Opinion of Advocate General Campos Sánchez-Bordona delivered on 5 October 2023

1. Directive 2015/2366

3. Article 4 (‘Definitions’) provides:

‘For the purposes of this Directive, the following definitions apply:

…

1. “payment service” means any business activity set out in Annex I;

2. “payment institution” means a legal person that has been granted authorisation in accordance with Article 11 to provide and execute payment services throughout the Union;

3. “payment transaction” means an act, initiated by the payer or on his behalf or by the payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee;

…

1. “payment order” means an instruction by a payer or payee to its payment service provider requesting the execution of a payment transaction;

…’

4. Article 18 (‘Activities’) reads:

‘1.

Apart from the provision of payment services, payment institutions shall be entitled to engage in the following activities:

1. the provision of operational and closely related ancillary services such as ensuring the execution of payment transactions, foreign exchange services, safekeeping activities, and the storage and processing of data;

2. the operation of payment systems, without prejudice to Article 35;

3. business activities other than the provision of payment services, having regard to applicable Union and national law.

2.

Where payment institutions engage in the provision of one or more payment services, they may hold only payment accounts which are used exclusively for payment transactions.

3.

Any funds received by payment institutions from payment service users with a view to the provision of payment services shall not constitute a deposit or other repayable funds within the meaning of Article 9 of Directive 2013/36/EU [of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338)], or electronic money as defined in point (2) of Article 2 of Directive 2009/110/EC.

…

5.

Payment institutions shall not conduct the business of taking deposits or other repayable funds within the meaning of Article 9 of Directive 2013/36/EU.

…’

5. Paragraph 1 of Article 78 (‘Receipt of payment orders’) provides:

‘Member States shall ensure that the time of receipt is when the payment order is received by the payer’s payment service provider.

The payer’s account shall not be debited before receipt of the payment order. …’

6. Paragraph 1 of Article 83 (‘Payment transactions to a payment account’) states:

‘Member States shall require the payer’s payment service provider to ensure that after the time of receipt as referred to in Article 78, the amount of the payment transaction will be credited to the payee’s payment service provider’s account by the end of the following business day. That time limit may be extended by a further business day for paper-initiated payment transactions.’

2. Directive 2009/110

7. In accordance with Article 2 (‘Definitions’):

‘For the purposes of this Directive, the following definitions shall apply:

1. “electronic money institution” means a legal person that has been granted authorisation under Title II to issue electronic money;

2. “electronic money” means electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transactions as defined in point 5 of Article 4 of Directive 2007/64/EC [of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC (OJ 2007 L 319, p. 1)], and which is accepted by a natural or legal person other than the electronic money issuer;

…’

8. Article 10 (‘Prohibition from issuing electronic money’) is worded as follows:

‘Without prejudice to Article 18, Member States shall prohibit natural or legal persons who are not electronic money issuers from issuing electronic money.’

9. In accordance with Article 11 (‘Issuance and redeemability’):

‘1.

Member States shall ensure that electronic money issuers issue electronic money at par value on the receipt of funds.

2.

Member States shall ensure that, upon request by the electronic money holder, electronic money issuers redeem, at any moment and at par value, the monetary value of the electronic money held.

3.

The contract between the electronic money issuer and the electronic money holder shall clearly and prominently state the conditions of redemption, including any fees relating thereto, and the electronic money holder shall be informed of those conditions before being bound by any contract or offer.

…’

1. Law on payments⁽⁶⁾

10. Pursuant to Article 2(11) and (40), respectively, ‘payee’ means any natural or legal person, other entity or subdivision of an entity which appears on a payment order as the recipient of the funds to which the payment transaction relates; and ‘payer’ means a natural or legal person, other entity or subdivision of an entity which is the holder of a payment account and authorises a payment order from that account or, where no payment account exists, which issues a payment order.

11. Under Article 5, the following are payment services: payment transactions, including transfers of funds through a payment account with the user’s payment service provider or with another payment service provider; direct debits, including one-off direct debits; payment transactions through a payment card or a similar device; or transfers, including standing orders (point 3); and money transfers (point 6).

12. In accordance with Article 6(3), payment institutions form part of payment service providers.

13. Article 38(1) provides that the payer’s payment service provider is to refund the payer the amount of an unauthorised payment transaction immediately after it has become aware of or has been informed of the transaction, by the end of the next business day at the latest, and that, where necessary, it is to restore the payment account from which the amount was debited to the state in which it would have been had the unauthorised payment transaction not been carried out, unless the payer’s payment service provider has reasonable grounds to suspect the existence of fraud and communicates those grounds in writing to the supervisory authority. The payer’s payment service provider must also ensure that the payer does not incur any losses as a result of interest owed to or by the payment service provider.

14. Article 42(2) states that a payment service user which initiates a payment order and its payment service provider may agree that execution of the payment order is to commence on a specified day, at the end of a specified period or on the day on which the payer made the funds available to the payment service provider. In such a case, the date thus agreed will be treated as the date of receipt of the payment order. Where the agreed date is not a business day for the payment service provider, the payment order will be deemed to have been received on the next business day.

15. Article 46(1) provides that the payer’s payment service provider must ensure that, once the payment order is received, the amount of a payment transaction in euro carried out in Lithuania and destined for another Member State is credited to the account of the payee’s payment service provider by the end of the next business day, except in the situation set out in Article 46(3). That time limit may be extended by one additional business day where the payment transaction is initiated on paper.

16. Article 46(3) stipulates that, when transfers in euro are carried out in Lithuania, the payer’s payment service provider must ensure that, once the payment order has been received, the amount of the payment transaction is credited to the account of the payee’s payment service provider on the same day, where the payment order has been received on a business day before 12.00. Where the payment order has been received after 12.00, the payer’s payment service provider must ensure that the amount of the payment transaction is credited to the account of the payee’s payment service provider by the next business day at the latest. In the situation provided for in Article 42(2) of that law, the payer’s payment service provider is to ensure that the amount of the payment transaction is credited to the account of the payee’s payment service provider on the date of execution of the payment order, and, where that day is not a business day for the payment service provider, on the next business day.

2. Law on payment institutions⁽⁷⁾

17. Article 4(3) states that a payment institution which provides one or more payment services may hold payment accounts intended solely for the provision of payment services. Funds received by a payment institution from payment service users for the provision of payment services do not constitute deposits or other repayable funds or electronic money.

18. Article 4(5) provides that a payment institution may not receive deposits or other repayable funds from non-professional market operators or issue electronic money.

3. Law on electronic money⁽⁸⁾

19. In accordance with Article 2(1), ‘electronic money’ is defined as monetary value, as represented by a claim on the issuer, which is put into circulation when funds are transferred to the issuer by natural or legal persons and which has the following characteristics: it is to be stored in electronic, including magnetic, format, for payment purposes and will be accepted by persons who are not electronic money issuers.

20. Article 5 prohibits any natural or legal person which is not an electronic money issuer from issuing electronic money.

21. Article 6(1) states that issuers of electronic money are to issue electronic money at its par value after funds have been received from natural or legal persons.

1. Electronic money

33. Digital evolution is leading to a major overhaul of the provision of financial services and the retail payment sector is at the forefront of that trend.⁽¹⁴⁾ EU legislation, most notably Directive 2015/2366, is barely able to contain that rapid technological change⁽¹⁵⁾ and, therefore, the Commission has proposed the repeal of the directive and its replacement by another.⁽¹⁶⁾

34. One of the innovations in the provision of payment services was the emergence of electronic money, which is issued by EMIs and is now widespread.⁽¹⁷⁾ The arrangements for this were governed by Directive 2000/46/EC⁽¹⁸⁾ until it was repealed by Directive 2009/110, which is now in force.

35. Directive 2009/110 updated the definition of electronic money to make it clearer and technically neutral.⁽¹⁹⁾ According to the definition in Article 2(2) of that directive, the term ‘electronic money’ means electronically, including magnetically, stored monetary value⁽²⁰⁾ which:

• is represented by a claim on the issuer;

• is issued on receipt of funds for the purpose of making payment transactions; and

• is accepted by a natural or legal person other than the electronic money issuer.⁽²¹⁾

36. Electronic money products can be hardware- or software-based, depending on the technology used to store the monetary value. Schemes mixing both hardware- and software-based features also exist.

37. In the case of hardware-based products, the purchasing power resides in a personal physical device, such as a chip card, with hardware-based security features. Monetary values are typically transferred by means of device readers that do not need real-time network connectivity to a remote server.

38. Software-based products employ specialised software that functions on common personal devices such as personal computers or tablets. To enable the transfer of monetary values, the personal device typically needs to establish an online connection with a remote server that controls the use of the purchasing power.

39. The legal rules applicable to electronic money, on the one hand, and payment services, on the other, are laid down in two different but interrelated directives,⁽²²⁾ the separate existence of which is being reconsidered.⁽²³⁾

2. Payment service, payment transaction and payment account

40. Article 4 of Directive 2015/2366 contains definitions of the concepts used in its enacting terms. In so far as is important for these proceedings:

• Article 4(3) defines ‘payment service’ as any business activity set out in Annex I. At least three of those activities involve actions on a payment account.⁽²⁴⁾

• Article 4(5) defines ‘payment transaction’ as an act, initiated by the payer or on his or her behalf or by the payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee.

• Article 4(12) defines ‘payment account’ as an account held in the name of one or more payment service users which is used for the execution of payment transactions.⁽²⁵⁾

1. Time limit for execution of payment orders

49. Article 83(1) of Directive 2015/2366 lays down a short period within which a payer’s PSP is to credit the amount of the payment transaction to the payee’s account (more specifically, to the account of the payee’s PSP).⁽³¹⁾

50. That period starts to run from the time of receipt of the payment order. Pursuant to Article 78(2), the PSP and the payer may agree another date as ‘the time of receipt for the purposes of Article 83’ of Directive 2015/2366.⁽³²⁾

51. As the Czech Government states,⁽³³⁾ the provision in Article 78(2) of Directive 2015/2366 would be rendered meaningless if PSPs were under an obligation to comply with the time limit in Article 83(1) with effect from the receipt of funds and not from the receipt of the payer’s payment order.

52. The time limit for execution in Article 83 of Directive 2015/2366 starts to run as soon as the payment order is received, and not when the payment account holder transfers funds to that account. In other words, the period does not start at the time of receipt of funds if the payer has not issued a payment order from those funds.

53. The link between the period for execution of the payment transaction and receipt of the payment order ensures that a PSP acts in accordance with an act initiated by the payer (Article 4(5) of Directive 2015/2366) or with an instruction by the payer (Article 4(13) of Directive 2015/2366).

54. That link means that the holder may (as frequently occurs) transfer funds to its payment account without, as yet, an accompanying payment order. The holder is authorised to keep funds in the account which will be used to execute future payment orders. Logically, a PSP will not be able to execute a payment order received if there are no funds in the payer’s payment account.

55. On the same lines, Directive 2015/2366 refers to instances of payment services which, for their proper execution, require the ‘continuous’ availability of funds in the payment account. For example, the execution of direct debits⁽³⁴⁾ necessitates, to a certain extent, the continuous availability of funds in the payment account: it would be highly impractical for a user to transfer funds a very short time in advance for each debit, with the added risk that the amount of the debit might change.

56. The requirement of the continuous availability of funds in a payment account is also clear in cases such as that in Article 78(2) of Directive 2015/2366, which provides for the execution of payment orders a posteriori and within an agreed period.

57. The Lithuanian Government and the referring court appear to suggest, by contrast, that there is an issuance of electronic money where a PSP receives funds in a payment account without the holder transmitting payment orders for execution, in which case the PSP should proceed to repay those funds rather than hold them (in readiness) in the payment account. That was the Bank of Lithuania’s complaint to ABC Projektai.

58. I believe that that argument, as regards the conversion of funds into electronic money, is not supported by Directive 2015/2263.

59. In my opinion, a PSP will infringe that directive,⁽³⁵⁾ but will remain within its scope, if it receives payment orders and does not execute those orders in accordance with Articles 78 and 83 of the directive. By infringing the contractual provisions applicable to the operation of a payment account, a PSP may also incur the liability provided for in Article 89 of Directive 2015/2366, but that is not the reason why funds would be converted into electronic money. Such a conversion does not occur merely because funds have been transferred to a payment account and are kept in that account for the execution of future payment orders.

60. With the exception of expressly defined cases, Directive 2015/2366 provides for complete harmonisation (Article 107(1)). Accordingly, any national provisions which are contrary to the directive must be disapplied, such as where a Member State sets a compulsory period within which PSPs must execute payment orders following the receipt of funds in a payer’s account.

61. Article 10 of Directive 2015/2366 requires that the funds of payment service users which are held by a PSP must be safeguarded, by ensuring: (a) either that those funds are not commingled with the funds of any natural or legal person other than payment service users on whose behalf the funds are held, (b) or that the funds are covered by an insurance policy or some other comparable guarantee from an insurance company or a credit institution, which does not belong to the same group as the PSP itself.

62. Accordingly, there is no risk to the user where that user transfers to or keeps funds in a payment account for a period of time and later issues a payment order against those funds. It will be upon receipt of that payment order that the PSP will have to proceed to execute the order with the speed required by Article 83 of Directive 2015/2366.

63. Funds received by PSPs from users who have a payment account may be used only for payment transactions (Article 18(2) of Directive 2015/2366). Therefore, those funds must always be available and under the control of the account holder, which will not receive interest if it keeps the funds in the account to carry out future payment transactions. Those funds, as I observed when transcribing Article 18(3) of Directive 2015/2366, do not constitute deposits or other repayable funds for the purposes of Article 9 of Directive 2013/36, or electronic money.

2. Decisive criteria for the issuance of electronic money

64. It may be inferred from the definition contained in Directive 2009/110 and from other provisions of that directive that the issuance of electronic money involves the following criteria:⁽³⁶⁾

• the user makes funds available to the EMI and the EMI creates a supplementary asset in an amount no lower than that monetary value. Prepayment is the starting point for the issuance of electronic money;

• the user and the EMI conclude a contract pursuant to which the latter issues electronic money with a view to carrying out payment transactions. The purpose of the electronic money is to serve as a payment instrument that the user will issue to a person who accepts that type of money;

• electronic money is stored electronically or magnetically;

• monetary value represents a claim on the issuer by the user. The issuer is required to repay that value,⁽³⁷⁾ upon request by the holder;⁽³⁸⁾

• electronic money is accepted as a means of payment by a natural or legal person other than the issuer.

65. In my view, which is largely the same as that of ABC Projektai, the German, Czech and Polish Governments and the Commission, in the circumstances described by the referring court a number of the essential criteria for treating ABC Projektai’s activity as constituting the issuance of electronic money are not met.

66. First, as I explained above, the issuance of electronic money requires specific agreement, set out in a contract. The user must agree with the EMI to provide it, in that format, with the corresponding funds for the purposes of carrying out payment transactions. The EMI issues electronic money because the user expresses its wish to avail itself of that model and transfers those funds to the EMI to be used for its subsequent payments.

67. Subject to the referring court’s final assessment, nothing in the case file suggests that such a contract existed or that the user expressed its wish that ABC Projektai should issue electronic money for the monetary value of the funds transferred. The transfer of funds to a payment account and the holding of those funds in that account without immediately mandating any payment operations to the value of those funds does not entail a (tacit) expression of the user’s wish for the issuance of electronic money.

68. It is true that the subjective component, that is to say the purpose⁽³⁹⁾ pursued by the user would not be decisive in itself if it were not set out in a contract with the EMI; that contract is a structural (and, by the same token, objective) element of the issuance of electronic money.

69. The wishes of both parties must be made clear in that contract, such that the user and the EMI expressly agree that the latter is to issue electronic money for the monetary value of the funds received from the former. Otherwise, there would be a transfer of funds to a payment account so that the PSP or the EMI itself⁽⁴⁰⁾ could carry out payment services on behalf of the user.

70. Secondly, the prepayment requirement, which is another distinguishing feature of electronic money, is not fulfilled in the circumstances described by the referring court either. As a result of prepayment, the EMI has control of the funds transferred to it by the user in order to make subsequent payments once those funds have been converted into electronic money.

71. When electronic money is issued, control of the funds rests with the EMI⁽⁴¹⁾ and not with the user who uses the monetary value as a payment instrument. The EMI controls, until the end of the contract, any funds received from the user⁽⁴²⁾ in the form of electronically stored monetary value. Electronic money is a supplementary asset which the EMI creates on the basis of those funds.

72. However, where payment services are provided on the basis of a payment account, it is the user and not the PSP which controls the funds transferred to that account at all times.

73. In this case, subject to the referring court’s assessment, it does not appear that ABC Projektai had control of the funds in the payment accounts but rather the holders of those accounts, who were able at any time to send ABC Projektai payment orders for execution.

74. Thirdly, since electronic money is a supplementary asset controlled by an EMI, that institution must have a specific accounting system which enables the application of the particular method of calculating its own funds provided for in Article 5(3) of Directive 2009/110.

75. It is for the referring court to verify whether ABC Projektai had that specific accounting system for electronic money and for calculation of the own funds requirements, a matter which it is not possible to deduce from the information supplied to the Court.

76. Fourthly, with payment accounts, the holder has control of the funds, as I indicated above, and may withdraw those funds as it wishes. In the case of electronic money, there is also the possibility that the payer may ask the EMI for ‘redemption’ of what it has not used to make payments to third parties. However, the reconversion of electronic money to its par value and the subsequent payment of funds on the instructions of the electronic money holder will be dependent on the conditions laid down in the contract between the user and the EMI, which may provide, for example, for the payment of fees by the customer in the case of early redemption.⁽⁴³⁾

77. That is what Article 11(3) and (4) of Directive 2009/110 states when it provides that:

• the contract between the electronic money issuer and the electronic money holder shall clearly and prominently state the conditions of redemption, including any fees relating thereto, and the electronic money holder shall be informed of those conditions before being bound by any contract or offer; and

• redemption may be subject to a fee only if stated in the contract in accordance with paragraph 3 and only in any of the following cases: (a) where redemption is requested before the termination of the contract; (b) where the contract provides for a termination date and the electronic money holder terminates the contract before that date; or (c) where redemption is requested more than one year after⁽⁴⁴⁾ the date of termination of the contract. Any such fee shall be proportionate and commensurate with the actual costs incurred by the electronic money issuer.

78. It is, once again, the responsibility of the referring court to establish whether there was a contract between the user and the EMI in which those clear and prominent conditions of redemption were stated, as a prerequisite for the issuance of electronic money.

79. Fifthly, electronic money is stored electronically or magnetically and may only be used in relation to users who accept it voluntarily⁽⁴⁵⁾ and have instruments for its use. By contrast, payment orders executed from a payment account must be accepted by the PSPs of all economic operators.

80. The information available in the case file does not suggest that ABC Projektai held electronically or magnetically money which could be used with a network of customers who accepted it voluntarily. On the contrary, all the indications are that funds were deposited in payment accounts and could be used only to execute payment orders from users.

81. In short, subject to the referring court’s findings, the activity at issue falls within the scope of Directive 2015/2366 and cannot be classified as the issuance of electronic money within the meaning of Directive 2009/110.