EU Court definitively rejects Pilatus challenge of ECB decisions withdrawing licence

The European Court of Justice has definitively rejected two appeals by the shuttered private Maltese bank Pilatus Bank, against orders of the General Court in which it challenged the withdrawl of its licence by the European Central Bank.

The cases concerned two appeals by Pilatus Bank against orders of the General Court: the first from September 2021, which dismissed Pilatus’s action for annulment of a decision of the ECB as manifestly lacking any foundation in law. That 2018 order came by way of e-mail, instructing Pilatus that it was no longer competent to carry out its direct prudential supervision and to take measures concerning it. In the other appeal, Pilatus sought the annulment of a judgment of the General Court that dismissed a request to annul the ECB decision to withdraw its credit institution licence.

In both judgements, the European Court of Justice said the General Court had failed to require proof that the lawyer representing Pilatus had been duly instructed by a qualified representative. “The General Court thus erred in law by not proceeding, of its own motion to verify the lawfulness of the mandate conferred by the applicant's board of directors on its lawyer,” the ECJ said, saying such a manifest error must lead to the annulment of the contested order without even ruling on Pilatus’s please.

The ECJ added that Pilatus Bank had failed to provide evidence that the mandate of the competent person appointed to take over the shuttered bank, was in a situation of conflict of interest. “The fact that the competent person was appointed by the national competent authority, which submitted the proposal for withdrawal of authorisation to the ECB, is not in and of itself sufficient to characterize the existence of a conflict of interest.”

Pilatus Bank plc and Pilatus Holding had filed 11 pleas to the General Court after its banking licence was suspended by the ECB in 2018 following the arrest of its owner Ali Sadr Hasheminejad in the United States, on charges of breaching Iran sanctions.

Hasheminejad was accused in 2018 of bypassing American banking rules on the transfer of $115 million in payments to finance a housing project in Venezuela, that were illegally funnelled for the benefit of Iranian individuals and undertakings. Following Hasheminejad’s indictment in the United States, the bank received withdrawal requests totalling €51.4 million worth of deposits, approximately 40% of the deposits on its balance sheet. Although Convicted of violating U.S. sanctions against Iran, the tide later turned for Ali Sadr Hasheminejad, after the United States government said they were withdrawing the criminal case against because prosecutors had failed to disclose all evidence against him. His guilty verdict was expunged in a nolle prosequi request by the American prosecutors.

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. When Hasheminejad was arrested in Dulles airport in the United States in February 2018, the Maltese financial regulator shut down the bank and started an investigation.

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