Court of Justice of the European Communities (including Court of First Instance Decisions)

OPINION OF ADVOCATE GENERAL

MEDINA

delivered on 29 June 2023(1)

Joined Cases C‑207/22, C‑267/22 and C‑290/22

Lineas – Concessões de Transportes SGPS, S.A. (C‑207/22)

Global Roads Investimentos SGPS, Lda (C‑267/22)

v

Autoridade Tributária e Aduaneira

(Requests for a preliminary ruling from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal))

and

NOS-SGPS, S.A. (C‑290/22)

v

Autoridade Tributária e Aduaneira

(Request for a preliminary ruling from the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal))

(Reference for a preliminary ruling – Economic and monetary policy – Supervision of the European Union’s financial sector – Directive 2013/36/EU – Article 3(1)(22) – Regulation (EU) No 575/2013 – Article 4(1)(26) – Financial institution – Concept – Holding company – Management of shares in undertakings which are not subject to the supervision and the prudential requirements applicable to banking or financial activities)

I.      Introduction

1.        These requests for a preliminary ruling concern the interpretation of Directive 2013/36/EU (2) and Regulation (EU) No 575/2013, (3) namely the term ‘financial institution’ contained in both of those legislative acts in the version applicable to the facts in the main proceedings.

2.        The requests have been made in the context of the disputes between, on the one hand, Lineas – Concessões de Transportes SGPS (Case C‑207/22), Global Roads Investimentos SGPS (Case C‑267/22) and NOS SGPS (Case C‑290/22) and, on the other hand, the Autoridade Tributária e Aduaneira (Customs and Tax Authority, Portugal), concerning the imposition of a tax on documented legal transactions prescribed by Portuguese national law.

3.        The three cases invite the Court to clarify whether a holding company the sole object of which is the management of shares in undertakings which do not carry out banking or financial activities and which are therefore not subject to the supervision and the prudential requirements applicable to those activities can be regarded as a ‘financial institution’ within the meaning of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013.

II.    Legal framework

A.      European Union law

1.      Directive 2013/36

4.        Recitals 2, 20 and 54 of Directive 2013/36 declare:

‘(2)      This Directive should, inter alia, contain the provisions governing the authorisation of the business, the acquisition of qualifying holdings, the exercise of the freedom of establishment and of the freedom to provide services, the powers of supervisory authorities of home and host Member States in this regard and the provisions governing the initial capital and the supervisory review of credit institutions and investment firms. The main objective and subject matter of this Directive is to coordinate national provisions concerning access to the activity of credit institutions and investment firms, the modalities for their governance, and their supervisory framework … This Directive should therefore be read together with [Regulation No 575/2013] and should, together with that Regulation, form the legal framework governing banking activities, the supervisory framework and the prudential rules for credit institutions and investment firms.

…

(20)      It is appropriate to extend mutual recognition to those activities where they are carried out by financial institutions which are subsidiaries of credit institutions, provided that such subsidiaries are covered by the consolidated supervision of their parent undertakings and meet certain strict conditions.

…

(54)      In order to address the potentially detrimental effect of poorly designed corporate governance arrangements on the sound management of risk, Member States should introduce principles and standards to ensure effective oversight by the management body, promote a sound risk culture at all levels of credit institutions and investment firms and enable competent authorities to monitor the adequacy of internal governance arrangements. Those principles and standards should apply taking into account the nature, scale and complexity of institutions’ activities. Member States should be able to impose corporate governance principles and standards additional to those required by this Directive.’

5.        Article 1 of Directive 2013/36, under the heading ‘Subject matter’, provides:

‘1.      This Directive lays down rules concerning:

(a)      access to the activity of credit institutions and investment firms (collectively referred to as “institutions”);

(b)      supervisory powers and tools for the prudential supervision of institutions by competent authorities;

(c)      the prudential supervision of institutions by competent authorities in a manner that is consistent with the rules set out in [Regulation No 575/2013];

(d)      publication requirements for competent authorities in the field of prudential regulation and supervision of institutions.’

6.        Article 3 of Directive 2013/36, headed ‘Definitions’, provides:

‘1.      For the purposes of this Directive, the following definitions shall apply:

…

(22)      “financial institution” means financial institution as defined in point (26) of Article 4(1) of [Regulation No 575/2013];

…’

7.        Article 34 of Directive 2013/36 provides:

‘1.      Member States shall provide that the activities listed in Annex I may be carried out within their territories …, either by establishing a branch or by providing services, by any financial institution from another Member State, whether a subsidiary of a credit institution or the jointly owned subsidiary of two or more credit institutions, the memorandum and Articles of association of which permit the carrying out of those activities and which fulfils each of the following conditions:

(a)      the parent undertaking or undertakings are authorised as credit institutions in the Member State by the law of which the financial institution is governed;

(b)      the activities in question are actually carried out within the territory of the same Member State;

(c)      the parent undertaking or undertakings holds 90% or more of the voting rights attaching to shares in the capital of the financial institution;

(d)      the parent undertaking or undertakings satisfies the competent authorities regarding the prudent management of the financial institution and has declared, with the consent of the relevant home Member State competent authorities, that they jointly and severally guarantee the commitments entered into by the financial institution;

(e)      the financial institution is effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings …

…’

8.        Annex I to Directive 2013/36 provides the list of activities subject to mutual recognition.

2.      Regulation No 575/2013

9.        Article 1 of Regulation No 575/2013, headed ‘Scope’, provides:

‘This Regulation lays down uniform rules concerning general prudential requirements that institutions supervised under [Directive 2013/36] shall comply with in relation to the following items:

(a)      own funds requirements relating to entirely quantifiable, uniform and standardised elements of credit risk, market risk, operational risk and settlement risk;

(b)      requirements limiting large exposures;

(c)      after the delegated act referred to in Article 460 has entered into force, liquidity requirements relating to entirely quantifiable, uniform and standardised elements of liquidity risk;

(d)      reporting requirements related to points (a), (b) and (c) and to leverage;

(e)      public disclosure requirements.

This Regulation does not govern publication requirements for competent authorities in the field of prudential regulation and supervision of institutions as set out in [Directive 2013/36].’

10.      Article 4 of Regulation No 575/2013, headed ‘Definitions’, provides:

‘1.      For the purposes of this Regulation, the following definitions shall apply:

…

(3)      “institution” means a credit institution or an investment firm;

…

(26)      “financial institution” means an undertaking other than an institution, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to [Directive 2013/36], including a financial holding company, a mixed financial holding company, a payment institution …, and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined, respectively, in points (f) and (g) of Article 212(1) of [Directive 2009/138/EC] ^[(4)^];

…’

3.      Regulation (EU) 2019/876

11.      Regulation (EU) 2019/876 (5) amended Regulation No 575/2013.

12.      In particular, Article 1, point 2, of Regulation 2019/876 provides:

‘Article 4 [of Regulation No 575/2013] is amended as follows:

(a)      paragraph 1 is amended as follows:

…

(iii)      point (26) is replaced by the following:

(26)      “financial institution” means an undertaking other than an institution and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to [Directive 2013/36], including a financial holding company, a mixed financial holding company, a payment institution …, and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined, respectively, in points (f) and (g) of Article 212(1) of [Directive 2009/138];

…’

B.      Portuguese law

1.      Decreto-Lei n. 495/88

13.      Decreto-Lei n. 495/88 (Decree-law No 495/88 of 30 December) (6) lays down the legal rules applicable to Portuguese holding companies.

14.      Article 1 of Decree-law No 495/88, headed ‘Sociedades gestoras de participações sociais’ (Holding companies; ‘SGPS’), provides:

‘1.      The sole business purpose of [SGPS] is to manage the shares of other undertakings, as an indirect means of pursuing economic activities.

2.      For the purposes of this Decree-law, the shareholding in a company is regarded as an indirect means of pursuing economic activities when it is not simply occasional and concerns at least 10% of the share capital, with voting rights, either directly or through shares in other companies in which the SGPS occupies a dominant position.

3.      For the purposes of the previous paragraph, the shareholding shall be regarded as not simply occasional if the SGPS keeps it for a period of more than one year.

4.      An SGPS may acquire and hold shares in an amount lower than that referred to in paragraph 2 in accordance with the provisions of Article 3(3) to (5).’

2.      Código do Imposto do Selo

15.      The Código do Imposto do Selo (Code on the tax on documented legal transactions; ‘the CIS’) (7) lays down the rules regarding the application of a tax to acts, contracts, documents, titles, papers and other facts or legal situations.

16.      Article 7(1)(e) of the CIS provides:

‘1.      The following shall also be exempt from tax:

…

(e)      interest and commission charged, guarantees provided and the use of credit granted by credit institutions, financial corporations and financial institutions to venture capital companies and to companies or institutions whose form and objects are of a type consistent with those of credit institutions, financial companies and financial institutions provided for in Community legislation, where all these are established in the Member States of the European Union or in another State, with the exception of those established in territories with a favourable tax regime, which shall be defined by decree of the Treasury;

…’

III. The facts in the main proceedings and the questions referred

17.      The applicants in the main proceedings – Lineas – Concessões de Transportes SGPS (Case C‑207/22), Global Roads Investimentos SGPS (Case C‑267/22) and NOS SGPS (Case C‑290/22) – are holding companies established in Portugal, the corporate object of each of which is to manage shares in other undertakings as an indirect form of carrying on economic activities. None of the activities of the respective companies in which they have shareholdings come within the banking or financial sectors.

18.      Each of the applicants, in the course of their respective business between 2014 and 2017, entered into credit and financial intermediation transactions with several credit institutions – namely through loan agreements or through trade bills and the issuance of bonds – under which they requested and obtained financing. Those transactions were subject to the tax on documented legal transactions pursuant to Article 1(1) and (2) of the CIS, which led the credit institutions, as taxable persons, to pay that tax to the State and, subsequently, to pass it on to the applicants.

19.      The applicants disagreed with the assessment of their respective payment of the tax on documented legal transactions and, in essence, each submitted, first, an application for review of the lawfulness of the fact that that tax was passed on to them and, second, an administrative appeal. In those administrative proceedings, the applicants relied on the exemption provided for in Article 7(1)(e) of the CIS on the ground that they were holding companies which could be classified as financial institutions in accordance with the relevant EU law to which that national provision refers. However, the tax authorities dismissed their claims.

20.      As regards, in the first place, Lineas – Concessões de Transportes SGPS and Global Roads Investimentos SGPS, each of these undertakings appealed to the Centro de Arbitragem Administrativa (Centre for Administrative Arbitration) for the establishment of an arbitral tribunal, seeking annulment of the decisions of the tax authorities and, consequently, the repayment of the duties paid.

21.      The Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), which is the referring court in Case C‑207/22 and Case C‑267/22, finds that it is apparent from the Portuguese legislation that the tax on documented legal transactions is not applicable to financial institutions within the meaning of EU law. However, there are inconsistencies within national case-law as regards the interpretation of the term ‘financial institution’. That court considers it therefore necessary to determine whether that term covers only holding companies which hold shares in undertakings that are credit institutions or investment firms, and that are therefore subject to the supervision and the prudential requirements applicable to banking or financial activities.

22.      It is in those circumstances that the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration)) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

(Case C‑207/22) ‘May a holding company which has as its sole object the management of shareholdings in other companies, as an indirect means of pursuing economic activities, and which, in that context, acquires and holds on a long-term basis such shareholdings, which, in general, are at least 10% of the share capital of the companies in which it has a shareholding, where the activity of those companies comes within the category of transport infrastructure management, including the design, construction and management of roads and/or motorways, be regarded as a “financial institution” within the meaning of [Directive 2013/36] and [Regulation No 575/2013]?’

(Case C‑267/22) ‘Is a holding company established in Portugal and governed by the provisions of Decree-law No 495/88 of 30 December 1988, which has as its sole object the management of shareholdings in other companies, as an indirect means of pursuing economic activities, and which, in that context, acquires and holds on a long-term basis such shareholdings, which, in general, amount to at least 10% of the share capital of the companies in which it has a shareholding, where those companies do not operate in the insurance or financial sectors, covered by the definition of “financial institution” within the meaning of point 22 of Article 3(1) of [Directive 2013/36] and point 26 of Article 4(1) of [Regulation No 575/2013]?’

23.      In the second place, as regards NOS SGPS, that undertaking submitted a request for arbitration which was rejected by the Centro de Arbitragem Administrativa (Centre for Administrative Arbitration). In particular, that centre held that a holding company is not a financial institution for the purposes of the exemption provided for in the CIS, contrary, according to NOS SGPS, to its findings in earlier proceedings concerning the same issue.

24.      Being of the view that opposing decisions were given in response to the same fundamental point of law and within an identical legislative framework, NOS SGPS brought an appeal for the purposes of unification of precedent before the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal), which is the referring court in Case C‑290/22. That court also observes that the Portuguese legislature chose, when delimiting the exemption from the tax at issue in the main proceedings, to refer expressly to the type and form of financial institution referred to in the EU legislation. For that reason, that court finds it necessary to determine whether that term covers only holding companies which hold shares in undertakings subject to the supervision and the prudential requirements applicable to banking or financial activities.

25.      It is in those circumstances that the Supremo Tribunal Administrativo (Supreme Administrative Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Does a holding company domiciled in Portugal and governed by the provisions of Decree-Law No 495/88 of 30 December 1988, the sole object of which is to manage shareholdings in companies other than those operating in the insurance sector, fall within the concept of ‘financial institution’ within the meaning of point (22) of Article 3(1) of [Directive 2013/36] and point (26) of Article 4(1) of [Regulation No 575/2013]?’

IV.    Assessment

26.      By the three questions referred in cases C‑207/22, C‑267/22 and C‑290/22, the referring courts seek, in essence, to ascertain whether a holding company the sole object of which is the management of shares in undertakings and the subsidiaries or holdings of which do not carry out banking or financial activities can be regarded as a ‘financial institution’ within the meaning of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 in the version applicable to the facts of the main proceedings.

27.      As a preliminary point, regarding the admissibility of those questions, I would briefly note that the tax on documented legal transactions at issue in the three cases is an indirect tax established by Portuguese legislation. It results from that legislation that, in order to benefit from the exemption from the payment of that tax, an undertaking must have the status of a financial institution. The tax on documented legal transactions is not subject to EU law harmonisation. However, Portuguese legislation makes a direct and unconditional reference to EU law to define the term ‘financial institution’, specifically to Directive 2013/36 and Regulation No 575/2013, which is the reason why the referring courts invite the Court to provide further clarification on the interpretation of that term.

28.      The Court has consistently held that it has jurisdiction to give preliminary rulings on questions concerning provisions of EU law even in situations where the facts in the main proceedings fall outside the scope of EU law, if those provisions have been rendered applicable by national law. (8) No residual doubt should therefore remain as to the competence of the Court for ruling in the present requests and for considering those requests as being admissible.

29.      As to the substance, Directive 2013/36 aims to coordinate national provisions concerning access to the activity of credit institutions and investment firms, the modalities for their governance, and their supervisory framework. That directive is to be read together with Regulation No 575/2013, (9) which establishes uniform and directly applicable prudential requirements for credit institutions and investment firms. Both legislative acts constitute the legal framework governing banking and financial activities and defining the supervisory and prudential rules applicable to credit institutions and investment firms.

30.      According to settled case-law, it follows from the need for uniform application of EU law and from the principle of equality that the terms of a provision of EU law which make no express reference to the law of the Member States for the purpose of determining its meaning and scope must be given an autonomous and uniform interpretation throughout the European Union. (10)

31.      Inasmuch as the concept of ‘financial institution’ is defined in Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 and no reference is made in either of those provisions to the law of the Member States for determining its meaning and scope, that concept must be regarded as an autonomous concept of EU law, which must thus be interpreted and applied equally in all the Member States. It is consequently for the Court to give it a uniform interpretation in the legal order of the European Union. (11)

32.      Furthermore, when interpreting a provision of EU law, it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part. (12) I shall therefore assess the definition of the term ‘financial institution’, within the meaning of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013, following a literal, contextual and teleological interpretation.

1.      Literal interpretation

33.      First of all, regarding the wording of Article 3(1)(22) of Directive 2013/36, that provision directly refers, for the definition of the term ‘financial institution’, to Article 4(1)(26) of Regulation No 575/2013. In turn, the latter provision defines the term ‘financial institution’ as an undertaking other than an ‘institution’, the principal activity of which must be the acquisition of holdings or the pursuance of one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36. A further illustration is provided for within Article 4(1)(26) of Regulation No 575/2013 which expressly includes within the scope of the term ‘financial institution’ financial holding companies, mixed financial holding companies, payment institutions within the meaning of Directive 2007/64 and asset management companies. By contrast, insurance holding companies and mixed-activity insurance holding companies, as defined in points (f) and (g) of Article 212(1) of Directive 2009/138, are expressly excluded from being financial institutions.

34.      In that regard, it is important to note, first, that the reference to the term ‘institution’ in Article 4(1)(26) of Regulation No 575/2013 must be read in conjunction with Article 4(1)(3) of Regulation No 575/2013, which defines that term as a credit institution or an investment firm. It follows that credit institutions, which, according to Article 4(1)(1) of Regulation No 575/2013, are undertakings the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account, are excluded from the concept of financial institutions. That is also the case for investment firms, defined in Article 4(1)(2) of Regulation No 575/2013 by reference to Article 4(1)(1) of Directive 2014/65/EU. (13) That provision defines those firms as any legal person whose regular occupation or business is the provision of one or more investment services to third parties and/or the performance of one or more investment activities on a professional basis.

35.      Second, the principal activity of an undertaking, in order to be considered a ‘financial institution’ within the meaning of Article 4(1)(26) of Regulation No 575/2013, has to be either the acquisition of holdings or the pursuance of one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36. The wording suggests that these are alternative conditions, which would mean that it is sufficient to correspond only to one of them to fall under that definition.

36.      Third, excluded from the definition of the term ‘financial institution’ are both insurance holding companies and mixed-activity insurance holding companies, as defined in points (f) and (g) of Article 212(1) of Directive 2009/138. Consequently, an undertaking coming within those definitions would not satisfy the requirements to be a ‘financial institution’.

37.      Fourth, Article 4(1)(26) of Regulation No 575/2013 does provide a list of holding companies that must be considered financial institutions. These are, inter alia, ‘financial holding companies’ and ‘mixed financial holding companies’. (14)

38.      In that regard, a ‘financial holding company’ is defined in Article 4(1)(20) of Regulation No 575/2013 as a financial institution, the subsidiaries of which are exclusively or mainly institutions, or financial institutions, at least one of such subsidiaries being an institution, and which is not a mixed financial holding company.

39.      Article 4(1)(21) of Regulation No 575/2013 further provides the definition of a ‘mixed financial holding company’. That provision refers to the definition provided in Article 2(15) of Directive 2002/87/EC, (15) which states that a mixed financial holding company is a parent undertaking, other than a regulated entity, which together with its subsidiaries, at least one of which is a regulated entity, which has its head office in the Community, and other entities, constitutes a financial conglomerate. The term ‘regulated entity’ is defined, within Directive 2002/87, as a credit institution, an insurance undertaking or an investment firm. (16)

40.      While both of the types of holding companies included in the definition in Article 4(1)(26) of Regulation No 575/2013 are defined as having ‘institutions’ as subsidiaries, it is necessary to ascertain from the wording of that provision whether they should be understood as non-exhaustive examples or, by contrast, as a numerus clausus list, from which it would not be possible to derogate when checking whether a holding company should be considered a ‘financial institution’.

41.      It is my view that the illustrations contained in Article 4(1)(26) of Regulation No 575/2013 should be interpreted in a non-exhaustive manner. That conclusion, which stems from the consideration of the English version of Regulation No 575/2013 – in particular from the use of the word ‘including’ – also appears to be supported by the wording of other linguistic versions of Article 4(1)(26) of that regulation. For instance, the French and German versions of Article 4(1)(26) respectively employ the words ‘en ce compris’ and ‘schließt’, which align with a non-exhaustive interpretation. Furthermore, in the Latvian version, the word ‘tostarp’ is used, again indicating that the list containing financial holding companies and mixed financial holding companies should not be understood in the sense of a numerus clausus

42.      That being said, a non-exhaustive list does not mean that that list ought not to be narrowed by the examples provided in it. Indeed, it is settled case-law of the Court that those examples serve as guiding terms, restricting interpretation to only those elements expressly listed in the list or which can be classified in the same category. (17) In the present case, the types of holding companies provided for in Article 4(1)(26) of Regulation No 575/2013 are intended to define the extent of the definition provided for therein, with the result that that definition applies only to the holding companies which are expressly listed there or which can be classified in the same category (ejusdem generis).

43.      Regarding Article 4(1)(26) of Regulation No 575/2013, it is therefore necessary to point out, first, that the non-exhaustive list refers only to holding companies and, second, that these holding companies must have ‘institutions’ as holdings or subsidiaries. In turn, ‘institutions’ are required to hold a connection with the financial or banking sector due to their principal activities. Therefore, even when taking into consideration the main argument submitted by the applicants in the hearing, regarding the need to interpret the definition of that term in isolation, the aforementioned considerations imply that any other holding company not covered by these examples would have to be related to the banking or financial sectors.

44.      I would note that that interpretation of the wording of Article 4(1) of Regulation No 575/2013 is also supported by the Commission’s answer to a European Banking Authority question raised in 2014, (18) in which it stated that, based on the structure of definitions in Article 4(1)(26) and (27) of that regulation, as well as the aim of the deductions set out in Article 36 thereof, the part of the definition of ‘financial institution’ that refers to the principal activity of acquiring holdings does not include purely industrial holding companies. In line with that same understanding, Regulation 2019/876 recently modified the definition of Article 4(1)(26) of Regulation No 575/2013 to expressly exclude ‘pure industrial holding’ companies from the concept of the term ‘financial institution’. Even if not applicable to the present cases ratione temporis, (19) I shall explain later that that modification is capable of illustrating the spirit behind the initial definition of that term.

45.      It follows from the foregoing considerations that the literal interpretation of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 suggests that, for a holding company to be considered a financial institution within the meaning of the latter provision, that company must acquire holdings in companies which carry out banking or financial activities. By contrast, holding companies the sole object of which is to manage shareholdings in companies other than those carrying out banking or financial activities appear not to fall under the concept of ‘financial institution’ within the meaning of those two provisions.

2.      Contextual interpretation

46.      As indicated above, when interpreting a provision of EU law, account should be taken of its context. In the present cases, financial institutions find themselves connected to specific rules, requirements and benefits that are useful in providing a contextual interpretation of the term ‘financial institution’ under Article 4(1)(26) of Regulation No 575/2013.

47.      In that regard, I have already mentioned that Regulation No 575/2013 provides uniform rules concerning general prudential requirements with which financial institutions supervised under Directive 2013/36 must comply. According to Article 1 of that regulation, those rules concern own funds requirements, liquidity requirements and reporting obligations, as well as public disclosure requirements.

48.      First, own funds requirements, such as the one set out in Article 93 of Regulation No 575/2013, require undertakings covered by that regulation to undertake risks only to the extent that they are supported by adequate levels of capital. (20) Such requirements ensure that undertakings have the necessary level of capital to be able to withstand losses that may result from their risk-taking, such as when a borrower of a loan defaults. (21)

49.      Second, liquidity requirements, provided for in Articles 412 to 414 of Regulation No 575/2013, complement capital adequacy requirements by making it mandatory for institutions to sell assets when they need to realise cash in order to pay liabilities or to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions. (22)

50.      Third, requirements relating to large exposures, regulated by Article 111 et seq. of Regulation No 575/2013, restrict significant extensions of credit to a single client or a group of connected clients. Those rules concern the regulation of the credit risk connected with lending to certain clients, as the materialisation of such a risk could jeopardise the financial interests of the European Union.

51.      In essence, prudential supervision rules, as described above, levy additional and burdensome regulatory requirements on undertakings beyond general matters such as taxation and financial consolidation. These provisions are inherently linked to banking and financial activities, and together form a management system to ensure the security of the European Union’s financial interests.

52.      Furthermore, while Article 11 of Regulation No 575/2013 subjects financial institutions to the requirements of prudential supervision, these requirements essentially regulate financial institutions in the context of them being subsidiaries of institutions or financial institutions having holdings in institutions, within the meaning of Article 4(1)(3) of Regulation No 575/2013. That means that a holding company that does not have a connection with the banking or financial sectors is actually not subject to any of the abovementioned requirements.

53.      A similar situation arises with regard to the benefits that are afforded to financial institutions by the regulatory framework at issue. One of the main benefits is the possibility to carry out the banking or financial activities referred to in Annex I to Directive 2013/36 in the territory of another Member State, once that financial institution is licensed in the Member State of origin. Indeed, Article 34 of Directive 2013/36 states that financial institutions should have the benefit of mutual recognition with regard to banking or financial activities, where they are subsidiaries of credit institutions. That provision, read in the light of recital 20 of that same directive, essentially allows financial institutions to open branches in other Member States and engage in the cross-border activities mentioned in Annex I to Directive 2013/36. The benefits that financial institutions enjoy with regard to mutual recognition are inherently tied to the financial or banking sectors due to their link with the activities of Annex I to Directive 2013/36.

54.      It follows from those considerations that a holding company the sole object of which is the management of shares and the subsidiaries or holdings of which do not carry out banking or financial activities are not covered by any of the requirements mentioned above, in particular regarding prudential supervision. Furthermore, those holding companies lack the ability to make use of the benefit of mutual recognition provided for in Directive 2013/36. Indeed, these provisions are not related to those holding companies because they have no such holdings, nor are they subsidiaries, nor do they engage in any of the activities listed in Annex I to Directive 2013/36.

55.      Consequently, the interpretation proposed by the applicants in the present three cases would undermine the coherence in Directive 2013/36, given that some financial institutions would have to follow prudential supervision rules, while others would not. From a contextual perspective, it does not seem appropriate to consider holding companies as financial institutions where they (i) do not perform the responsibilities of a financial institution, (ii) cannot take advantage of the benefits that are given to financial institutions, and (iii) do not perform the tasks generally ascribed to financial institutions. If this were allowed, it would create a legal status without any practical purpose.

56.      It is appropriate to highlight another challenging aspect of the applicants’ interpretation. Indeed, if holding companies such as those at issue in the main proceedings were considered to be financial institutions, the definition of that term would be unnecessarily broad. Many companies could resort to the structure of a holding company in order to manage their operations and investments, even though they do not have any institutions as subsidiaries or holdings.

57.      An illustrative example of the consequences of such a broad interpretation of the term ‘financial institution’ was provided by the Portuguese government during the hearing. Of all the SGPS registered in Portugal, 94% were registered as non-financial institutions, meaning that only 6% of SGPS were regulated and scrutinised by the relevant authorities. Following an interpretation of ‘financial institution’ provided by the applicants, that percentage would rise to 100%.

58.      If all holding companies were to be treated as financial institutions under Article 4(1)(26) of Regulation No 575/2013, it would create a peculiar situation. In fact, the responsibilities of holding companies would not materially change, unless they choose to acquire holdings in institutions or become subsidiaries of institutions. Essentially, they would have no additional burden, but they would be eligible to receive benefits provided by national law, such as, in the case of Portugal, the exception on the tax on documented legal transactions. The consequence would be that holdings that are managed by SGPSs would be placed at a competitive advantage when compared to other companies in a similar market that are not managed by an SGPS.

59.      Additionally, a similar situation arises when looking at the responsibilities of the national authorities. If all holding companies were to be treated as financial institutions then the national authorities would have an undue burden placed upon them with regard to the duties they have to perform in the field of prudential supervision, as set out, inter alia, in Article 4 of Directive 2013/36.

60.      From the foregoing, it is possible to draw a distinction between two types of holding companies: on the one hand, those holding companies that pursue management tasks for their industrial subsidiaries, such as the type of holding companies concerned in the main proceedings; and, on the other hand, those which acquire holdings that are part of the banking or financial sectors. It is only the latter category that appears to be covered by Regulation No 575/2013 and Directive 2013/36 as a result of a contextual interpretation.

61.      This more restrictive interpretation of ‘financial institution’ also seems to correspond to the amendment to Article 4(1)(26) that was introduced by Regulation 2019/876, which, as indicated in point 44 above, excludes ‘pure industrial holding companies’ from that definition.

62.      It is important to note that the term ‘pure industrial holding company’ has not been defined and there is no guidance provided in Regulation 2019/876 regarding its definition. Furthermore the travaux préparatoires regarding Regulation 2019/876 also contain no relevant indication regarding its interpretation.

63.      However, more recently, in a 2021 Commission proposal, (23) a definition of ‘pure holding companies’ has been proposed. Article 1(f) of that proposal, which incorporates a new point 26a into Article 4(1) of Regulation No 575/2013, states that a pure industrial holding company is an undertaking that fulfils three conditions: first, its principal activity is to acquire or own holdings; second, neither it nor any of the undertakings in which it owns participations are referred to in Article 4(1)(27) points (a), (d), (e), (f), (g), (h), (k) and (l) of Regulation No 575/2013; third, neither it nor any of the undertakings in which it owns participations perform as a principal activity any of the activities listed in Annex I to Directive 2013/36, any of the activities listed in Section A or B of Annex I to Directive 2014/65 in relation to financial instruments listed in Section C of that annex to that directive, or are investment firms, payment service providers within the meaning of Directive (EU) 2015/2366 (24), asset management companies, or ancillary services undertakings.

64.      The proposed definition, while having no legal effect, aligns with my previous analysis. It establishes that pure industrial holding companies have no connection with the financial or banking sectors due to them neither being an undertaking which performs as a principal activity any of the activities referred to in Article 4(1)(26) of Regulation No 575/2013 nor owning participations in undertakings which perform those activities as a principal activity. It follows that there needs to be a connection with the banking or financial sectors even for companies who acquire holdings.

65.      From the aforementioned considerations, I would conclude that the reference to an ‘undertaking which has as its principal activity the acquiring of holdings’, when considered in the context of Regulation No 575/2013 and Directive 2013/36, should be read restrictively. Such a reading of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 would imply that a holding company the purpose of which is the management of holdings in companies that are not subject to supervision or prudential requirements and that therefore do not fall within the scope of that directive and that regulation, would not be considered a ‘financial institution’.

3.      Teleological interpretation

66.      As regards the teleological interpretation of Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013, it is common ground that both legislative acts were adopted in order to reinforce the governance requirements applicable to financial institutions. The financial crisis which started in 2008 showed the need for a greater trust in and reliability of the financial system of the European Union. Prior to that crisis, the lack of effective checks and balances within those institutions resulted in a defective oversight of management decision making. That led to short-term oriented and excessively risky management strategies. (25) However, sound internal governance practices helped some undertakings to manage the financial crisis significantly better than others. (26)

67.      Against that background, it is clear that the absence of internal governance systems can have potentially detrimental effects on the European Union’s financial interests, as evidenced by recitals 53 and 54 of Directive 2013/36, and recitals 113 and 114 of Regulation No 575/2013. Therefore, remedying the pre-existing governance system was the goal which Directive 2013/36 and Regulation No 575/2013 sought to achieve.

68.      It follows that the definition of the term ‘financial institution’ set out in Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 needs to be consistent with that aim and keep that rationale in mind. In particular, the role of Article 4(1)(26) of Regulation No 575/2013 should be understood as to indicate which entities require stricter internal governance systems, and which entities pose a threat to the European Union’s financial interests. The definition of the term ‘financial institution’ must therefore be capable of differentiating between, on the one hand, undertakings which might pose that threat and, on the other hand, undertakings which would not have such an impact. In this way, Directive 2013/36 and Regulation No 575/2013 can be effectively utilised by the relevant authorities, and can achieve the aim they intended.

69.      Within that context, an interpretation of the term ‘financial institution’ that includes all holding companies appears somewhat detached from the scope of the definition that the EU legislature intended to cover. Own funds requirements, liquidity requirements and requirements relating to large exposures, as described in points 47 to 50 of this Opinion, are all measures applicable to financial institutions that aim to ensure sound internal governance and adequate risk management practices. This is because those requirements have a preventive effect on the potentially negative impact to the European Union’s financial interests, as well as the natural and legal persons engaging with those financial institutions. Yet, holding companies that manage non-institution holdings do not carry that same risk. It follows that their inclusion within the remit of the term ‘financial institution’ would not help in achieving the goal of remedying lacking internal governance systems of undertakings that pose a risk to the financial security and the financial interests of the Union.

70.      On another note, Annex I to Directive 2013/36 lists activities, which, as I have already indicated, are subject to mutual recognition. Article 4(1)(26) of Regulation No 575/2013 provides that an undertaking, the principal activity of which is to pursue any of the activities set out in points 2 to 12 and point 15 of that annex, will be considered a financial institution, as long as it fulfils the remaining requirements stemming from the definition established in that article. For context, examples of activities covered include, inter alia, financial leasing, lending, money broking and issuing electronic money.

71.      Two intermediary conclusions can be derived from a consideration of these activities. First, the list of respective activities, provided in Annex I to that directive, is broad. Second, they are very clearly connected to the banking or financial sectors. I believe that the EU legislator intended to make the scope of the term ‘financial institution’ as broad as possible, to avoid loopholes, where some undertakings might try to move assets out of the scope of prudential supervision, yet, still clearly related to the banking or financial sectors.

72.      It is evident that if one was to apply such reasoning to an interpretation that includes all holding companies within the scope of the term ‘financial institution’, it would only align with one of the two previously mentioned conclusions. While the scope of covered undertakings would, indeed, be broad, it would, however, fail to show a connection to the banking or financial sectors. Accordingly, I believe that a teleological reduction is necessary to ensure that such an interpretation does not excessively broaden the scope of the definition of the term ‘financial institution’.

73.      From the aforementioned analysis, it would not be appropriate to consider holding companies as the ones concerned in the main proceedings to be ‘financial institutions’ within the context of Directive 2013/36 and Regulation No 575/2013. Furthermore, this interpretation of Article 4(1)(26) of Regulation No 575/2013 is in line with and supports the previously mentioned analysis regarding a contextual interpretation.

74.      In the light of the foregoing considerations, it is apparent that all methods of interpretation lead to a restrictive reading of Article 4(1)(26) of Regulation No 575/2013. For that reason, I conclude that Article 3(1)(22) of Directive 2013/36 and Article 4(1)(26) of Regulation No 575/2013 should be interpreted as meaning that a holding company the sole object of which is the management of shares in companies, and the subsidiaries or holdings of which do not carry out activities in the banking or financial sectors cannot be regarded as a financial institution within the meaning of those provisions.

V.      Conclusion

75.      On the basis of the analysis set out above, I propose that the Court answer the questions referred by the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), and the Supremo Tribunal Administrativo (Supreme administrative Court, Portugal) as follows:

Article 3(1)(22) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC, and Article 4(1)(26) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012

are to be interpreted as meaning that a holding company the sole object of which is the management of shares in undertakings and the subsidiaries or holdings of which do not carry out banking or financial activities cannot be regarded as a financial institution within the meaning of those provisions in the version applicable to the facts of the main proceedings.

1      Original language: English.

2      Directive of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338), as amended by Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ 2014 L 60,p. 34).

3      Regulation of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1), as amended by Regulation (EU) 2016/1014 of the European Parliament and of the Council of 8 June 2016 amending Regulation (EU) No 575/2013 (OJ 2016 L 171, p. 153).

4      Directive of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ 2009 L 335, p. 1).

5      Regulation of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (OJ 2019 L 150, p. 1).

6      Diário da República No 301/1988, 6^th Supplement, Series I of 30 December 1988, as subsequently amended (‘Decree-law No 495/88’).

7      Law No 150/99 of 11 September 1999, as amended by Decree-law No 287/2003 of 12 November 2003 (Diário da República No 213/1999, Series I-A of 11 September 1999).

8      Judgment of 19 October 2017, Europamur Alimentación (C‑295/16, EU:C:2017:782, paragraph 29).

9      See recital 2 of Directive 2013/36.

10      Judgment of 3 February 2022, Finanzamt A (C‑515/20, EU:C:2022:73, paragraph 26 and the case-law cited).

11      Ibid. (paragraph 27).

12      See judgment of 9 March 2023, ACER v Aquind (C‑46/21 P, EU:C:2023:182, paragraph 54).

13      Directive of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ 2014 L 173, p. 349).

14      That provision also refers to payments institutions, within the meaning of Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (OJ 2007 L 319, p. 1), and asset management companies, which are defined in Article 4(1)(19) of Regulation No 575/2013. However, as they are not holding companies, those types of financial institutions are not relevant for the purposes of the present analysis.

15      Directive of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ 2003 L 35, p. 1).

16      See Article 2(4) of Directive 2002/87.

17      Judgment of 9 July 2020, Land Hessen (C‑272/19, EU:C:2020:535, paragraph 69). See also judgment of 16 December 2008, Satakunnan Markkinapörssi and Satamedia (C‑73/07, EU:C:2008:727, paragraph 41), and judgment of 6 November 2003, Lindqvist (C‑101/01, EU:C:2003:596, paragraphs 43 and 44).

18      Commission answer to question 2014_857 regarding the definition of a financial institution in Regulation No 575/2013, 18 July 2014, available at https://www.eba.europa.eu/single-rule-book-qa/-/qna/view/publicId/2014_857.

19      See Article 3(3)(b) of Regulation 2019/876.

20      Chiu, I.H.-Y., and Wilson, J., Banking Law and Regulation, Oxford University Press, 2019, p. 330.

21      Ibid. (p. 330).

22      Ibid.

23      Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 575/2013 as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor. 2021/0342(COD).

24      Directive of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ 2015 L 337, p.35).

25      European Banking Authority, Final Report on Guidelines on internal governance under Directive 2013/36/EU, EBA/GL/2021/05, 2 July 2021, p. 5.

26      Ibid.

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