Court supports measures imposed by the MFSA and the ECB

On the 15 October 2020, in the First Hall Civil Court judgement Mr. Messaging Limited vs Nemea Bank plc presided over by Hon. Judge Anna Felice, , the Court delved into the applicability of the special summary proceedings contemplated under Articles 167 to 170 of the Code of Organisation and Civil Procedure, Chapter 12 of the laws of Malta (COCP) in light of regulatory sanctions and restrictions imposed on a local credit institution.

By way of background, the plaintiff company had money deposited in a current account opened with the defendant bank, which bank was then made subject to sanctions issued by the Malta Financial Services Authority (MFSA) and the European Central Bank (ECB) (through the Directorate General Micro-Prudential Supervision)as a result of a number of serious regulatory shortcomings.

In order to safeguard the interests of all of the interested parties, the MFSA appointed PriceWaterhouseCoopers (PwC) to:

  1. “to take charge of the assets of the Bank for the purposes of safeguarding the interests of depositors and its other clients; and
  2. to assume the control of the Bank’s business and to carry on that business and such other business as the MFSA may direct.”

The regulatory sanctions imposed by the MFSA included, inter alia, a daily maximum withdrawal restriction on depositors up to 250 EUR which was later was revised to 2,500 EUR per day in 2016. On 20 January 2017, the MFSA issued another public notice in which it outlined that considering that despite its numerous requests, the defendant bank’s regulatory stance was not yielding the desired progress. It therefore proposed to the ECB the withdrawal of the defendant bank’s licence granted in accordance with the Banking Act, Chapter 371 of the laws of Malta.

Pending the ECB’s final decision on the withdrawal of the licence, the MFSA had issued a ban on withdrawal of deposits as a precautionary measure, consequent to which the plaintiff company was unable to withdraw its deposits. Mr. Messaging Limited had refrained from withdrawing all their deposits in light of the fact that:

  1. PwC had reassured them that the regulatory sanctions imposed by the MFSA were only temporary measures imposed for a short period of time;
  2. as an act of its loyalty to Nemea Bank; and
  3. because it did not make sense for the plaintiff company to do so due to bank charges.

Rather than making the daily authorised withdrawals as it was able to do, the plaintiff company relied on Articles 167 and 170 of the COCP, which provide the plaintiff with an alternative remedy for the recovery of a debt, certain, liquidated and due. These provisions of the COCP allow the plaintiff to recover the amount due without having to proceed to trial by filing a sworn application to the Court, stating, in his/her belief there is no defence to the action.

The defendant contended that the issue at hand was not simply one of a relationship between a bank and its depositor. The defendant bank was unable to liquidate the full amount of the plaintiff’s account balance due to the regulatory sanctions imposed by the MFSA and the ECB. Nemea Bank was made subject to the measures imposed by the local and the supranational authorities and any deviation or violation of the same which would lead to a breach of its obligations, the liability of its directors as well as administrative and/or disciplinary measures. Therefore, the Court held that the defendant could not be held liable for observing measures imposed by the authorities which regulate it, nor can it be requested or obliged to act against such regulations, sanctions or measures.

While the plaintiff was not disputing the MFSA’s right to impose sanctions on the defendant bank, it was asking the Court to bypass and overrule the sanctions and measures imposed by the regulatory authority. The Court reiterated the stance taken by the MFSA, by highlighting the importance of safeguarding the interests of all the depositors. If the Court were to request the bank to liquidate the full amount of the plaintiff’s account balance, it would do so to the detriment of other depositors of the bank.

The Court also asserted that the plaintiff had all the opportunity to withdraw the full balance of its current account had it followed the MFSA’s measures and withdrawn the daily authorised maximum regularly when it was able to do so. The Court was rather unequivocal in refusing to accept the plaintiff’s assertions that the latter company did not withdraw its deposits as a sign of loyalty to its bank.

After consideration of both parties’ claims and the evidence brought forward, the Court rejected the plaintiff’s request to liquidate the balance of the plaintiff’s account in its entirety on the basis of the fact that the defendant bank could not be ordered to act in violation of the applicable laws and regulations, and the sanctions or measures imposed by the MFSA and ECB. Consequently, the plaintiff remains unable to withdraw its account balance in a single lump sum as long as the measures remain in force.


The author would like to thank Tina Mifsud, intern at Ganado Advocates, for her assistance in preparing this report.