Background
Prohibition
Questions Submitted
Comment
On November 6 2002 the Conseil d'Etat (supreme administrative court) requested a preliminary ruling from the European Court of Justice (ECJ) on whether the French prohibition on credit institutions preventing them from paying interest to their clients on funds deposited in current accounts is consistent with EU law.
The decision suspended proceedings instituted by Caixa Bank France, the French subsidiary of the Spanish credit institution. These were aimed at reversing a decision of the Banking Commission, which prohibited it from paying interest to its clients on funds deposited in their current accounts, on the ground that such prohibition would violate Article 43 of the EC Treaty.
The challenged decision is based on Article L 312-3 of the Monetary and Financial Code. This provision prohibits any credit institution which has funds from the public for less than five years from paying interest higher than that specified in the banking regulations. Accordingly, a decision of the Comité de la Réglementation Bancaire et Financière (86-13) expressly prohibits credit institutions from paying any interest on current accounts opened in the national currency.
Such a prohibition does not exist in any other EU member state except in Greece. France has invoked monetary policy reasons, such as the promotion of mid and long-term savings, to defend this prohibition. Further, from the consumer's point of view, the absence of interest payments on liquid assets is balanced out by a prohibition which prevents French credit institutions from charging clients for the administration and payment of cheques (Article L 131-71, Section 2 of the French Monetary and Financial Code).
Caixa claims that the Banking Commission's decision is contrary to freedom of establishment, as stated in Article 43 of the EC Treaty. According to Caixa, the prohibition prevents European banks from successfully entering the French banking market by depriving them from any competitive advantage.
Surprisingly, the Conseil d'Etat decided not to deal with this issue itself. Instead, it requested a preliminary ruling on the matter from the ECJ, in accordance with Article 234 of the EC Treaty. The first question submitted to the ECJ is whether the prohibition constitutes an obstacle to the freedom of establishment, as provided by Article 43 of the EC Treaty. If so, the Conseil d'Etat has asked the ECJ to determine which public interest grounds might justify such an obstacle.
Proceedings before the Conseil d'Etat will be suspended until the ECJ answers these questions. However, many commentators believe that this procedure will lead to the end of the prohibition. This could occur even before the final court decision is made. Should the outcome of this case be the abrogation of this prohibition then, like most of their European neighbours, French consumers will have to pay for their cheque books.
For further information on this topic please contact Philippe Portier or Raphaële Navelet-Noualhier at Jeantet & Associés by telephone (+33 1 45 05 81 96) or by fax (+33 1 47 04 87 98) or by email ([email protected] or [email protected]).