Limitation of liability of the FSMA and NBB under pressure?

The Belgian financial supervisory authorities enjoy a far-reaching limitation of their civil liability. Following a recent judgment of the European Court of Justice, the validity of this limitation of liability under European Union law may be in question.


The Belgian financial supervisory authorities – the National Bank of Belgium ("NBB") and the Financial Services and Markets Authority ("FSMA") – enjoy a far-reaching limitation of their civil liability. They are only liable in the case of their own fraud or gross negligence (article 68 of the Act on Financial Supervision for the FSMA and article 12bis of the act establishing the organic statute of the National Bank of Belgium for the NBB). These Belgian liability limitations were established after a comparative law study which showed that such limitations are commonplace in neighbouring countries. The legislator particularly wanted to avoid the supervisory authority being rendered a lame duck if it were held liable for all of its actions.

In a recent judgment of the European Court of Justice (Nikolay Kantarev v Balgarska Narodna Banka of 4 October 2018 (C-571/16)), a limitation of liability (to a certain extent comparable to the Belgian limitation) was considered to be at odds with European Union law.

This judgment was prompted by the incorrect transposition of the Deposit Guarantee Directive (2014/49/EU of the European Parliament and the Council of 16 April 2014 on deposit guarantee schemes) in Bulgaria, as a result of which a Bulgarian saver, Nikolay Kantarev, had incurred a delay in the reimbursement under the local deposit guarantee scheme of his deposit held with a Bulgarian bank that had gone bankrupt. He tried to claim compensation for the damage arising from this delay from the Bulgarian supervisory authority. Under Bulgarian law, the national supervisory authority can only be held liable when it has caused such damage intentionally.

How did the Court rule?

Following its earlier case law (which is now also applied to financial supervisory authorities), the Court held that obtaining damages for the harm caused to individuals cannot depend upon a condition based on any concept of fault that goes further than a "sufficiently serious breach" of EU law. In other words: if a public authority (such as a financial regulator) causes harm to an individual as a result of a "sufficiently serious breach" of EU law, it can be held liable for that harm. The legislator can ease this condition under national law (e.g. by determining that the supervisory authority can be held liable for any fault, whether or not caused by a serious breach of law), though it cannot make it more strict.

The Court is of the opinion that Bulgarian law is contrary to EU law when it states that an individual is only entitled to compensation when the supervisory authority has caused harm "intentionally".

Furthermore, the Court refers to the principle of equivalence (the conditions for reparation of loss and damage laid down by national law cannot be less favourable than those for similar domestic claims) and the principle of effectiveness (the national regulation may not make it impossible or excessively difficult to obtain reparation).

The European Court of Justice thereby confirms that national limitations of liability with respect to financial regulators, which were often included in national regulations in the aftermath of the financial crisis, are contrary to EU law to the extent that they limit the liability of the regulator for its "sufficiently serious breach" of EU law.

Impact on the limitation of liability of the FSMA and the NBB?

Like Bulgaria, Belgium has a limitation of liability in place for its financial regulators. The FSMA and the NBB are only liable for their own fraud or gross negligence. How the Court of Justice and the Belgian courts will interpret and implement this judgment remains to be seen, but it is likely that the current Belgian limitation of liability goes beyond what is allowed under EU law. It remains to be seen whether this will encourage individuals to hold the Belgian supervisory authorities liable when these authorities act in breach of EU law.