The Berlusconi litigation against the European Central Bank ("ECB"), related to the Mediolanum case, ended on 19 September 2024 with the Court of Justice of the European Union ("CJEU") reversing the decision of the General Court of the CJEU of 11 May 2022 ("Berlusconi Case 2022")2 in its judgment Fininvest & Berlusconi v. ECB3 ("Berlusconi Case 2024", together with the Berlusconi Case 2022 the "Berlusconi Cases").
Under applicable EU law, any person who intends to acquire or further increase a qualifying holding in an EU credit institution must obtain the prior approval of the competent supervisory authorities4 .
The notion of "acquisition or an increase of a qualifying holding" is therefore fundamental as it determines the power and right of scrutiny that competent authorities have over mergers & acquisitions and other types of restructuring transactions involving EU credit institutions. The clarifications provided by the CJEU in the Berlusconi Case 2024 are therefore most welcome.5
1. The Legal Framework of Acquisitions of Qualifying Holdings in Credit Institutions
The legal framework for the prudential supervision of EU credit institutions is set out in Directive 2013/36/EU of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, as amended ("CRD")6 , which has been implemented into Luxembourg law through the Law of 5 April 1993 on the financial sector, as amended ("LFS").
Pursuant to Article 22(1) CRD, "Member States shall require any natural or legal person or such persons acting in concert (the "proposed acquirer"), who have taken a decision either to acquire, directly or indirectly, a qualifying holding in a credit institution or to further increase, directly or indirectly, such a qualifying holding in a credit institution as a result of which the proportion of the voting rights or of the capital held would reach or exceed 20%, 30% or 50% or so that the credit institution would become its subsidiary (the "proposed acquisition"), to notify the competent authorities of the credit institution in which they are seeking to acquire or increase a qualifying holding in writing in advance of the acquisition, indicating the size of the intended holding and the relevant information, as specified in accordance with Article 23(4). [...]"7.
According to Article 22(6) CRD, "if the competent authorities do not oppose the proposed acquisition within the assessment period in writing, it shall be deemed to be approved"8.
The acquisition of qualifying holding procedure is an ex-ante procedure. The proposed acquirer has the obligation to notify the competent authority before the acquisition of the qualifying holding, meaning that the competent authority's assessment must be carried out9 and its regulatory clearance obtained, before the proposed acquirer becomes the legal owner of the underlying qualifying holding (or the further increase of such a qualifying holding crossing one of the relevant thresholds provided for in Article 22(1) CRD)10. The notion of "acquisition or increase of a qualifying holding" is therefore central because M&A, restructuring and other transactions falling within the scope of Article 22 CRD will be subject to a thorough and at times lengthy assessment by competent authorities, which requires a certain degree of anticipation from the acquirers during the acquisition process to avoid any deal breakers.
While the CRD11 provides a legal definition of the notion of "qualifying holding"12, it is the interpretation of the concept of "acquisition" therein that is at the heart of the present litigation and the ensuing doubts about the types of transactions covered by Article 22 CRD.
The clarifications provided in the Berlusconi Cases on this notion are therefore of key importance for market players and practitioners.
2. How The Conflict Begun: The Facts
In 2015, Banca Mediolanum, an Italian credit institution, absorbed its sole shareholder, the financial holding company Mediolanum by means of an upstream merger. At that time, Fininvest owned a holding of approximately 30% in Mediolanum (and indirectly in Banca Mediolanum) and Mr Silvio Berlusconi was the majority shareholder of Fininvest. As a result of the merger between Mediolanum and Banca Mediolanum, Fininvest (an indirect qualifying shareholder of Banca Mediolanum before the merger) became a "direct" holder of a qualifying holding in the capital of Banca Mediolanum.
The ECB and the Banca d'Italia (the NCA responsible for the supervision of credit institutions in Italy under the SSM framework) considered that this change in the shareholding structure of Banca Mediolanum triggered a qualifying holding authorisation.
Based on the proposal from the Banca d'Italia, the ECB adopted on 25 October 2016 a final negative decision by which it refused to authorise the abovementioned "acquisition of a qualifying holding" in Banca Mediolanum. One of the reasons for the ECB's negative decision was that Silvio Berlusconi did not meet the reputation requirement applicable to holders of qualifying holdings. Silvio Berlusconi and Fininvest challenged, as applicants, the ECB's decision before the General Court.
3. The Berlusconi Case 2022
Before the General Court, the applicants notably argued that the ECB's decision violated Article 15(3) of the SSM Regulation13 and Articles 22 and 23 of the CRD because it qualified the absorption by Banca Mediolanum of its sole shareholder, Mediolanum, as an "acquisition" of a qualifying holding. In their view, these provisions apply to cases where there is actually a "potential acquirer" and a "qualifying holding acquisition project" and not to natural or legal persons who are already the owners of a qualifying holding in a credit institution.
In the Berlusconi Case 2022, the General Court adopted a wide interpretation of the notion of "acquisition" on the basis that "the concept of 'acquisition of a qualifying holding' cannot be interpreted restrictively, since that would have the effect of enabling the assessment procedure to be circumvented by removing certain types of acquisitions of qualifying holdings from the ECB's control and, therefore, of jeopardizing those objectives"14.
Bearing this objective in mind, the General Court explained that "in the usual sense, the concept of 'acquisition of securities or shareholdings' is not limited to cash transactions but can also cover different types of transactions such as forward or options transactions, or share-for-asset swap transactions"15 and that "the procedure for the assessment of acquisitions of qualifying holdings in a credit institution is to apply to both direct and indirect acquisitions. Thus, where, in the course of a specific transaction, an indirect qualifying holding becomes direct, or where the degree of indirect control of that qualifying holding is altered, notably where an indirect holding owned indirectly through two companies becomes indirectly owned through a single company, the legal structure of the ownership of a qualifying holding itself is altered, so that such a transaction must be regarded as the acquisition of a qualifying holding within the meaning of that provision"16.
Following its reasoning, the General Court held that the merger between Banca Mediolanum and Mediolanum had the effect of altering the legal structure of the applicants' (Silvio Berlusconi and Fininvest) qualifying holdings in Banca Mediolanum and that the ECB was therefore fully entitled to conclude that the merger in question constituted an acquisition of a qualifying holding in a credit institution despite the fact that the applicants' respective shareholding percentages in Banca Mediolanum had remained unaltered and did not cross any Article 22 CRD threshold.
Silvio Berlusconi17 and Fininvest lodged an appeal before the CJUE against the General Court's decision.
4. Arguments of The Appellants
a) The concept of "alteration of the legal structure"
By the fifth part of the first grounds of the appeal, the appellants notably argued that:
- "the interpretation of [the General Court] that the concept of "acquisition of a qualifying holding" includes the "alteration of the legal structure" is not supported by the text of CRD IV directive, or the SSM regulation, or ordinary language, or the objectives pursued by the legislation in question. [...] Any "alteration of the legal structure" of a holding already owned does not result, as in the present case, in any change in ownership of that holding18".
- "the new concept created by the General Court of 'alteration of the legal structure' of a holding is contrary to the principle of legal certainty, since that concept has no defined meaning in EU law and cannot be interpreted, according to the General Court, by reference to the law of the Member States".19
b) Distinction between direct and indirect qualifying holdings
By the sixth part of their first grounds, the appellants notably argued that:
- "the General Court infringed Article 22 of the CRD IV Directive [...] in holding that Fininvest had acquired a qualifying holding subject to authorisation due to the fact that its indirect qualifying holding in Banca Mediolanum had become direct".20
- "Article 22(1) of CRD attaches no significance to the distinction established in the judgment between direct qualifying holding and indirect qualifying holding".21
5. The Reasoning and Decision of the CJEU
The CJEU, which examined the applicants' fifth and sixth parts of the first grounds of their appeal together, upheld both grounds.
The CJEU first explained that "regarding, in particular, the direct or indirect nature of the qualifying holding subject to the acquisition, Article 22(1) of the CRD IV Directive sets out expressly that it is irrelevant whether the holding is acquired "directly or indirectly".
Moreover, the CJUE held that "it is apparent more generally from point 36 of Article 4(1) of Regulation No 575/2013 that the legal structure of the qualifying holding is irrelevant22; that point defines a qualifying holding, in an alternative manner, as a "direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking"23and that "it is not the legal structure of a holding – in particular, whether it is direct or indirect – which determines the existence of a qualifying holding but [...] whether that holding makes it possible to attain a particular level of control or influence over the credit institution".24
The CJUE thus reached the conclusion that the General Court erred in law in holding that the alteration of the legal structure of the applicants' holdings could be regarded as an acquisition of such a holding, even if the quantum of that holding had not been altered.
Accordingly, the fact that (i) Fininvest's holding in Banca Mediolanum, which was previously indirect, became direct and the fact that (ii) Mr Berlusconi's indirect holding in Banca Mediolanum, previously through Fininvest and Mediolanum, became indirect through Fininvest only, do not constitute an "acquisition of a qualifying holding".
6. Legal Certainty Re-established
We can only welcome the CJUE's judgment as it upholds the letter of the law and discards the ECB's and the General Court's broad interpretations of the concept of "acquisition of a qualifying holding" dissociated from any crossing of threshold as required by Article 22 of the CRD.
If an extensive interpretation of "acquisition" was already dubious in a scenario where an indirect qualifying shareholder becomes a direct qualifying shareholder (irrespective of whether or not the capital or voting rights have changed, to the extent there was no crossing of one of the legal qualifying thresholds), the argument that the mere alteration of the degree of indirect shareholding in the legal ownership structure (i.e. if an indirect qualifying shareholder remained an indirect qualifying shareholder but with fewer intermediate corporate entities between it and the credit institution) would constitute an acquisition within the meaning of Article 22 of the CRD was, in our view, highly debatable and unfounded.
The CJUE's judgment is unequivocal in that it makes no distinction between direct and indirect qualifying holdings, in line with the letter of Article 22 CRD. This makes sense, in our view, because it does not matter whether a shareholder is a direct qualifying shareholder or an indirect qualifying shareholder, since both have been assessed against the same criteria at the time when they acquired their qualifying holding. A shareholder does not become more or less of a qualifying shareholder depending on where this shareholder sits in the shareholding structure. A shareholding either has a qualifying holding or does not. Whether this holding is direct or indirect is, in our view, henceforth irrelevant.
In support of this approach, we believe it is useful to refer to the Advocate General's Opinion of 16 May 2024 (Berlusconi Case 2024), according to which "the authorisation of the ECB would be required only if the acquisition of those holdings led to an increase in the acquirer's level of control over the financial institution"25, and that "in transactions [...] in which the same persons and entities retain the same level of control and influence over a credit institution, no acquisition or increase of a qualifying holding takes place".26
Most importantly, and we agree with him, the Advocate General continues by stating that: "the first criterion for determining whether there is [a] direct or indirect acquisition or [an] increase of a qualifying holding is quantitative"27, is that "the acquisition must represent 10% or more of the capital or of the voting rights of the undertaking while the increase must entail an increase in capital or voting rights equal to or in excess of [10%], 20%, 30% or 50%".28
The Advocate General further specifies that "The decisive point is not whether the qualifying holding is acquired directly or indirectly but rather whether that acquisition exists in either form and whether, as a result, a particular level of control or influence over the credit institution is attained".29
The General Advocate's Opinion is clearly supported by the explicit wording of Article 22 CRD and therefore expressly relied upon by the CJUE.30 The mere changes in the percentage of a qualifying shareholding that occur outside of the qualifying holding thresholds do not qualify as an "acquisition of a qualifying holding".31 A different interpretation would again run contrary to the letter of the law and open the door to legal uncertainty.
There is little doubt that the Berlusconi Case 2024 will have a direct impact on restructuring transactions in the banking sector. Some of these transactions, particularly those related to holding chain reorganisations, should from now on fall outside the scope of the ECB's assessment, thereby considerably speeding up their process. We welcome this reduction in administrative burden, which should not be detrimental to the supervisory effectiveness given the little added value of these assessments, as explained above.
The ramifications of the Berlusconi Case 2024 should not, in our view, be limited to the banking sector alone. Indeed, in the spirit of cross-sector harmonisation for the assessment of qualifying holdings in the EU, competent authorities32 should apply the lessons of the Berlusconi Case 2024 with respect to acquisitions of other supervised entities, such as payment institutions, electronic money institutions, investment firms, insurance and reinsurance undertakings, and other professionals of the financial sector.
All in all, the Berlusconi Case 2024 is a triumph for legal certainty by making sure that the scrutiny exercised by the ECB of acquisitions in EU credit institutions remains in line with the text of the CRD.
Footnotes
1 The views expressed in this contribution are those of the authors and do not necessarily reflect the views of the Luxembourg law firm Elvinger Hoss Prussen, société anonyme.
2 General Court of the European Union, T-913/16P, Finanziaria d'investimento Fininvest SpA (Fininvest) and Berlusconi v European Central Bank, 11 May 2022.
3 CJEU, Joined Cases C-512/22P and C-513/22P, Finanziaria d'investimento Fininvest SpA (Fininvest) and Marina Elvira Berlusconi, Pier Silvio Berlusconi, Barbara Berlusconi, Eleonora Berlusconi et Luigi Berlusconi, en qualité d'ayants droit de Silvio Berlusconi" v European Central Bank, 19 September 2024, ECLI:EU:C:2024:774 (Judgment).
4 Under the Single Supervisory Mechanism ("SSM"), the ECB has exclusive competence to approve acquisitions of qualifying holdings in credit institutions, following the non-binding assessment by the relevant national competent authority ("NCA").
5 This contribution will only analyse the clarifications provided by the CJEU with respect to the fifth and sixth parts of the first ground of the applicants' appeal.
6 Directive (EU) 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, OJUE 27.6.2013, L 176/338. The CRD has recently been amended by Directive (EU) 2019/878 of the European Parliament and of the Council of 20 May 2019 (CRD V) and Directive (EU) 2024/1619 of the European Parliament and of the Council of 31 May 2024 (CRD VI).
7 Article 22(1) CRD has been transposed in Article 6(5) LFS.
8 Article 22(6) CRD has been transposed in Article 6(12) LFS.
9 Article 23(1) CRD states: "In assessing the
notification provided for in Article 22(1) and the information
referred to in Article 22(3), the competent authorities shall, in
order to ensure the sound and prudent management of the credit
institution in which an acquisition is proposed, and having regard
to the likely influence of the proposed acquirer on that credit
institution, assess the suitability of the proposed acquirer and
the financial soundness of the proposed acquisition in accordance
with the following criteria:
a) the reputation of the proposed acquirer;
b) the reputation, knowledge, skills and experience, as set out in
Article 91(1), of any member of the management body and any member
of senior management who will direct the business of the credit
institution as a result of the proposed acquisition;
c) the financial soundness of the proposed acquirer, in particular
in relation to the type of business pursued and envisaged in the
credit institution in which the acquisition is proposed;
d) whether the credit institution will be able to comply and
continue to comply with the prudential requirements [...];
e) whether there are reasonable grounds to suspect that, in
connection with the proposed acquisition, money laundering or
terrorist financing [...] is being or has been committed or
attempted, or that the proposed acquisition could increase the risk
thereof.".
10 See T. NOGUEIRA, F. VAN RYMENANTS, P. BAZIN, Acquisitions of Qualifying Holdings in the Financial Sector: Obtaining Regulatory Approval, Droit Bancaire et Financier au Luxembourg, 2024.
11 Article 3(33) CRD cross-refers to Article 4(1)(36) of Regulation (EU) 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, as amended ("CRR").
12 A qualifying holding is defined under the CRD as "a direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking". Article 3(33) of the CRD has been transposed in Article 1(25) of the LFS, which states that: "'qualifying holding' shall mean any direct or indirect holding in an undertaking which represents 10% or more of the capital or of the voting rights, in accordance with Articles 8, 9 and 10 of the Law of 11 January 2008 on transparency requirements, as amended, and the conditions regarding the consolidation of voting rights as set out in Article 11(4) and (5) of this Law, or which makes it possible to exercise a significant influence over the management of that undertaking. For the purpose of Articles 6 and 18 of this Law [the LFS], rights or shares which credit institutions or investment firms may hold as a result of providing the underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis included under 6 of Section A of Annex II of this Law shall not be taken into consideration, provided that those rights are, on the one hand, not exercised or otherwise used to intervene in the management of the issuer and, on the other, disposed of within one year of acquisition."
13 Article 15(3) SSM Regulation states that "The ECB shall decide whether to oppose the acquisition on the basis of the assessment criteria set out in relevant Union law and in accordance with the procedure and within the assessment periods set out therein."
14 Press release No 80/22 of the General Court of the European Union of 11 May 2022, "The General Court upholds the decision by which the ECB refused to authorise Silvio Berlusconi's acquisition of a qualifying holding in Banca Mediolanum", p. 2.
15 General Court, Fininvest & Berlusconi v ECB, para. 51.
16 General Court, Fininvest & Berlusconi v ECB, para. 57.
17 Following the death of Mr Berlusconi on 12 June 2023, his legal heirs pursued the case C-513/22.
18 Court of Justice, Fininvest & Berlusconi, para. 63.
19 Court of Justice, Fininvest & Berlusconi, para. 64.
20 Court of Justice, Fininvest & Berlusconi, para. 66.
21 Court of Justice, Fininvest & Berlusconi, para. 67.
22 The Advocate General has qualified the concept of "alteration of the legal structure of the holding" as a concept which should be categorised as "inappropriate" [in the context of acquisitions of qualifying holdings] and "which cannot be accepted" (see Advocate General's Opinion of 16 May 2024, para. 76).
23 Court of Justice, Fininvest & Berlusconi, para. 108.
24 Court of Justice, Fininvest & Berlusconi, para. 109.
25 Advocate General's Opinion of 16 May 2024, para. 64.
26 Advocate General's Opinion of 16 May 2024, para. 66.
27 Advocate General's Opinion of 16 May 2024, para. 70.
28 Advocate General's Opinion of 16 May 2024, para. 71.
29 Advocate General's Opinion of 16 May 2024, para. 73.
30 Court of Justice, Fininvest & Berlusconi, para. 108 referring to the Advocate General's Opinion of 16 May 2024, para. 73.
31 For example, an indirect shareholder with a qualifying shareholding of 35%, which holds a direct qualifying shareholding of 42% in an EU credit institution after an internal restructuring of its banking group, should not be deemed to have acquired a "qualifying holding" subject to ECB's prior approval.
32 In the same vein as the Joint Guidelines which have been adopted in their entirety by both the Commission de surveillance du secteur financier (CSSF) and the Commissariat aux assurances (CAA), which has become the main text of reference, in addition to EU and national law, for both the CSSF and the CAA, when carrying out their prudential assessment for all regulated entities of the financial sector.
Originally published by Bulletin Droit & Banque, n°76, ALJB, June 2025, pp. 93-97.
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