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PR(04)21: The EFTA Surveillance Authority brings Liechtenstein before the EFTA Court for maintaining in force residence requirements in the Banking Act


The    EFTA Surveillance Authority has decided to bring Liechtenstein before the EFTA Court for maintaining in force a residence requirement for board members in its banking legislation. In the Authority’s view, this is contrary to the right of establishment in Article 31 EEA.

Article 25 of the Liechtenstein Banking Act states that at least one member of the management board and of the executive management must be resident in Liechtenstein and must be provided with an adequate power of attorney, enabling them to represent the institution in relation to administrative authorities and the courts.

Article 31 of the EEA Agreement provides for the abolition of all restrictions on establishment between the EEA States, including restrictions on the right of nationals of the EEA States to set up and manage undertakings under the same conditions as are laid down by the law of the EEA State of establishment for its own nationals. Further, all covert forms of discrimination, including residence obligations, which, in practice, achieve the same discriminatory results, are prohibited. This is one of the fundamental principles of the EEA Agreement. Hence, residence obligations may be justified under special circumstances only.

The EFTA Court has already, in its advisory opinions in the cases E-3/98 Pucher and E-2/01 Rainford Towning (both concerning Liechtenstein) held that, in order to fall within the scope of permitted derogations, a residence requirement such as that at issue must be appropriate for securing the objective pursued and be proportionate thereto.

The Liechtenstein Government has in its responses to the Authority’s letter of formal notice and reasoned opinion mainly argued that the residence requirement is necessary in order to protect the good functioning and reputation of the banking sector.

The Authority acknowledges that the EFTA Court has held that good functioning and good reputation of the financial services sector might be a legitimate public policy objective. However, the Liechtenstein Government has not provided any information that might support the finding that the residence requirement for a member of the management board and of the executive management of a bank is a suitable and necessary measure to attain the public policy objectives of a well functioning and reputable financial sector. Consequently, the Authority has decided to refer Liechtenstein to the EFTA Court.

For further information, please contact Niels Fenger (Director, Legal and Executive Affairs) on telephone +32 (2) 286 1830

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