The latest decision of the European Court of Justice (ECJ) of 03.10.2006 (Ref. C-452/04) underlines the importance of the European Constitution for the internal market.
Switzerland is not part of the internal market: therefore, according to the ECJ, BaFin may also prohibit commercial lending by companies established in third countries.
Legal basis Pursuant to Section 33 of the German Banking Act (Kreditwesengesetz – KWG), the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) is responsible for prohibiting companies from granting loans on a commercial basis if the lending company has neither its head office nor a branch in Germany.
No free movement of services for Switzerland: providers from Switzerland do not enjoy any “European” privileges. Therefore, from a European constitutional point of view, a restriction of the free movement of services is possible with regard to such companies from so-called third countries.
The reasons: The relevant § 33 KWG is compatible with Community law, the court ruled. The freedom to provide services, which is standardised in Articles 49 to 55 of the EC Treaty, and the freedom of capital movements, which is regulated in Articles 56 to 60 of the EC Treaty, are not applicable to companies from third countries.
Practice implications:
Initiators, intermediaries and distributors experience surprises again and again, because their own concepts are not target-oriented, legally designed. In addition to a prohibition by BaFin, the appointment of a liquidator is also possible at the expense of domestic financial service providers. It is not uncommon for such unsafe arrangements to have criminal repercussions. It is also conceivable that intermediaries and distributors will be liable if financial services are offered or brokered “without the necessary prior permission”. Often it is not only about commissions, but there is the threat of a complete reversal of the transaction or compensation for damages.
The Swiss company concerned could have secured protection under the European Constitution with just a few qualified measures. Instead, the ECJ has now sealed the ?end? for this self-made business idea.
by Dr. Johannes Fiala
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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