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The preliminary reference procedure under Article 267 of the Treaty on the Functioning of the European Union (TFEU) constitutes a mechanism by which the Court of Justice of the European Union (CJEU) ensures the uniform interpretation and application of Union law across the Member States.

In the specific context of EU financial regulation, this procedural instrument assumes a distinctive function: that of enabling organic harmonisation within the internal market. By facilitating a judicial dialogue between national courts and the CJEU, the preliminary ruling mechanism operates as a decentralised yet effective method of aligning national interpretations of key provisions within directives such as Directive 2014/65/EU (MiFID II), Directive 2009/65/EC (UCITS) as amended in further directives, and Directive 2011/61/EU (AIFMD) as amended by Directive 2024/927/EU (AIFMD II).

Ongoing doctrinal perspectives

There is an ongoing debate on the extent to which Article 267 functions as a harmonising mechanism in itself, especially within fields like financial regulation. On one hand, many view the preliminary rulings system as an engine of integration that effectively compensates for gaps or ambiguities in EU financial legislation. Each preliminary ruling not only decides the specific dispute but also creates an interpretative precedent that other national courts and regulators are likely to follow, thus converging national practices. Indeed, the procedure has been praised for enabling a form of “judicial dialogue” that incrementally builds a de facto uniform interpretation. On the other hand, some commentators point out practical limitations. Not every divergence or inconsistency in financial supervision will end up before a national court, and not every national court will refer questions to the CJEU.

For example, if national competent authorities (NCAs) adopt different interpretations of a concept like “fit and proper” criteria for bank managers or “market manipulation” under the Market Abuse Regulation, those differences might persist unless and until a dispute is litigated. Thus, while the preliminary reference mechanism is indispensable for harmonisation, it is not a panacea; it works in tandem with consistent enforcement and regulatory cooperation.

An underlying doctrinal point is that Article 267 serves as a gentle reconciler of national autonomy with EU integration. In the sensitive field of financial regulation, Member States historically had their own approaches (common law vs civil law traditions in financial supervision, different market cultures, etc.), and they retain some discretion in areas not exhaustively harmonised. The preliminary reference process does not overtly strip that autonomy; rather, it invites national courts to voluntarily engage in a dialogue aimed at finding the common European meaning of the law. This is a consensual form of harmonisation. National courts only refer questions when they deem it necessary, and they frame the questions themselves.

Article 267 acts as a bottom-up mechanism for integration, steered by national judiciaries, which preserves a sense of ownership and mutual respect. In the broader perspective, this process contributes to a gradual alignment (a kind of incremental federalisation) of financial governance: Member States’ courts, through their referrals and the CJEU’s answers, collectively develop a unified interpretative community in financial law.

Critics of “judicial harmonisation” sometimes argue that the preliminary‐reference system can impose burdens on national courts or constrain Member State autonomy in areas like fiscal policy. These concerns have some merit: tax law and criminal law questions may drag national judges into EU analysis. For instance, in Mastromartino (Case C-53/18) it upheld Italy’s ability to police off‑premises sales (door‑to‑door advice) because MiFID’s scope was defined to exclude such local door‑to‑door selling.

By focusing on the objectives of directives and the Treaties, the Court’s case law weaves a common standard. For example, MiFID’s recitals emphasize investor protection and a fully integrated securities market. When national rules conflict with those aims, CJEU rulings correct course, as in Fondee and F S.A.. When no conflict exists, the Court gracefully allows divergence, as in Mastromartino.  This dual approach – strict where cross-border integration is implicated, lenient where the situation is domestic – is itself a form of harmonisation strategy.

Nevertheless, the current doctrinal arguments appreciate Article 267’s crucial harmonising role but also recognise the need for complementary measures (such as detailed regulations, technical standards, and guidance) to achieve enhanced convergence in financial regulation. The prevailing view in favour of preliminary rulings is that preliminary references in financial regulation have significantly contributed to legal integration, ensuring that core concepts (from interpreting definitions in MiFID to consumer protection norms) are interpreted uniformly across the Union.

Practical impact on financial regulation

 The CJEU’s preliminary rulings in financial law exemplify how judicial mechanisms further integration in a way that respects Member State courts. The tone adopted by the Court is generally collegial and focused on problem-solving, which has earned it a positive reputation among many national judges. Far from being seen as an intrusion, the Article 267 process is often described as a cooperative form of federalism: national courts and the European Court “actively collaborate in the adjudication of a single case” through mutual respect. In fields like financial regulation, this helps prevent regulatory arbitrage (where firms might otherwise exploit differing national interpretations) and strengthens the internal market. For instance, when the CJEU clarifies provisions of MiFID in response to a national court’s question, that interpretation effectively becomes part of the uniform corpus of EU financial regulatory framework.

The result is a more integrated financial governance framework, achieved not by top-down imposition but through case-by-case clarification. This process contributes to a form of subtle federalisation of financial governance in the sense that it is an EU-wide legal order in financial services that increasingly resembles a federal system in consistency and unity, albeit achieved incrementally and maintaining national courts as key actors. Indeed, the CJEU’s role via preliminary references is viewed as constructive, facilitating legal integration without overtly encroaching on national prerogatives, and thereby striking a balance between unity and diversity in the EU’s financial regulatory space.

The CJEU has consistently recognised that legal certainty and regulatory convergence are imperative within the field of financial services, particularly given the cross-border nature of investment activities and of prudential and conduct requirements. It is within this teleological framework that the Court interprets provisions under these directives (namely, MiFID, AIFMD and UCITS), thereby shaping the operative meaning of critical terms, obligations, and exemptions.

In Case C-695/22, Fondee a.s. v Česká národní banka, the CJEU interpreted Article 3(1)(c)(i) of MiFID II as precluding national legislation that prohibits an exempted intermediary, falling under Article 3, from transmitting client orders to investment firms established in other Member States. The Court held that where a Member State elects to exempt certain persons from the scope of MiFID II, it must nonetheless allow such persons to exercise the freedom to provide investment services on a cross-border basis, provided that the exemption complies with the harmonised conditions set out in the Directive. This judgment effectively limited the regulatory autonomy of national competent authorities to impose restrictions on intra-Union order transmission and reaffirmed the primacy of Union law in securing market access and service provision under harmonised conditions.

Conversely, in Case C-53/18, Mastromartino v Consob, the CJEU distinguished between measures implementing harmonised conduct-of-business obligations and purely internal disciplinary measures falling outside the scope of Union law. Here, the temporary prohibition imposed by an Italian authority on a financial adviser, pending criminal proceedings, was deemed to constitute a matter of national competence, as the factual situation lacked a cross-border element and did not engage the freedoms of establishment or services under Articles 49 and 56 TFEU. The Court’s reasoning highlighted that whilst the MiFID regime harmonises certain minimum requirements concerning investor protection and organisational requirements, it does not regulate the totality of supervisory enforcement powers at national level.

In the context of transitional compliance with AIFMD, the Court addressed the interpretation of Article 61 in Case C-174/23 (HJ and Others v Twenty First Capital SAS). The issue at stake was whether AIFMs operating prior to the directive’s transposition were required to apply remuneration rules set out in Article 13 immediately upon entry into force, or only from the date of formal authorisation. The CJEU held that such obligations became binding only from the date of authorisation, but it also emphasised that managers must refrain, during the transitional period, from adopting conduct that could undermine the directive’s objectives. This nuanced teleological interpretation ensures that transitional flexibility is not misused to delay or evade substantive compliance.

The CJEU’s preliminary rulings in the field of financial regulation serve not only to resolve interpretative disputes but also to progressively harmonise the regulatory environment across the Union. They function as instruments of integration, shaping the content and boundaries of national discretion within directives such as MiFID II, UCITS, and AIFMD.

Taking Malta as an example of a jurisdiction with an outsized financial sector relative to its size (and one deeply integrated within the EU internal market), Maltese authorities must approach transposition and enforcement with mindful regard to the CJEU’s evolving case law. The principle of proportionality, as shaped by the Court, demands that any national measure restricting cross-border activity must be both necessary and suitable for achieving a legitimate regulatory aim. Consequently, the Malta Financial Services Authority (MFSA) and Maltese courts must interpret national implementing measures in conformity with the evolving acquis as developed by the CJEU.

Rather than operating solely as a corrective tool, the preliminary ruling mechanism functions as a structural feature of integration, through which the CJEU incrementally defines the contours of permissible national variation within harmonised regimes. In the context of EU financial regulation, the Court’s application of proportionality serves as a constitutional benchmark for assessing whether national implementing measures remain within the spirit and objectives of the internal market. By clarifying the limits of discretion under directives such as MiFID II, UCITS, and AIFMD, preliminary rulings contribute to a legal order in which harmonisation proceeds not by rigid uniformity, but through measured calibration between Union objectives and Member State autonomy. In this sense, the proportionality principle underpins a form of normative equilibrium where the pursuit of national regulatory goals must always remain proportionate to, and compatible with, the overarching logic of EU financial regulatory integration.

The preliminary ruling mechanism under Article 267 TFEU has emerged as a subtle but decisive driver of legal and regulatory convergence across EU financial markets legislation. In financial services, it allows the CJEU to interpret key provisions of MiFID II, UCITS, and AIFMD with a view to both integration and proportionality. Through this mechanism, national discretion is not eliminated; but rather guided to ensure that Member States remain within the permissible limits of regulatory autonomy when pursuing legitimate financial regulatory supervisory objectives.

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Mario Mizzi.