In December 2001 the Constitutional Court ruled on the conformity of the Federal Securities Supervisory Agency with the Constitution. The decision also affects the All-Finances Supervisory Agency, which is due to become operational on April 1 2002.

In the course of a decision examination procedure the Constitutional Court had second thoughts as to whether the Federal Securities Supervisory Agency, as an independent legal entity, comes under the authority and responsibility of the minister of finance, as required by the Constitution.

The Constitution stipulates that the minister of finance must be able to exercise control to ensure the legality of the manner in which the agency performs its tasks. The court also reviewed the regulations by which the Federal Securities Supervisory Agency was established. There was a danger that the legal basis of the agency's existence would be withdrawn.

The court ruled that the agency's independent status is unconstitutional but that it should continue to exist as a government agency. The ruling was restricted to the annulment of the provisions that granted the agency its independent status.

Even in its new non-independent form the agency retains the authority to impose administrative sanctions. This authority was seen as one of the core competencies of the state administration.

The court repealed the relevant provisions of the Law concerning Securities Supervision with effect from April 1 2002.

The same misgivings that the court had about the agency also apply to the new All-Finances Supervisory Agency, which is similarly conceived as an independent institution that is not answerable to the minister of finance. Thus, the relevant provisions of the Law on Financial Markets must be amended so that the new All-Finances Supervisory Agency can start work in its permissible form. Otherwise, there is a risk that its status will be opposed as unconstitutional on the same grounds as those argued in the case of the Federal Securities Supervisory Agency.

A change to the Law on Financial Markets requires a constitutional amendment which, in turn, requires the support of a two-thirds majority vote in Parliament. Since the present coalition government does not command such a majority, support from the opposition is necessary.

The opposition has indicated that such support might be given, subject to certain conditions concerning the incorporation of the Central Bank into the All-Finances Supervisory Agency. It remains to be seen whether a political solution will be found in time.

For further information on this topic please contact Tibor Fabian at Binder Grösswang Rechtsanwälte by telephone (+43 1534 80) or by fax (+43 1534 808) or by email ([email protected]). The Binder Grösswang Rechtsanwälte website can be accessed at