EU acts without binding legal force producing binding legal effects at the national level: Enforcement of ESA soft law in the Czech Republic

The European Supervisory Authorities (ESAs) are empowered, by their founding regulations, to adopt guidelines and recommendations “with a view to establishing consistent, efficient and effective supervisory practices within the ESFS, and to ensuring the common, uniform and consistent application of Union law”. These acts can be considered genuine EU soft law since they lack the binding legal force. However, they remain perfectly non-binding only at the EU level and in the relation between the ESAs and the national competent authorities (NCAs). Although the NCAs have a duty “to make every effort to comply” with such soft law, they keep a certain leeway to decide whether they eventually comply or not. Nonetheless, the situation is different in case of financial institutions under their supervision. Formally, the EU regulations attribute to them also only a duty “to make every effort to comply”. However, once the NCA decides to comply and effectively enforces the compliance from financial institutions, the latter have a very limited, or even no leeway to decide about the compliance. Within the complex regulatory system, the NCA metamorphosis from a normtaker into an effective norm-enforcer who is capable to determine what effects the ESA soft law have at the national level. This paper focuses on the life of ESA soft law in the Czech Republic. It examines the role and power of the Czech NCA (the Czech National Bank, CNB) in the light of the legislative framework and other domestic binding legal rules. It takes into consideration the real enforcement strategy and practices of the CNB to show that, in the hands of the CNB, ESA guidelines and recommendations become acts, which produce binding legal effects upon financial institutions. Based on this observation, the paper raises questions about the proper control of ESA soft law and potential remedies.