3. Dissuasiveness

Sources of the three principles of EU law

1. EU secondary law —> e.g. Unfair Commercial Practices Directive

2. Case law of the CJEU in dialogue with national courts —> e.g. Rewe

Relevance of 3 principles for the enforcement of consumer law

1. Content of a single remedy or sanction —> e.g. administrative fine, compensation

2. Combination between different remedies or sanctions (e.g. injunction and administrative fine) within a particular enforcement mode —> public or private

3. Coordination between different enforcement modes —> public and private

Principle of effectiveness

- National law shouldn't make it practically impossible or excessively difficult to exercise rights conferred by EU law —> art. 19(1) TEU

- Remedial response to a violation of EU consumer law must be adequate in terms of:

1. The remedy's ability to perform the function for which it is designed —> deterrence, compensation, punishment

2. The absence of obstacles for the exercise of these functions —> e.g. a delayed remedial response; an excessively high burden of proof

Principle of proportionality

3 step test to assess proportionality of a given measure:

1. Suitability

2. Necessity

3. Proportionality in the strict sense

Principle of dissuasiveness

- Sanction should discourage infringements and neutralise the effects of misbehaviour (deterrent effect)

- Encourage compliance

- NB! The principle also applies to private law remedies —> e.g. national judge should refrain from replacing an unfair term with a fair one

Public enforcement EU consumer law: 3 impacts of EU law

1. Establishment of administrative agencies with the task of consumer protection:

- Administrative law as a primary means

- Criminal law occasionally used at national level (e.g. Belgium, UK)

2. Minimum powers of administrative agencies

3. Requirements as to the appropriate administrative sanctions

General 'minimum powers' of national administrative agencies

- Have access to any relevant documents, data or information

- Carry out necessary on-site inspections

- Purchase goods or services as test purchases

- Adopt interim measures to avoid the risk of serious harm to the interests of consumers

- Order or bring about the cessation or the prohibition of infringements

- Impose penalties (e.g. fines)

Private enforcement EU consumer law: types of action

1. Individual action

- Civil courts

- Alternative dispute resolution (ADR) bodies

2. Collective action

- Civil courts

Impact of action types on EU law

Individual action:

- Fostering ADR

- Special venues for cross-border disputes —> European Consumer Centres Network; European small claims procedure

Collective action:

- Qualified entities (e.g. consumer organisations) may bring a representative action before a civil court of an administrative authority to seek injunctive or redress measures

- National courts have an ex officio (as a result of one's status) obligation to apply consumer law —> e.g. Unfair Contract Terms Directive

Private enforcement: Injunctive measures

Provisional or definitive measures to cease or prohibit a certain practice (injunctions)

Private enforcement: redress measures

- e.g. compensation, repair, replacement, price reduction, contract termination, reimbursement of the price paid

- In the case of collective action, the qualified entity and the trader may reach a redress settlement

Coordination between public and private enforcement?

- Currently underdeveloped —> e.g. civil courts are generally not bound by administrative decisions, with a notable exception of competition law

- But some coordination between administrative agencies / courts and civil courts is emerging —> e.g. the final decision of an administrative agency or court can be used as evidence in civil proceedings

Manifestations of hybrid enforcement

- An administrative agency may refrain from imposing a fine or reduce its amount if an infringer has compensated the aggrieved consumers on its own initiative

- BUT —> consumer protection authorities generally have no explicit powers to order a trader to provide compensation against his will

- An administrative agency may initiate redress settlements and/or bring a collection action before civil courts

Three models of financial supervision: public enforcement

1. Twin-peak model —> prudential supervision and conduct of business supervision in the hands of two separate authorities

2. Integrated model —> one authority in charge of both prudential and conduct of business supervision

3. Sector-based model —> different authorities in charge of different sectors of financial services, combining prudential and conduct of business supervision

Impact of EU law: public enforcement financial law

- Establishment of the European system of financial supervision

- Establishment of national administrative agencies to supervise the financial industry:

1. Administrative law as a primary means

2. Criminal law occasionally used at national level

- Minimum powers of administrative agencies

- Extensive requirements as to the appropriate administrative sanctions

ESMA's mission

- European Securities and Markets Authority (ESMA)

1. Improve functioning of the internal market, including sound, effective and consistent level of regulation and supervision

2. Ensure the integrity, transparency, efficiency and orderly functioning of financial markets

3. Strengthen international supervisory coordination

4. Prevent regulatory arbitrage and promote equal conditions of competition

5. Ensure the taking of investment and other risks are appropriately regulated and supervised

6. Enhancing customer protection

ESMA's powers related to consumer protection e.g.

1. Develop 'draft regulatory technical standards' to be submitted to the European Commission for endorsement

2. Adopt guidelines and recommendations with a view to promoting the safety and soundness of markets and convergence of regulatory practice

3. Issue warnings in the event that a financial activity poses a serious threat to the realisation of its objectives

4. Temporarily prohibit or restrict certain financial activities

4 conditions for the exercise of ESMA's temporary product intervention powers

1. Significant investor protection concern / threat to the orderly functioning and integrity of financial market or financial stability

2. The risk is not sufficiently addressed by existing regulatory requirements under EU law

3. Measure is proportionate

4. No adequate national measures have been taken (yet)

Impact of EU law: Private enforcement financial law

Individual action:

- Fostering ADR

- Special venues for cross-border disputes e.g. FIN-NET

Collective action:

- Qualified entities (e.g. consumer organisations) may bring a representative action before a civil court or an administrative authority to seek injunctive or redress measures

- European private law remedies are provided to a varying degree

Payment Services Directive (PSD) 2

1. Authorisation and operating conditions for PSPs / public supervision of PSPs

2. Ensuring the balance between the interests of PSP and consumer —> transparency / parties' rights and obligations in relation to payment services

3. Individual consumer redress:

- Detailed liability rules allocating losses from fraud, forgery and error between PSPs and users / PSPs

- Rules improving the procedural position of consumers (e.g. with respect to the burden of proof)

Markets in Financial Instruments Directive (MiFID) 2

1. Authorisation and operating conditions for ISPs / public supervision of ISPs —> a high level of harmonisation of supervisory powers and administrative sanctions

2. No individual investor rights

3. No private law remedies under EU law for aggrieved investors —> principle of civil liability ultimately not included

4. Harmonising effects on national contract and tort laws vary across the EU

Coordination between public and private enforcement in financial law

- Underdeveloped

- BUT some coordination between administrative agencies / courts and civil courts is emerging, e.g.

-- The final decision of an administrative agency or court can be used as evidence in civil proceedings

-- An administrative authority can transmit the documents related to its administrative investigation to a civil court at the court's request

Manifestations of hybrid enforcement EU financial law

- Financial supervisory authorities generally have powers to facilitate compensation e.g.

-- A 'minimum power' to receive from the trader, on the trader's initiative, remedial commitments for the benefit of consumers

- Some financial supervisory authorities have explicit powers to order a financial institution to provide compensation (even against its will)

Consumer redress powers of the UK FCA

- FCA: Financial Conduct Authority

- In cases of a widespread or regular failure to comply with rules where consumers have suffered damage, the FCA may require a financial institution to establish and operate a consumer redress scheme