Pilatus Bank loses EU Court appeal over ECB appeal

The owners of the shuttered private bank Pilatus in Malta have lost an appeal before the European Court of Justice to nullify an email from the European Central Bank, delegating certain decisions on the suspension of its banking licence, to the Maltese financial regulator.

In an appeal that dealt with legal technicalities, the EU Court upheld the original decision of the General Court of 2019, which dismissed the bank’s request to annul an ECB email from September 2018 directing Pilatus Bank on “future communications with the ECB” to the MFSA.

Pilatus has filed a host of cases in the EU Court to challenge the suspension its banking licence in the beginning of 2018, after its owner and chairman Ali Sadr Hasheminejad, was deemed not fit and competent to run the bank. Hasheminejad was arrested in Dulles Airport on US federal charges of breaching sanctions against Iran. He was convicted of having funnelled US dollar payments from a Venezuelan housing project to Iranian beneficiaries, but charges were dropped after the US district attorneys revealed they had withheld evidence from the Hasheminejad defence team.

In November 2018, Pilatus sought the annulment of the email. The ECB insisted the email was not a challengeable act under the EU Treaty. The General Court dismissed the action as inadmissible because the email was not deemed to have any legal effect that could be challenged.

Pilatus insisted that the instruction meant its subsequent communications had to comply with the requirements of the email at issue, failing which they would be rejected. In that email, the ECB informed Pilatus of the following:

‘Finally, taking into consideration that, as you are aware, the [MFSA] has appointed a [“]Competent Person[”] to represent [Pilatus Bank] we would like to ask you to direct your comments/future communications with the ECB in respect of [Pilatus Bank] via this Person or to attach to any future submission the Competent Person’s approval.’

The first court, the General Court, held that the email, by specifying the forms which communications addressed to the ECB should take, had only expressed the ECB’s view over the course of the preparatory proceedings for the withdrawal of the licence.

It found that the email did not produce binding legal effects capable of affecting the bank’s interests.

Pilatus appealed the order, saying its demands were admissible, and that the General Court had wrongly classified the email as “a preparatory act”.

The ECJ, in its appeals verdict, said that Pilatus’s original nine pleas did not contain enough information to support them, and that their content contained general considerations which did not enable the pleas in law to be examined in detail. For example, it said Pilatus went so far as to refer “in regrettable terms, to ‘the ECB[’s] reckless disregard for the rule of law’, for which it provides no arguments whatsoever.”

The ECJ also said that Pilatus did not demonstrate how the annulment of the email at issue, would have given it some sort of advantage given that its banking licence had already been withdrawn prior to the email.

Hasheminejad ran a private bank in Malta, which he had licensed in 2013, and which largely dealt with millions in reserves owned by the Azerbaijani ruling family and oligarchs.

His bank was implicated in the Egrant affair, when the late journalist Daphne Caruana Galizia claimed the bank had processed a $1 million payment from the Aliyevs of Azerbaijan to the wife of former prime minister Joseph Muscat. The allegation was disproven by a Maltese magisterial inquiry along with other allegations she made about Pilatus Bank, but by then the banks’ other dealings for Azerbaijan had come under the lens of financial investigators.