Act on Judicial Relief Granted to Holders of Qualified Bank Credit: Constitutional Court decision

The Constitutional Court of the Republic of Slovenia today announced its decision with regard to the Act on Judicial Relief Granted to Holders of Qualified Bank Credit, which has repealed the contested law in its entirety. Banka Slovenije finds that the decision supports our view that the law is contestable from the point of view of monetary financing and the financial independence of the central bank.

Today’s judgment allows us to continue our activities to comprehensively address the issues in total alignment with the legal system, which Banka Slovenije began in late 2020. The independent taskforce of legal experts that we engaged with the aim of drawing up a comprehensive solution to the issue has already put forward a proposal for a legal solution, which will be made available to the competent authorities to use at their own discretion in legislative and other procedures. The taskforce will present its proposal to the public in the coming days.

Banka Slovenije lodged an application to assess the constitutionality of the Act on Judicial Relief Granted to Holders of Qualified Bank Credit (the law) two years ago. Before making its decision, the Constitutional Court addressed questions to the Court of Justice of the European Union, which in September of last year confirmed Banka Slovenije’s position with regard to the contestability of the law from the perspective of the independence of the central bank and monetary financing.   

Today the Constitutional Court has confirmed our position that the contested law contravenes EU law and consequently the Constitution of the Republic of Slovenia. The contested law fails to uphold the principle of the independence of the central bank, and the prohibition on monetary financing. On this basis the Constitutional Court has repealed the law in full.

Today’s judgment allows Banka Slovenije to continue its activities to comprehensively address the issue in a fully lawful manner. Banka Slovenije has in recent years committed itself to comprehensively settling the unresolved issues at the earliest possible opportunity in line with the Slovenian legal system and EU law. We therefore decided that Banka Slovenije would take a more active role in the search for solutions to the unresolved issues.

Steps were taken in this direction when the taskforce of independent, reputable experts was engaged. On the basis of their in-depth understanding not only of the situation in narrow technical terms, but also from the perspective of the functioning of the entire national system, they drew up a set of proposals for the comprehensive settlement of the aforementioned unresolved issues. The taskforce, which consists of Prof Miha Juhart, Dr Miro Prek, Prof André Prüm and Franc Testen, presented its report in May 2021. The final findings made reference to the following:

• In light of the independence of central banks, objective liability on the part of Banka Slovenije, as envisaged by the law, is not the key to a solution of the issue of (potential) claims against commercial banks by former holders of qualified liabilities.
• A reimbursement scheme funded from the state budget seems to be the sole legally acceptable, transparent, consistent and effective solution for ensuring the legal security of any injured parties.

In the second phase of its work the taskforce drew up a proposed legal solution that complies with European law and Slovenia’s own constitutional arrangements. The key aim of the proposed legal solution is that it should be available to the competent authorities to use in legislative and other procedures at their own discretion. The proposed legal solution will be unveiled to the public in the coming days.