The liability regime taps into the Slovenian NCB’s own funds/general reserves to fund victims.

in its cancellation decision. The CJEU found that the prohibition of monetary financing did preclude liability regime 2.22

The CJEU substantiates her view using several reasons. Primarily by stating that the Slovenian legislation envisaged a social and political objective for liability regime 2: to prevent the effects of the cancellation of financial instruments from forming an excessive burden on natural persons with a modest income.23 This all whilst liability regime 2 is a measure which – as a reorganisation measure – aims to guarantee stability of the financial system. Therefore, a payment obligation from the National Central Bank’s own funds towards these natural persons exists as a result of political choices made by the legislature. This regime must therefore be seen as leading the Slovenian Central Bank to be responsible for financing of public sector obligations under national legislation art.1(1) sub b (ii) Council Regulation No 3603/93 .24

Lastly, the Slovenian Government argues that the prohibition of monetary financing should not apply to this regime because the regime prescribes the National Central Bank to transfer profits made by it to victims instead of to the Republic of Slovenia. This argument does not succeed because the liability regime relies not only on a different allocation of Central Bank profits but also on a levy on the general reserves of the bank or a loan from the Republic of Slovenia.25

Preliminary question 3: National Central Bank Independence

According to the concept of independence, NCBs are ensured to be in a position to carry out the tasks conferred upon them independently.26 The principle of independence is a general principle and is even divided into different categories of independence: functional independence, institutional independence, personal independence and financial independence.27 When speaking of independence in this context, the CJEU refers to financial independence, according to which the independence of an NCB would be jeopardised if it could not autonomously avail itself of sufficient financial resources to fulfil its mandate (e.g. to perform tasks that fall with the ESCB scope).28 The independence principle is mentioned in several provisions as well as case law. For instance, art. 130 TFEU and art. 7 of the Protocol prohibits NCBs and the ECB from taking instructions from any Member State governments or EU institutions. Art 282(3) TFEU, on the other hand, is only addressed to the ECB and states that the ECB is to be independent in the management of its finances.

In substantiating its judgement that the liability regime breaches the principle of independence by exposing the Slovenian Central Bank to political pressures, the CJEU finds that the independence principle doesn’t apply in the same way to an NCB exercising a power that is within the ESCB scope (e.g. monetary policy implementation)29 versus an NCB that exercises a power assigned to it by national law – such as liability regime 1 – according to art. 14.4 of the Protocol.30

In principle, the exercise by a national central bank of a power that does not fall within the ESCB scope does not infringe the independence principle so long as the national provisions do not undermine the NCB’s ability to independently carry out tasks that do fall within the ESCB scope.31 When applying this to the current case, the CJEU finds that the exercise of monetary policy32 - an ESCB scope power – is endangered by the exercise of the liability regime under Slovenian law. The reasons for this are that:33 i. The liability regime taps into the Slovenian NCB’s own funds/ general reserves to fund victims. It is exactly these funds that are detrimental to offsetting losses suffered by the NCB resulting from monetary policy operations under art. 18 of the Protocol and; ii. As the liability regime draws from its own funds, it could lead – in the event where allocation of profits is insufficient – to the Slovenian Central Bank negotiating with/seeking consent of national (political) authorities by taking a loan for funding in order exercise tasks conferred upon it which fall under the ESCB scope and; iii. It is not apparent that the liability regime will ensure the NCB to have sufficient own funds to carry out its tasks within the ESCB scope in an effective manner.

C) CONCLUSION AND COMMENT ON NCB LIABILITY

With this judgement the CJEU deems NCB liability regimes EU-proof: allowing NCBs to be liable for damages caused by the exercise of powers conferred upon them under national law, so long as it (a) does not breach EU law (e.g. prohibition of monetary financing, NCB independence), (b) hinders the exercise of a conferred power within the ESCB’s scope (e.g. monetary policy) and (c) provided that the liability is only established if claimants carry the burden of proof as to the breach