In what can be considered a setback for the EFTA Surveillance Authority (ESA), on 20 December 2024, the EFTA Court delivered its judgment in Case E-13/23, ESA v Norway (Prior authorisation in the financial sector).
The EFTA Court dismissed ESA’s in different pleas, with two plea being held inadmissible, and a third being partly unfounded.
Infringement proceedings against EFTA-EEA states
Article 31 SCA provides ESA with the ordinary ground to bring infringement proceedings against an EFTA-EEA state for its failure to comply with EEA law. It is the equivalent procedure available to the European Commission over EU Member States as contained within Article 258 TFEU.
ESA’s pleas
In the case at hand, ESA sought a declaration of the EFTA Court that Norway had breached several provisions of EEA law by maintaining an authorisation requirement for Norwegian financial institutions to set up subsidiaries in other states within the EEA.
In argued that Norway’s requirement for prior authorisation under national law was incompatible with both EEA primary law (Article 31 EEA on the freedom of establishment), and EEA secondary law (a number of directives).
Judgment of the EFTA Court
The EFTA Court’s judgment addressed substantive issues of EEA law, but more importantly, procedural issues of EEA law. Given the case fell on the latter, only that is analysed.
Of its own motion (given Norway had not pleaded inadmissibility), the EFTA Court decided to check whether all the conditions laid down for infringement proceedings under Article 31 SCA had been met. According to the EFTA Court,
‘it is incumbent upon ESA to prove the allegation that the obligation has not been fulfilled. Therefore, it is also ESA’s responsibility to place before the [EFTA] Court the information needed to enable the [EFTA] Court to establish that the obligation has not been fulfilled, and in doing so ESA may not rely on any presumption’ (para 61).
In then set out that in all direct actions, in line with the Rules of Procedure of the EFTA Court, applicants (in this case, ESA),
‘must state the subject-matter of the proceedings and set out a summary of the pleas in law on which the application is based, and that statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the [EFTA] Court to rule on the application. It follows that the essential points of law and of fact on which such an action is based must be indicated coherently and intelligibly in the application itself and for the form of order to be set out unambiguously so that the [EFTA] Court does not rule ultra petita or fail to rule on a complaint’ (para 62).
Pleas under EEA secondary law
On the pleas under EEA secondary law, the EFTA Court stated that,
‘ESA has not sufficiently explained why it considers that those provisions prohibit the home [s]tate authorities of the parent undertaking from assessing and intervening in the parent undertaking’s acquisition or establishment of a subsidiary in another EEA [s]tate’ (para 72).
In essence, the EFTA Court was saying that the pre-litigation procedure, which is part of the Article 31 SCA process, was not correctly followed. As the EFTA Court put it,
‘[the] purpose of the pre-litigation procedure: to give the EEA [s]tate concerned an opportunity to comply with its obligations under EEA law. For this objective to be achieved, ESA must ensure that the EFTA [s]tate is in a position to fully understand the nature of the alleged breach. This requires that ESA conducts a thorough investigation and properly defines the case at the administrative stage of the procedure, rather than deferring essential analyses until the final phase, such as the oral hearing.’ (para 75).
Further, the EFTA Court stated that,
‘it is not sufficient for ESA, in order to claim that the defendant EFTA State has not complied with a provision of EEA law, merely to cite that provision in the section of the reasoned opinion or of the application which covers the legal context and which is purely descriptive and lacking of any explanatory character’ (para 87).
In addition,
‘ESA has not provided an adequate examination of the provisions of the directives that it alleges Norway has infringed, the application does not meet the requirements of clarity, precision and coherence’ (para. 91).
Thus, the pleas of ESA, on the basis of the alleged infringement of EEA secondary law, was inadmissible.
Pleas under EEA primary law
On the pleas under EEA primary law, the EFTA Court stated,
‘it is not clear from ESA’s application which category or categories of institutions will be assessed on the basis of the freedom of establishment principle’ (para 110).
Thus,
‘ESA has failed to identify the financial institutions it considers to be the subject of the alleged breach of Article 31 EEA, it must be held that ESA has failed to demonstrate to the requisite standard of proof that Norway has failed to fulfil its obligations in respect of Article 31 EEA’ (para 114).
Brief analysis
The majority of cases that ESA takes under the infringement procedure in Article 31 SCA that arrive on the docket of the EFTA Court are not contested by the EFTA-EEA states in question. This leads to short judgments, of no major consequence.
The most intriguing cases are the ones that are contested. However, what this case has seen, remarkably, is that the case never proceeded to substantive analysis of the EFTA Court at all. Because here, the EFTA Court was not satisfied with the pre-litigation procedure.
To put it blunt, from reading the judgment, the EFTA Court was of the view that ESA bungled this infringement procedure, and that, in turn, it should start again.
Whilst there is a good argument to be made that ESA can and should be taking more infringement proceedings for EFTA-EEA states lack of compliance with EEA law (see, e.g., the argument of Ólafur Ísberg Hannesson, ‘Public and private enforcement’ in Graham Butler (ed), Research Handbook of EEA Internal Market Law (Edward Elgar Publishing, 2025), here), it is clear that the EFTA Court demands that EFTA-EEA states are afforded the opportunity of an adequate defence in infringement proceedings. In order for that to happen, ESA must be clearer in its pre-litigation procedure.
Read the judgment
The judgment of the EFTA Court in Case E-13/23, ESA v Norway (Prior authorisation in the financial sector), delivered on 20 December 2024, can be read here.