10_Public and Private Enforcement in the Fields of European Consumer and Financial Services Law

Enforcement of EU Market Regulation: Legal Challenges

Importance of effective enforcement

• What we discussed so far may fail without enforcement

Purely ‘national’ solutions do not suffice

• EU market integration and we need also enforcement harmonisation

Neither does a purely public or private enforcement mode

Division of labour between EU and MS

Traditionally, regulatory standards are defined by EU law, while enforcement is the duty of MS

Buts since the late 1980s, the procedural autonomy of the MS has been increasingly limited:

• EU legislation – general and specific provisions on enforcement (e.g. relevant institutions, remedies and sanctions, procedures)

• Many rules were not properly enforced, so they did this

Further Europeanisation of enforcement after the 2007-2008 financial crisis

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

• Effectiveness

• Proportionality

• Dissuasiveness

> EU law depends on national law, but EU law also influences national law

Sources of the three principles

EU secondary law:

• E.g. ‘Member States shall lay down penalties for infringements of national provisions adopted in application of this Directive and shall take all necessary measures to ensure that these are enforced. These penalties must be effective, proportionate and dissuasive.’ (Unfair Commercial Practices Directive, art. 13(1))

Case law of the CJEU in dialogue with national courts

• E.g. CJEU, Case 33/76 Rewe

Relevance of the three principles

Content of a single remedy or sanction (e.g. administrative fine, damages)

• When regulatory agency considers imposing an administrative fine, it should consider those three principles

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

• Combination of sanctions should also apply with the three principles

Coordination between different enforcement modes (public and private)

• More theoretical than practical

• Those three principals should also govern the different enforcement modes

• The entity that violated the regulatory standard get fine and may also have to pay damages (private and public system, such combination also apply the three principles)

The principle of effectiveness

National law should not make it practically impossible or excessively difficult to exercise rights conferred by EU law (e.g. CJEU, C-49/14 Finanmarid EFC; see also art. 19(1) TEU)

Remedial response to regulatory violation must be adequate in terms of:

• (a) the remedy’s ability to perform the function for which it is designed (deterrence, compensation, punishment);

• (b) the absence of obstacles to the exercise of these functions (e.g. a delayed remedial response; an excessively high burden of proof)

The principle of proportionality

A three-step test to assess the proportionality of a given measure:

• Is it suitable for the pursued objective?

• Is it necessary (are there less intrusive means to attain an equivalent result?

• Is it proportionate (stricto jure)?

E.g. CJEU, C-210/00 Kaserei Champignon Hofmeiste)

Potential conflicts between three principles

They may conflict with each other

Proportionality vs. dissuasiveness?

• E.g. a consumer may claim reimbursement or refuse payment without any duty to return goods or compensate for services if the trader has, among others

  • Falsely claimed that a product is able to cure illness; (overcompensate the consumers to deter traitors to engage in this kind of conduct)

  • Created the false impression that the consumer has won or will win a price;

  • Demanded immediate payment for products supplied but not solicited by the consumer

• (Belgian Code of Economic Law, art. VI. 38)

It does deter, but is it proportionate?

Enforcement Modes in the Field of EU Consumer and Financial Services Law

Public enforcement

• Through administrative law

• Through criminal law

Private enforcement:

• Through private law means

• Coordination between public and private enforcement

Hybrid enforcement

Public enforcement

Impact of EU law

Establishment of national regulatory (or administrative agencies):

• Administrative law as a primary means

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

Minimum powers of regulatory agencies

Requirements as to the appropriate administrative sanctions

EU Bank authority, EU market authority, EU insurance and pensions authority

• Sectoral EU supervisors

• Ensuring effective enforcement