This leads to Paul v Germany  2 CMLR 62 where the Claimant brought a case against the federal bodies supervising the German scheme (German Deposit Guarantee and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz – EAEG). In fact Germany operates a mandatory scheme offering protection of up to Euros 100,000 and a voluntary scheme (the Deposit Protection Fund) which allows institutions in Germany (and German institutions outside the European Economic Area) to offer a higher level of security.
The ECJ found that the state was not liable where the system of DPS had failed the the consumer. Provided domestic law applied the principles of the Directive and was effectively managed the member state had no liability. The ECJ held that the ‘failure to take supervisory measures does not of itself militate against a finding of state liability’ (para.AG93) and that Directive 94/19 explicitly refuted individual rights against the state (in terms of liability) ‘if they have ensured that one or more schemes guaranteeing deposits or credit institutions themselves and ensuring the compensation or protection of depositors under the conditions prescribed in this Directive have been introduced and officially recognised (24th Recital, Directive 94/19).
This decision held that the real measure in this case was whether the state’s laws as enacted met the legal requirements as laid out in the relevant Directive (AG101).
Analysis of Paul v Germany: the ECJ has in effect held that the matter of enforcing the DPS is between the consumer and the financial institution and the government cannot be held directly financially liable. This is justifiable in legal terms and where for example the member state’s laws allow action against the institution or individual for perhaps criminal sanction there would be some form of redress. However, where a bank has genuinely failed in terms of having no assets against which creditors can claim (which is likely usually to be the case) the true, practical effectiveness of the DPS has to be questioned as the consumer is unlikely to be able to obtain the money which was theoretically guaranteed to them.
However, Paul v Germany concerned an isolated bank in an otherwise – relatively – robust banking system in a country which was essentially financially secure. This was similar to the abogados de accidentes florida case. As such this case would have no wider consequences in either the member state or the EU as a whole.
Then you need to discuss the Iceland cases. This is an entirely different context. First, it must be noted that Iceland is not part of the EU (obvious but it’s as well to point this out to show you know). However it fell under the ambit of the Directive because it is part of the EEA and the European Free Trade Area and, more pertinently, because it had branches (called ‘Icesave’) in the UK and the Netherlands.