Rights as Usual

This post by Dr Ege OKAKIN ERBAŞ is part of the blog series Human Rights Reactions to Economic Laws. Dr OKAKIN ERBAŞ is an Assistant Professor at Istanbul Gedik University, Faculty of Law.

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As the EU expands its role in financial markets, the shift toward centralised supervision through European Supervisory Authorities (ESAs) raises complex legal and constitutional questions. Much of the debate has centred on ‘agencification’—the growing reliance on specialised EU agencies to assume supervisory functions traditionally carried out by national authorities—and, in particular, the limits of delegating regulatory powers to the ESAs. While procedural safeguards and review mechanisms exist to ensure good administration, they primarily act as counterbalances to the growing powers of ESAs rather than resolving a deeper concern: whether the push for a ‘truly integrated’ financial market aligns with human rights considerations such as due process, legal certainty, and access to justice. These issues are not merely abstract. In Investor Protection Europe (IPE) sprl v. ESMA, a company’s appeal was declared inadmissible after European Securities and Markets Authority (ESMA) declined to act on an alleged breach by a national authority—highlighting the difficulties in accessing judicial remedies at the EU level. Similarly, MiFID II empowers national regulators to impose intrusive sanctions, such as asset freezes or bans from professional activity, but leaves considerable discretion in how these powers are implemented. This uneven application, rooted in the coexistence of national administrative laws, risks undermining procedural safeguards and legal certainty.

In this blog post, I examine how centralised supervision affects national administrative laws and, in turn, the protection of human rights. Can the rule of law and good administration measures truly safeguard human rights in a multilevel system where enforcement often involves multiple levels of governance and therefore ignores, to varying extents, national administrative laws? Or does an exclusive reliance on these principles at a single EU level risk undermining the very human rights protections they are meant to uphold? Drawing on the ESMA’s latest enforcement activities, I explore these tensions and argue for a more comprehensive approach to financial supervision—one that balances supervisory efficiency with human rights across diverse national frameworks.

Evolution of EU financial supervision

Administrative reorganisation as a reaction to the financial crisis in the EU and deepening integration conferred a special role on the ESAs, which were established in 2011 as part of the new financial supervision system. Binding powers, effective decision-making, rule-making procedures, and the duty to cooperate with trust and full mutual respect contribute to their unique role in European institutional law. The network of the European System of Financial Supervision (ESFS), centred around three ESAs, the European Systemic Risk Board, and national supervisors, together with the Capital Markets Union and Banking Union, was expected to enable uniform supervisory standards at the EU level while day-to-day supervision is supposedly left to the national administrations. Although the question of political accountability and democratic legitimacy looms large at every step, attempts towards centralisation are always on the agenda. In particular, ESMA has emerged as the leading actor in the progressively federalised landscape of European securities law thanks to its direct supervisory and enforcement powers over certain market participants. Together with other European institutions, they are more determined than ever to achieve an integrated and direct level of supervision. Yet, as these bodies gain enhanced administrative and enforcement powers, it is crucial to identify and implement sufficient safeguards to protect human rights.

Assessing ESMA’s ambition to become the EU’s equivalent of the Securities and Exchange Commission (SEC) in the United States provides insights into the broader tension between law and economics, or between market demands and legal constraints. As a powerful, federalised regulator, wielding broad authority over all aspects of the securities industry, SEC serves as a point of comparison for ESMA’s desired evolution. The rise of independent supervisory authorities in Member States has already sparked debates over their constitutionality and classification. Similarly, the creation of EU agencies with binding powers challenges traditional understandings of institutional balance, particularly under the Meroni doctrine, since the Founding Treaties did not explicitly envision such entities.

Despite these legal uncertainties, EU competences continue to expand and diversify, as illustrated by ESMA’s evolving role discussed below. However, neither market integration nor supervisory centralisation has reached the desired level. Fragmented enforcement, disparities in national administrative laws, and diverged rules in some areas of financial law are frequently cited as barriers to a more unified supervisory framework. Yet, I argue that these so-called challenges do not just hinder centralisation; rather, pushing for centralisation without properly addressing them risks undermining legal certainty, security, and access to justice.

As ESMA’s role has expanded, its enforcement mechanisms have also evolved, operating through two distinct modes –a categorisation used by M. van Rijsbergen and M. Simoncini: direct and subsidiary. While direct enforcement fully centralises oversight at the EU level, subsidiary enforcement relies on coordination with national competent authorities (NCAs). Each approach presents its own legal challenges, particularly in terms of accountability, legal certainty, and access to justice.

The Human Rights Implications of ESMA’s Enforcement Powers

These opposite modes of direct enforcement and subsidiarity illustrate two key points. First, the EU legal framework seeks to keep pace with the rapidly evolving financial markets, which are inherently dynamic and constantly changing. Second, financial market participants and NCAs operate under continuous pressure to comply with new regulatory standards. This pressure appears to be mitigated by the control exercised ‘entirely at the EU level’ as the powers conferred upon ESMA are subject to a comprehensive framework of accountability mechanisms—administrative, political, and judicial—as well as the procedural safeguards. However, these supervisory developments can weaken the role of national administrative laws, which traditionally serve as a crucial layer of protection for individual rights. When enforcement shifts to the EU level—especially in areas like sanctioning or access to remedies—it may reshape or bypass national procedures designed to uphold fundamental rights, such as the right to be heard, access to effective judicial protection, and data privacy. As a result, the impact on human rights depends heavily on whether enforcement is carried out directly by ESMA or in coordination with national authorities.

In cases of subsidiary enforcement, as in the supervisory convergence function of ESMA, the promotion of ‘consistent implementation and application of the same rules using similar approaches’ is facilitated. For example, Article 69 of Markets in Financial Instruments Directive II (MiFID II) obliges Member States to empower NCAs to impose far-reaching remedies, ranging from asset freezing to the temporary prohibition of professional activity or the removal of a natural person from the management board of an investment firm. The implementation of these measures involves conducting on-site inspections or investigations. While ESMA does not directly enforce Article 69 or carry out these inspections, it plays a key role in coordinating and promoting consistent application by NCAs. However, these powers, defined in broad terms, leave considerable room for manoeuvre to national legislators. As a result, on-site inspection powers may be applied inconsistently across Member States. This inconsistency stems from the fact that administrative laws remain national, allowing NCAs to implement EU rules differently. Consequently, the establishment of a common supervisory culture is hindered. The coexistence of multiple administrative legal systems thus creates challenges for legal certainty and security, as market participants may face inconsistent regulatory interpretations and unpredictable enforcement outcomes across different jurisdictions.

In cases of direct enforcement, ESMA entirely displaces national administrative laws. It registers financial market participants (such as credit rating agencies), monitors compliance, investigates and imposes sanctions for any violation. This centralisation removes oversight from national authorities, raising concerns about accountability which directly impacts judicial protection as a fundamental right. Unlike national regulators, ESMA operates within an EU-level framework, making it harder for affected parties to challenge enforcement decisions. While judicial review before the CJEU is available, procedural hurdles, such as standing requirements, may limit access to justice.

The case of Investor Protection Europe (IPE) sprl v. ESMA illustrates the challenges in accessing judicial review of ESMA’s decisions, even though it arose in a context where ESMA declined to investigate an alleged breach of Union law by a NCA. There, a Brussels-based company sought to challenge ESMA’s refusal to investigate an alleged breach of Union law by a national authority—the Luxembourg Commission de Surveillance du Secteur Financier. Before it could access the General Court, the applicant was required to appeal to the Board of Appeal of the ESAs. The appeal was declared inadmissible because the company failed to demonstrate sufficient interest. While this case involved ESMA’s non-action rather than direct enforcement, it still highlights the procedural complexity and limited avenues of redress when EU agencies decline to act or issue binding decisions. Moreover, the jurisprudence of the General Court and the CJEU—as seen in Case T-660/14, SV Capital OÜ v. EBA [2015] and Case C-577/15 P, SV Capital OÜ v. EBA—shows judicial reluctance to review decisions not to initiate investigations. These hurdles suggest that access to judicial remedies may fall short of the standards typically expected under the right to effective judicial protection.

Additionally, ESMA’s accountability mechanisms—though in place—are more distant from market participants compared to national authorities, raising concerns about democratic legitimacy. This issue is particularly pressing in sanctioning decisions, where balancing effective supervision with procedural safeguards remains critical. (See, in particular, three examples discussed by Bovend’Eerdt et al. on how direct enforcement of EU law by EU enforcement authorities raises concerns regarding access to justice). At the same time, the discretionary power of an administrative and non-majoritarian authority like ESMA will always be scrutinised in terms of preventing abuse of power. While the CJEU upheld ESMA’s executive powers in its famous Short-Selling judgment, classifying them as administrative and technical rather than political, this does not mean that concerns over the scope and limits of ESMA’s discretion have been fully addressed—particularly when human rights such as judicial protection are at stake.

Conclusion

The challenges of balancing centralised supervision with human rights protections remain at the forefront. Striking the right balance is no easy task. Both subsidiary and direct enforcement raise distinct challenges—one risks legal fragmentation, while the other centralises power at the expense of accountability. The way forward lies in establishing a coherent framework for supranational EU administrative law—one that safeguards individuals from arbitrary interference by public authorities while respecting national legal traditions. This framework should take a sectoral approach, treating financial supervision as a distinct subfield of EU administrative law and acknowledging ‘the specificities of the exercise of public power in the EU’. Without such an approach, both ex ante procedural safeguards and ex post review mechanisms risk remaining insufficient to protect human rights.