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Levying “contributions” according to the Deposit Guarantee and Investor Compensation Act is compatible with the Basic Law
Press release No. 139/2009 of 11 December 2009
Order of 24 November 2009
2 BvR 1387/04
On 1 August 1998, the Deposit Guarantee and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz – EAEG) entered into force in the Federal Republic of Germany. The Act obliges deposit banks as well as credit institutions and other financial service institutions with certain permissions under the preconditions determined by the law to guarantee their deposits and liabilities from securities transactions through their membership in a compensatory fund. To this effect, the law distinguishes three groups of institutions, which either belong to the Entschädigungseinrichtung deutscher Banken GmbH or to the Entschädigungseinrichtung des Bundesverbandes Öffentlicher Banken Deutschlands GmbH or to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen. The compensatory fund’s task is to collect the contributions from the institutions assigned to them, to invest the funds and to compensate the creditors for deposits not repaid or for unpaid liabilities from securities transactions if a case of compensation arises. The funds for financing the compensation are raised according to the cost coverage principle by contributions of the institutions which are assigned to the compensatory fund. The Act distinguishes between annual contributions, one-time payments by institutions assigned for the first time, initial contributions and special contributions. Pursuant to the statutory provisions, the compensatory fund has to levy special contributions and to take up loans if this is necessary for carrying out a compensation procedure. On the basis of this Act, the Ordinance on the Contributions to the Securities Trading Firms’ Compensatory Fund at the Reconstruction Loan Corporation (Verordnung über die Beiträge zu der Entschädigungeinrichtung der Wertpapierhandelsunternehmen bei der Kreditanstalt für Wiederaufbau – BeitragsVO) determines the amount of the contributions and one-time payments.
The statutory provisions on the levying of contributions whose versions applicable in the years 1999 to 2001 were relevant in the constitutional complaint proceedings have been modified considerably, with the latest amendment dating from August 2009. The investor’s claim for compensation was increased and speedier payment of the compensation amounts was introduced; apart from that, the legislature drafted the provisions on the levying of the special contributions in a more detailed manner. However, the concept of distributing the risk by assigning the institutes to different compensatory funds with separate compensation tasks has fundamentally remained unchanged.
The complainant is a stock corporation which engages in stock-exchange and off-the-floor securities trading and is assigned to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen. It raised objections against the annual contributions for the years 1999, 2000 und 2001 fixed by the Entschädigungseinrichtung der Wertpapierhandelsunternehmen; each objection was rejected by the Federal Banking Supervisory Office (Bundesaufsichtsamt für das Kreditwesen). The actions brought against the notices of rejection and the appeals on points of law lodged against them before the Federal Administrative Court (Bundesverwaltungsgericht) were unsuccessful. By its constitutional complaint, the complainant objects in particular to the annual contributions pursuant to the EAEG being unconstitutional special levies.
The Second Senate of the Federal Constitutional Court rejected the constitutional complaint, which was admissible in part, as unfounded. The levying of the annual contributions pursuant to § 8.2 and 8.3 EAEG in conjunction with the BeitragsVO does not violate the complainant’s fundamental right to the free exercise of its occupation or profession (Article 12.1 GG). It is true that the Act intervenes in the area of protection of this fundamental right; the levying of this duty, however, complies with the strict constitutional requirements placed on an admissible special levy whose function is funding.
In essence, the decision is based on the following considerations:
The constitutional complaint is inadmissible to the extent that it challenges the statutory authorisation to collect special contributions pursuant to § 8.2 sentence 3 and § 8.3 sentence 2 EAEG (2001) in conjunction with § 3 BeitragsVO (2000) because in this respect, the complainant is not aggrieved and furthermore, the time-limit for lodging a constitutional complaint has not been observed. To the extent that the complainant challenges the unconstitutionality of the collection of annual contributions pursuant to § 8.2 sentence 1 and § 8.3 sentence 1 EAEG in conjunction with §§ 1 and 2 BeitragsVO, the constitutional complaint is admissible.
Notwithstanding the restriction of the admissible constitutional complaint to the collection of annual contributions which goes along wit this, the fundamental concept of risk assignment pursuant to the EAEG must be part of the constitutional appraisal of the annual contributions. The burdening with annual contributions alone is an expression of a specific risk assignment to those liable for making the contribution. The assignment to the compensatory fund for institutions according to § 6.1 sentence 2 no. 3 EAEG (“other institutions”) burdens the complainant pursuant to § 8.1 EAEG (not yet in terms of amount but on the merits) with regard to compensation cases occurring within the group of institutions assigned to the Entschädigungseinrichtung der Wertpapierhandelsunternehmen at the Reconstruction Loan Corporation.
The constitutional complaint is unfounded. In particular, Article 12 GG is not violated even though the challenged provisions on contributions intervene with the occupational freedom of those liable for making the contribution. The duty, which is referred to as contribution (Beitrag) in the Act, is directly linked to the activity of certain enterprises in the financial markets, and fundamentally, the volume of business is decisive for its amount. In this respect, it is similar to the contribution collected for the funding of the Federal Financial Supervisory Authority in the supervisory areas Credit and Financial Services and Securities Trading (see Federal Constitutional Court, order of the Second Senate of 16 September 2009 – 2 BvR 852/07 –, Wertpapier-Mitteilungen 2009, p. 2023). As is the case with the latter contribution, also the yield from the duty in the present case serves to guarantee the framework conditions of a specific market, and those liable to pay the duty are burdened with it because they participate in this market.
The Federation was allowed to enact the challenged provisions within its legislative competence for the law relating to economic affairs under Article 72.2 GG in conjunction with Article 74.1 no. 11 GG. The annual contributions are special levies for providing funding which comply with the special requirements that result for such levies from the protective and limitative function of the provisions in the Basic Law pertaining to fiscal activities. According to established case-law of the Federal Constitutional Court, such a levy cannot be justified under constitutional law as a tax but only as non-tax levy. In principle, the imposition of such a levy is limited by the requirement of a special factual ground of justification.
The levying of the duty serves an objective which goes beyond mere fundraising. The compulsory membership in one of the compensatory funds is part of the admission system for the access to the financial markets of the institutes affected (§ 32.3 and 3a, § 35.1 sentence 2 of the Banking Act (Gesetz über das Kreditwesen – KWG) and thus part of the statutory regulation of the financial markets. It is particularly aimed at: (1) facilitating investors the trustful access to securities services rendered by securities firms from EU Member States; and (2) facilitating securities firms cross-border distribution of securities services without obliging them to become members of an investor compensation scheme outside their own country.
The group of securities trading enterprises, which derives its primary structure from European Community law, is a homogeneous one exactly as regards factual proximity to, and responsibility of funding for, the objectives pursued by the collection of the duty; such proximity and responsibility is decisive under the provisions in the Basic Law pertaining to fiscal activities. The mandatory obligation, prescribed under European Community law by Article 2.1 of the investor compensation directive, for fundamentally all enterprises authorised to engage in securities transactions to belong to a compensation scheme already establishes a special proximity to the protective and safeguarding objectives of investor compensation. This fundamental obligation must, also independently of other provisions under European Community law, e.g. the provisions on state aids under Article 87 et seq. of the Treaty establishing the European Community, ultimately be regarded as an essential element a specific proximity to the subject-matter on the part of the securities trading enterprises, which is relevant also under the provisions in the Basic Law pertaining to fiscal activities.
In spite of overarching financial market risks which concern all groups of institutes, it is, basically at any rate, compatible with the requirements placed on a homogeneous group’s factual proximity and responsibility of funding that the legislature has not created a single compensatory fund for all deposit banks and securities trading enterprises, i.e. that thus, it has not created a single risk community but has segmented risk communities and risk assignments according to § 6.1 EAEG by creating three different groups of institutes – deposit banks governed by private law or by public law as well as securities trading enterprises as “other institutes” – which are each assigned to its own compensatory fund. Especially if is based on the different institutional and legal structures of the different groups in an adequate manner, such segmentation can be tenable also according to the purpose of the strict constitutional requirements placed on the collection of special levies. For what is at issue here is not a question of taking a fundamental decision about an additional burden but of adequately organising the burden, and the legislature must be granted appropriate latitude for doing so. Against the backdrop of the historical development of deposit protection in Germany and of the regulation of the financial markets under European Community law, spreading the risk of non-payment across the different groups of institutes is basically an adequate solution which does justice to the objective.
Organising viable compensation schemes in the financial market is an extremely complex task. In 1998, with the Deposit Guarantee and Investor Compensation Act, the legislature broke new ground in legislation in an area in which assessments and forecasts involve considerable uncertainties. Against the backdrop of the different starting situations of the deposit banks on the one hand and of the other institutes (§ 6.1 sentence 2 no. 3 EAEG) on the other hand, it was justifiable on the merits in this situation to take up organisational structures of existing compensatory funds, which had already proven their worth, and to correspondingly establish different groups of institutes. With a view to the question of whether the establishment of different groups of institutes was a suitable means, the legislature could, according to general constitutional principles, claim a certain scope for assessment and prognosis.
The securities trading enterprises’ proximity to the subject-matter and their responsibility for funding are also not called into question by the fact that the financial burdening of the institutes which jointly form the compensatory fund factually assigns them responsibility (also) for the consequences of third parties’ misconduct. According to the Federal Constitutional Court’s judgment on the Solidarity Fund for Re-Exporting Waste (Decisions of the Federal Constitutional Court (Entscheidungen des Bundesverfassungsgerichts – BVerfGE 113, 128 (152)), the principles concerning the permissibility of special levies do not preclude from the outset that such a levy, by means of what is known as fund solutions, is also used to pay for the elimination of the consequences of misconduct – for instance of conduct that is harmful to the environment – in cases in which those who are chiefly responsible cannot be burdened because they cannot be found or are unable to pay or because an effective individual assignment of the damage is not possible for other reasons.
The legislature was also allowed to assign a responsibility for funding also to those institutes whose customers, as is the case with the complainant, are in fact exclusively so-called institutional investors, which pursuant to § 3.2 EAEG are not entitled to compensation if a case of compensation arises. Including institutes in the group of those liable to make a contribution who according to their permit are not authorised to acquire ownership or possession of monies or securities of their customers, on the one hand takes account of possible transgression of what is permitted under the law of supervision; on the other hand, the contingent liability of the entire group has, also as regards these institutes, the advantage of strengthening the customer’s trust in honest business practice, which has a market-stabilising effect.
The requirement that the yield from the special levy be used for the benefit of the group is also complied with. The annual contributions for the funding of the Entschädigungseinrichtung der Wertpapierhandelsunternehmen can be justified on the basis of the responsibility for the ramifications of the circumstances or conduct of a specific group.