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Jurisdiction, applicable law, recognition and enforcement of decisions in matters of successions are governed by Regulation (EU) n. 650/2012, as implemented by Regulation of execution (UE) n. 1329/2014, both effective from August 17th , 2015, which also create the European Certificate of Succession.

Regulation is applicable to successions opened or subsequent to August 17th, 2015[1]; UK, Ireland, Denmark are not bound by the Regulation and are not subject to its application[2].

Since Regulation n. 650/2012 deeply modify the principles regarding successions previously in force in most of the UE Member States, it is really important to fully understand how international successions are now governed.

First of all, the Regulation introduces the principle of coincidence between forum and ius: the authorities taking care of a succession (forum) do apply their own law (ius), so as to improve the efficiency of the judicial system.

In order to have forum and ius coincident, the Regulation rule  is the habitual residence, which usually corresponds to the place where the inheritance assets are mainly located[3]

As to jurisdiction

The Courts of the Member State of the habitual residence of the deceased at the time of death shall have jurisdiction to rule on the succession as a whole (article 4).

Where the law chosen by the deceased to govern his succession is the law of his nationality, and such a law is a law of a Member State, the deceased can also choose that the Courts of such a Member State shall have exclusive jurisdiction (article 5).

Where the habitual residence of the deceased at the time of death is not located in a Member State, the Courts of a Member State in which assets of the estate are located shall have jurisdiction insofar as (article 10):

a) the deceased had the nationality of that Member State at the time of death; or, failing that,

b) the previous habitual residence of the deceased was in that Member State.

As to applicable law

The applicable law to the whole succession shall be the law of the State of the habitual residence of the deceased at the time of death (article 21)[4]

Neverthless, a person may choose as governing law of his succession the law of the State of his nationality, at the time of the choice or at the time of death (article 22).

The law determined as above shall govern the succession as a whole, whether or not it is the law of a Member State  (so-called “universal application” – articles 20 and 23).

Agreements as to succession shall be admissible only if admissible, under the applicable law determined by the Regulation, to the succession of all persons involved (articles 25 and 26)[5].

The application of a provision of the law determined by the Regulation may be refused if manifestly incompatible with the public policy (ordre public) of the forum (article 35).

Where the deceased had chosen the law applicable to his succession prior to 17th August, 2015, that choice shall be valid if (article 83 n.2):

(a) it meets the conditions of the Regulation as to the applicable law, or

(b) it is valid in application of the rules which were in force, at the time the choice was made, in the State of habitual residence of the deceased or in the State of his nationality.

 

Same as above for dispositions of property upon death (i.e. a will) prior to 17th August, 2015 (article 83 n.3). If such dispositions were made in accordance with the law the deceased could have chosen under the Regulation, that law shall be deemed to have been chosen as the law applicable to the succession (article 83 n. 4).

As to recognition, enforceability and enforcement of decisions[6]

Decisions on succession matters given in a Member State shall be recognised in the other Member States without any special procedure being required (article 39).

A decision shall not be recognised if (a) it is manifestly contrary to the public policy (ordre public) of the Member State in which recognition is sought, (b) the defendant was not served in time with the application which instituted the proceedings, (c) it is irreconcilable with a decision given in proceedings between the same parties in the Member State in which recognition is sought (article 40)

As to the European Certificate of Succession

The Regulation creates a European Certificate of Succession to be used in all Member States; the use of such a Certificate, however, shall not be mandatory (article 62).

Heirs or other persons having direct rights in the succession can use the Certificate in another Member State in order to invoke  their status or to exercise their rights (article 63).

The Certificate shall be issued in the Member State whose Courts have jurisdiction pursuant to the Regulation (article 64) and shall be requested and  issued by using a specific form (articles 65 and 67)[7].

The Certificate shall produce its effects in all Member States, without any special procedure being required, and it shall constitute a valid document for the recording of succession real estate properties in the relevant registers of a Member State[8].

________________________________________________________________________________

Taking into account the above new rules on international successions, let’s go now to apply them to some practical cases in order to better understand how do they work.

SOME PRACTICAL CASES

A Dutch citizen with habitual residence in Italy dies, without leaving a will. He was married with two children and owned two immovables, one in The Netherland and the second one in Italy. The estimated value of the inheritance is under € 1.000.000,00.

  • Succession is governed by Italian law (law of the State of habitual residence of the deceased) and Italian Courts shall have jurisdiction to rule on the whole succession. 
  • According to Italian law, the wife and the 2 sons are privileged heirs (1/3 each) and have to file a statement of succession. No inheritance tax is payable because the inheritance value is under € 1.000.000,00.[9]
  •  In order to prove their status of heirs in The Netherlands  (also in order of the property of the Dutch immovable), the heirs can apply in Italy for the European Certificate of Succession.

 

A Spanish citizen with habitual residence in France dies, choosing by will Spanish law as governing law of his succession. He owned in Spain one immovable only.

  •  Succession is governed by Spanish law (national law of the deceased, chosed by will).
  •  Disputes amongst heirs, if any, shall be referred to French Courts (forum  of the State of habitual residence of the deceased in the lack of choice, by will, of the Spanish forum).
  • The heirs according to Spanish law must file in France (State of habitual residence of the deceased) a statement of succession, and pay the inheritance tax on all the inheritance assets (including the immovable in Spain, in the lack of relevant bilateral Conventions or international Treaties between France and Spain on the subject matter).
  • If the heirs have to pay the inheritance tax in Spain for the Spanish immovable, then such a tax might be deducted from the French inheritance tax, if payable (depending on the inheritance value).

 

A German citizen with habitual residence in Switzerland (i.e. not a member State of E.U.) dies, without leaving a will. He was divorced without sons and with two brothers. He owned 2 immovables, one in Italy and the second one in Germany.

  •  Succession is governed by Swiss law (law of the State of habitual residence of the deceased); German Courts shall have jurisdiction to rule on the whole succession (forum of the State where one immovable is located) or also Italian Courts if the previous habitual residence of the deceased was in Italy (forum of the State where the second immovable is located).
  •  The heirs according to Swiss law (if not manifestly incompatible with the public policy of the competent forum – i.e. Germany or Italy - for the whole succession) must file in Switzerland a statement of succession, as well as in Germany and in Italy for the immovables located therein.
  •  The two brothers of the deceased, if heirs according to Swiss law, have to pay in Germany and in Italy the inheritance tax calculated on the value of the two immovables located therein[10].

A UK citizen with habitual residence in Italy dies. He was married with three children, and a close friend of him was appointed by will as universal heir, without any choice of applicable law and jurisdiction. He owned 2 immovables, one in UK and the other one in Italy, and a bank deposit in Switzerland.

  •  The whole succession is governed by Italian law (law of the State of habitual residence of the deceased); Italian Courts shall have jurisdiction  to rule on the whole succession.
  •  The will, even if valid and enforceable under UK law, can be contested, however, under Italian law insofar as testamentary dispositions cannot be prejudicial to rights reserved to the privileged heirs (in the case at issue, under Italian law,  the wife and the children). The inheritance, therefore, should be allotted to the heirs determined by the applicable law[11].
  •  UK, however, is not bound by the Regulation application. To the deceased’s succession, therefore, UK will apply UK law, with the so-called principle of “scission”: lex rei sitae for immovables and law of the State where the deceased was resident upon his death for movable goods.

·         Consequently:

ü  The UK immovable shall be transferred to the deceased’s friend, appointed by will (if valid and enforceable pursuant to UK law and with application of the principle of the lex rei sitae);

ü  The Italian immovable shall be transferred according to Italian law (being the applicable law as lex rei sitae under UK law, and also applicable law under the Regulation, being Italy the last habitual residence of the deceased);

ü  The Swiss bank deposit shall be transferred to the heirs as determined by Italian law (as applicable law under UK law on movable goods, and under the Regulation being Italy the last habitual residence of the deceased).

________________________________________________________________________________

As you can see, international successions as governed now by Regulation (EU) n. 650/2012, effective from August 17th, 2015, are not really easy to deal with. But for your convenience, Regulation of execution n. 1329/2014 (2 pages only) can give you a hand, with its 5 Exhibits (53 pages !!!) to be used for the proper application of Regulation (EU) n. 650/2012……

Good luck!

Avv. Roberto Rossi

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[1] Article 83 n. 1 

[2] Regulation premises n. 82 and 83

[3] The concept of “habitual residence” is not determined by many domestic laws, such as Italy,   whose  civil code just determine the concepts of domicile and residence: “A person’s domicile  is in the place where the center of his business and interests is located,  a person’s residence is in the place where he/she usually lives” (article 43 civil code).

[4] Italy, as well as many other EU Member Countries,  did apply,  on the contrary, the national law of the deceased  at the time of death as law applicable to his succession (article 46 n.1 Law 218/1995).

[5] Agreements as to  succession are agreements where  one or more persons make arrangements of their succession, or of their possible rights further to a future succession, or of the waiver to the same rights.  Under Italian law such agreements are null and void (article 458 civil code)  

[6] Provisions  of Regulation n. 650/2012 as to recognition, enforceability and enforcement of decisions on succession matters are very similar to those of the well known  Regulation (EU) n. 44/2001 on jurisdiction, recognition and enforcement of decisions  in civil and commercial matters.

[7] Forms were introduced by Regulation of execution (UE) n. 1329/2014, effective from 17th August, 2015

[8] In Italy, for instance, with the “Conservatoria dei Registri Immobiliari”

[9]The spouse, descendants and ascendants, under Italian law, are exempted from Inheritance tax up to € 1.000.000,00 for each beneficiary.

[10]  According to Italian tax law, the brothers are exempted up € 100.000,00,  then must pay 6% on the rest.

[11]  I. e. Italian law,  as follows: for 1/4 to the deceased close friend (share available by will), for 1/4  to the wife and for 2/4 to the three  children (shares reserved to the privileged heirs).

 

By Spyros ANTONELOS (This email address is being protected from spambots. You need JavaScript enabled to view it.)

Lawyer, Mediator MCIArb (2008), Trainer, SPYROS ANTONELOS LAW OFFICE (www.antoneloslaw.gr) and RESOLVE Mediators (www.resolve.gr) founding Partner, Athens SMEs Chamber Mediation Centre Director (www.diam-acsmi.gr), MEF University (Istanbul) ADR Instructor

In today’s quick-paced and uncertain business environment, in which, on the one hand, electronic transactions are happening with the simple click of a PC mouse and on the other hand, many E.U. countries’ national economies face slow economic growth, stagnation or financial crisis, proliferating commercial disputes, mediation is more needed than ever for both clients -physical persons or companies- and legal professionals.

Mediation can briefly be described as an extrajudicial private -civil or commercial- dispute resolution process, in which parties and their lawyers seek a settlement agreement with the even-handed assistance of a mediator, a specialist trained in psychology, negotiations and law (most often a legal professional with additional training and accreditation). This agreement in many countries is ipso jure or becomes, through a simple additional process, an enforceable act.

In order to keep the present article concise and accessible to readers who are unfamiliar with mediation and its different international models, I am compelled to indicate that it is based on the facilitative mediation model, which prevails in the E.U. and includes some generalizations in an effort to find a common denominator between European mediation processes provided by E.U. countries domestic mediation laws, which include more variatıons than alluded here.  It is also an important aspects list rather than an exhaustive how-to list, which would also often prove unfit for a dynamic mediation process, in which surprises and unexpected developments are almost certain to occur.

Mediation offers some advantages that make it particularly suitable for cases in which emotions are high, preserving relations (working, business or family) is important, sensitive information that needs to remain confidential is involved, a swift solution is needed or parties want to determine themselves the solution of their dispute in a manner adapted to their needs:

These are the flexibility and the speed of the process, confidentiality of the negotiations content and lower costs. Lower costs are mainly due to lower process-related expenses than the ones applicable in court proceedings and not to a loss in lawyers’ fees as it is wrongly assumed by some: various fiscal stamps, court bailiff delivery costs, legal interests etc. are avoided. Lawyers' fees are paid by clients in mediation as they pay them before courts. In most countries lawyers' presence in mediation is either mandatory by law or chosen by the parties, in order to receive legal advice during the mediation process, which has significant and binding results for them. The above financial advantages give lawyers who use mediation and regularly propose it to their clients a real opportunity to develop their clientele and to diversify their income sources.

Still, it is noteworthy that mediation being an assisted negotiation, requires both a specific mindset, different from the one required for participation in court proceedings, which are based on the adversarial model and a negotiation-oriented approach for both clients and lawyers. Taking this into account, lawyers’ preparation of clients, of strategy for negotiation and of themselves for mediation present some interesting particularities, which are examined below.

How Lawyers can explain to their clients and to the other party what mediation is and why to choose it

A lawyer’s role in informing the client for mediation is crucial. He/she not only has to explain this process to clients because they don’t have legal background and may not know of it but also has to compare it with other available dispute resolution options (court proceedings, arbitration, conciliation) and their characteristics as well as explain why it suits their specific case.

The lawyer, as a legal expert being familiar with all the above processes -and if not, becoming easily familiar with them through a varıety of more or less lengthy seminars or trainings available nowadays- is the best-suited specialist to provide this input.

Convincing a client to go to mediation may prove not as hard as it may seem on first consideration to a lawyer who has never attended a mediation: he/she can either invoke the numerous advantages of the process aforementioned or just convince the client to consult a mediator together, who shall provide ample information and address the client’s possible emotional tension when referring to the history and other aspects of his/her case.

The same applies to convincıng the other party and his/her Lawyer to participate to mediation; unless prohibited by domestic law, the mediator can contact them and deal in a neutral and empathetic manner with the potential questions and doubts, which may occur from their side. This is not an absolute rule, the way no other suggestion included in the present is absolute; still, a mediator’s communication with the other party and its lawyer in order to introduce mediation to them can be received with less suspicion and preconceived ideas than a call made by the lawyer of the party, which first decided to attempt mediation.

How Lawyers can establish a strategy for mediation with their clients

When both parties are convinced and a mediation agreement is concluded, each side -namely each Lawyer and client- need to prepare carefully together their negotiation strategy for the mediation process to come. Doing so together is needed because in a mediation they act together throughout the process.

It may prove quicker or easier to do it if the lawyer starts by asking the client what they want and help him/her find it, when the client doesn’t know it already. Then prioritization of objectives is required, to both prepare mentally and sentimentally the client for the mediation process, which is a negotiation, often involving give-and-take from both sides. This also allows to help him/her realize that some objectives may not be reached and choose, which the ones he/she prefers aiming at, are.

Then familiarizing the client with the nature of the process (i.e. it being facilitative), its participants and their role (i.e. lawyers, parties, the mediator and other advisors or experts agreed by the parties to be present), its steps (i.e. joint and private meetings, lunch break, other possible breaks) and its aim (a mutually acceptable settlement, which may become an enforceable act under legal conditions), with potential surprises (i.e. a party asking for a break or showing strong emotions) and with their management with the assistance of the mediator.

Identifying each party’s BATNA (best alternative to a negotiated agreement; namely the best that can happen after not settling in mediation) and WATNA (worst alternative to a negotiated agreement; namely the worst that can happen after not settling in mediation) are also crucial. Working on possible scenarios of offers and counter-offers from both sides often also proves important, in order to go to mediation with clear and organized ideas, planned strategies and knowledge of tangible options.

How Lawyers can prepare themselves for mediation

Apart from lawyer’s fees determination for mediation, which is definitely a topic to consider carefully prior to mediation and a sensitive issue each professional deals with quite subjectively, therefore I respectfully abstain from submitting thoughts on, it is undeniable that some other considerations require lawyers’ consideration before starting the mediation main step, namely the mediation day in which parties and lawyers meet and negotiate.

These may be: examining all factual and legal aspects of the dispute (i.e. deadlines involved, liability questions, relevant case-law) as well as the legal and procedural aspects of questions, which may occur during the negotiation (i.e. how long would it take to solve the same dispute in court if it did not settle, which is a quite common question to be answered at some point of the day, which are the legal considerations to have in mind when  offering a form of collateral to the other party, if enforceability of the settlement agreement is desired and necessary), which legal considerations are the most sensitive and could derail the negotiation process if mentioned too early and before rapport is built between the parties and the lawyers (i.e. a premature request of an admission of responsibility) as well as which could be the right timing for bringing them into the discussion. All the above are already well known to lawyers who are familiar with negotiations, i.e. contract ones. Perhaps, the following two aspects of preparation for lawyers may prove to be more of a challenge.

Mediation is about assisting one’s client to make choices and decisions. This requires the client to express his/her thoughts, feelings, needs and interests and to acknowledge them. Lawyers used to assuming the biggest part of choices and risks for his/her client’s case management themselves in their daily work, especially the ones of us who regularly litigate, may need to spend time preparing for a less active and vocal role so as to give space to their client’s expression. This in no-way means that they will be absent from the process; they shall actually need to often be silently alert and very present, in order to make timely interventions when appropriate for the benefit of the negotiatıons’ progress i.e. for clarifications or for giving a legal question, which occurred, an answer.

Preparation also applies to finding ways to convince the other party and its lawyer to reach a settlement with one’s client; a strong adversarial approach and attitude during the mediation negotiation phase may create an unproductive environment, a tension and a hostility, which may be excused or needed at times in court hearings, but could lead the other party to feel not trusted, even offended and either not to collaborate in reaching an agreement or leave the mediation table.

Last but not least, a lawyer with some life experience and self-awareness probably understands we humans all have biases and he/she is no exception to this. Preparing for mediation can also consist of assessing one’s own biases before the mediation so as not to let them hinder the process and do disservice to the client’s needs.

A well-prepared client and a well-prepared lawyer significantly increase their chances of reaching a satisfying result through mediation, despite the process’s potential surprises or challenges.

I thank you for your time and attention.

Spyros Antonelos,

April 28, 2017

The freedom of movement and the freedom of establishment are guaranteed for all professionals, including the fully qualified lawyers and for those who are partially qualified.

The primary law of the European Union has established, in time, the groundwork for the fully qualified lawyers through Directive 89/48 and Directive 98/5, but left a gap for those who are not fully qualified but have studied law and have worked in the legal field and wish to enroll in one of the European Union’s bars.

The Morgenbesser[1] case settled, to some extension, a set of guidelines for the Bars from the Member States to take into account when evaluating a candidate’s academic and professional training, throughout a comparative and in-depth perspective.

Accordingly to the Morgenbesser judgement, the Bar from each Member State must take into consideration the academic and all other stages of trainings completed successfully[2], as well as the national legal requirements, without compromising the freedom of movement. In the particular case of the profession of lawyer, any of the Member State must evaluate the applicant’s abilities, knowledge and competences regarding the legal profession in alliance with the State’s national qualifications.

Ioana Balan,                                                                                                               

On behalf of Jinaru, Mihai & Notingher

1st March 2017


[1] Christine Morgenbesser v Consiglio dell’Ordine degli avvocati di Genova (C – 313/01);

[2] Guidelines for Bars & Law Societies on Free Movement of Lawyers within the European Union.

 

 

Special attention must be paid to the European Parliament and Council Directive 2012/29/EU (hereinafter mentioned as ˮthe Directiveˮ) dated 25 October 2012 which established for its Member States several responsibilities for standards on the rights, support and protections of victims of crime. According to the Directive, all European Union (EU) Member States must have fully implemented the directive by November 2015.

The aim of the directive is to promote improved standards on the entitlements, support and protection available to victims of crime across the EU.

Among the rights promoted by the Directive, the Member States should have implemented standards regarding the right to avoid the contact between Victim and Offender. The main goal of such provisions is to assure increased protection of the victim's psyche. In this respect, the Directive established the necessary conditions to enable avoidance of contact between victims and, where appropriate, their family members and the offender inside the criminal proceedings.

The avoidance of the contact is to be assured by each of the Member States, excepting when the contact is so imposed by the national criminal procedures.  One of the main obligations of the Member States was to assure that the buildings in which the law suits are undergoing, namely the national courts be designated with separate waiting rooms for the victims.

The Directive also includes several other recommendations in order to protect the victim: separate entrances, different waiting rooms as well as facilities for the victims of the crimes such as water and food facilities, different scheduling of the victim’s and aggressor’s entry inside not only in the court room, but as well inside the court’s building.  

Mainly, what the Directive aimed is that the court rooms be so designed that the victim be not obliged to trespass in front of its aggressor or the aggressor's supporters, in order to reach to the witnesses area because it might raise the victim’s/witnesses’s feeling of threat or intimidation.

According to the public information, only few European Member States were able to fully and correctly transpose the Directive’s provisions in due time.

Andreea Paducel,

On belhaf of Jinaru, Mihai & Notingher

17.03.2017

 

 

 

Financial services legislation in the EU is shaped by initiatives that were created in response to the 2008 global financial crisis. The main initiatives include: the Markets in Financial Instruments Directive II, the Bank Recovery and Resolution Directive (“BRRD”), Capital Requirements Directive IV (“CRD IV”), the Capital Requirements Regulation (“CRR”) and the Mortgage Credit Directive. 

The examples below highlight the key EU regulatory developments currently affecting EU banks, financial services providers and consumers,. Further, an attempt at covering possible developments in 2017 is made.

Markets in Financial Instruments Directive II

In 2010, the European Commission (the “Commission”) announced a review of MiFID which subsequently led to the publication of a package proposal: MiFID II and a new regulation (the Markets in Financial Instruments Regulation (“MiFIR”)). It took the EU institutions time to agree the texts of both measures which were eventually finalised and published in the Official Journal of the EU on 12 June 2014. 

The reason why agreement on MiFID II and MiFIR took so long was that they take MiFID into new areas: non-equity market transparency; regulatory product intervention powers; third country provisions; and high frequency trading controls being some of the more important.

MiFID II and MiFIR were to enter into force in all Member States on 3 January 2017.  However, given the technical challenges concerning implementation in February 2016 the Commission issued legislative proposals delaying MiFID II and MiFIR by a year.  The regime is to transpose into national law by 3 July 2017 and apply from 3 January 2018. This is largely welcomed by banks in Bulgaria, as preparation time is extended.

Firms and banks are to be ready and prepared by the end of 2017. Draft implementation legislations are being prepared currently in Bulgaria, however no significant news has been disclosed by the national competent authority on terms and discretions.

Some key points of MiFID II and MiFIR include:

  • the provision for new market infrastructures, such as organised trading facilities;
  • the introduction of new consumer protection rules;
  • amendments in the regulated products and regulators’ product supervision;
  • new conduct of business requirements on how firms are set up, structured and governed, for example by introducing board diversity measures; and
  • access of non-EU firms to EU markets. Harmonised requirements regarding the ability of non-EU firms to access EU markets.

MiFID II and MiFIR empower the European Securities and Markets Authority (“ESMA”) to develop numerous draft regulatory technical standards (“RTS”) and draft implementing technical standards (“ITS”). These add the necessary detail to the rules as they are directly binding on member states (due to the regulation status).  No further transposition on those is expected in member states, however it is possible some regulatory ordinance be created.  During the course of 2015, ESMA delivered drafts of the RTS and ITS to the Commission and at the time of writing their adoption is awaited.  In addition, ESMA has provided technical advice to the Commission on the possible content of the delegated acts required by several provisions of MiFID II and MiFIR. All of these would be applicable from 3 January 2018 (as extended from the 3 January 2017).

Bank Recovery and Resolution Directive (“BBRD”)

At an EU level, a major focus of the regulatory response to the financial crisis of 2008 was the design and implementation of tools to prevent EU banks from failing and using public funds for their bail out.  Key amongst these was the BRRD.  Member States were required to implement the BRRD by 1 January 2015. 

During 2016, a number of delegated regulations relating to key issues in the BRRD that enhance supervisory convergence were adopted by the Commission.  Such delegated regulations included those that specify the content of bank recovery plans, resolution plans and group resolution plans.

Each institution (at entity and group level) had to prepare a full recovery plan that sets out the measures it will take in different scenarios where it is at risk.

The resolution authority (the central bank in many cases) then had to prepare a resolution plan for an institution (at an entity and group level) setting out options for resolving every bank in different scenarios. The resolution includes details of how to apply the resolution tools and how to make sure the institution continues to provide critical functions. If the resolution authorities identify a significant impediment to a resolution, they have the power to request the institution to address or remove this impediment.

One aspect of the BRRD which has been a hot topic in 2016, and will be in 2017, concerns the “bail-in” tool.  A key part of the BRRD is that it sets out various measures that are aimed at providing EU resolution authorities with a minimum toolkit for resolving a failed bank.  Amongst the new tools is the “bail-in” tool which provides that an EU resolution authority may exercise powers to rescue a troubled bank by writing down debt or converting debt into equity. 

Article 55 of the BRRD provides that EEA banks must include contractual terms in any agreements governed by the laws of non-EEA Member States, which create certain payment and other liabilities specifying that they may be subject to bail-in by resolution authorities under the BRRD.  Obviously this applies to a very broad spectrum of payment and potentially other contractual and non-contractual liabilities and bail-in recognition provisions have had to be included in various loan agreements and financial documentation, guarantees, letters of credit, bonds documentation (prospectuses), etc.

EU banking union

The EU banking union has three pillars, being: the single supervisory mechanism (“SSM”); the single resolution mechanism (“SRM”); and the European deposit insurance scheme (“EDIS”).  The SSM empowers the European Central Bank to carry out key supervisory tasks for banks in those Member States that are participating in the EU banking union.  The SRM is a single resolution process that applies to all banks established in those Member States participating in the SSM.  The SRM is co-ordinated by the Single Resolution Board. 

A resent asset quality review (“AQR”) and stress test exercise, based on the ECB AQR exercises that have been conducted in the EU 2014 – 2015 has opened talks of the possibility of the ECB to take on supervisory powers as part of the SSM in at least some of the bigger banks in Bulgaria. Any serious steps in that direction are expected to be seen in resent years (maybe in the 2020 timeframe). It is expected a ECB supervisory AQR to take place for the country’s banking system before any steps towards the SSM are taken. Such steps should be part of a Euro currency acceptance as well, which is another matter as a whole.   

Capital Markets Union

Capital Markets Union (“CMU”) is the current flagship initiative of the Commission and has three objectives, which are to:

  • broaden the sources of financing in Europe towards non-bank financing by giving a stronger role to capital markets;
  • deepen the single market for financial services; and
  • promote growth and financial stability.

The Action Plan on Building a Capital Markets Union sets out a programme of actions and related measures, which aim to establish the building blocks of an integrated capital market in the European Union by 2019.

Bank structural reform legislation

In January 2014, the Commission published a draft regulation on structural measures improving the resilience of EU banks.  The legislative proposal followed a report on structural bank a reform that was put together by an expert group led by Erkki Liikanen, the Governor of the Bank of Finland.  The draft regulation as originally proposed prohibits EU banks within scope to conduct proprietary trading.  It also permits EU banks within scope to engage in trading and investment banking activities, other than proprietary trading, at the discretion of their national authority. 

CRD V reform

A reform package for the existing banking regulations is on its way. The reform includes Regulation (EU) No 575/2013 (the Capital Requirements Regulation or CRR) and Directive 2013/36/EU (the Capital Requirements Directive or CRD), on prudential requirements for and supervision of institutions, the BRRD, as well as the mentioned SRM directives.

These are looking to address identified weaknesses in the existing prudential requirements. The proposed new amendments to existing CRD IV /CRR legislation include the European implementation of Leverage Ratio requirements, as well as Net Stable Funding Ratio the implementation of some of the ‘Basel 4’ accord.

Developments are expected in 2017 as the texts of the proposals are to be discussed and implemented on a national level.

The summary of the legislative initiatives above is not by any means exhaustive and has a purely informative nature. 

Dahterova & Partners - Attorneys at Law

 

Bulgaria, 25 January 2017