EU Court Says It Has Final Say in Berlusconi Bank Case

(CN) — Europe’s highest court Wednesday said it alone can rule on a decision by the European Central Bank to bar media mogul and former Italian Premier Silvio Berlusconi from owning a large stake in an Italian bank due to his conviction for tax fraud.

The ruling means Europe's high court will have the final say over whether Berlusconi and his Fininvest must divest about 20 percent of the stakes they own in Banca Mediolanum, an asset-gathering bank. It was considered a setback for Berlusconi and Fininvest because the high court tends to back decisions made by the European Central Bank.

The Wednesday ruling from the European Court of Justice came in a long-running dispute over whether Berlusconi and his associates can own more than 10 percent in Banca Mediolanum, a Milan-based bank. Berlusconi’s ownership stake was put into question after he was convicted of tax fraud in 2013.

The conviction also barred the scandal-ridden, but still popular, former premier from holding public office. But that ban was lifted in May by an Italian court and Berlusconi, 82, is again active in politics, heading up the center-right Forza Italia party.

Since the 1990s, the Berlusconi family’s holding company Fininvest has owned about 30 percent of Mediolanum, which controlled Banca Mediolanum.

Berlusconi’s tax fraud conviction led to the fight over whether his criminal conviction made him unfit to own more than 10 percent in Mediolanum. Under Italian and European laws, people can be barred from owning large stakes in financial institutions if they are considered untrustworthy, such as people with criminal records.

The Banca d’Italia, Italy's central bank, determined that the former premier no longer fulfilled this “reputation requirement” and therefore should not be allowed to own more than 9.9 percent of Mediolanum.

Berlusconi took his case to Italy’s administrative courts and won. In March 2016, Italy’s Council of State, which interprets and rules on public laws, nixed the Banca d’Italia’s decision. The council said Berlusconi’s ownership of Mediolanum preceded a law requiring a good reputation and that the law could not be applied retroactively.

But the fight was hardly over. In the meantime, Banca Mediolanum took over Mediolanum in a merger. In turn, this meant that Fininvest needed a new authorization to own a qualifying holding in the bank, which is more than 10 percent of it. And to get such authorization, Banca  d’Italia determined Berlusconi needed to cross the good-reputation threshold.

In 2016, the Banca d’Italia and the European Central Bank said Berlusconi did not meet this definition due to his tax fraud conviction. The banks also noted irregularities by other members of Fininvest.

Berlusconi then asked the General Court of the European Union, a court under the Court of Justice, to annul the European Central Bank’s decision. That case is on hold pending a ruling from the Court of Justice.

Berlusconi and Fininvest also asked the Council of State to annul the Banca d’Italia’s decision. The Council of State in turn asked the Court of Justice to determine whether national courts or EU courts should review decisions to initiate procedures, such as the one Banca d’Italia did against Berlusconi.

On Wednesday, the Court of Justice said EU courts, under the EU’s Rome Treaty that spells out how the bloc functions, have the power to assess the legality of acts adopted by an EU institution, in this case the European Central Bank’s decision, which was based on the Banca d’Italia’s recommendation. The ruling said it falls to EU courts to determine if there were any defects in the Banca d’Italia’sdecision-making.

Fininvest did not immediately comment on the ruling. The high court did not indicate when it may rule on whether Berlusconi and Fininvest can own 30 percent of the bank. Since 2016, 20 percent of Fininvest’s voting rights in the bank have been suspended.

(Courthouse News reporter Cain Burdeau is based in the European Union.)

Follow @cainburdeau

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